What are you customers saying about you?

Have you purchased a new car lately? You can find out everything you need to know about any make or model without ever stepping foot on the lot. All data on features, colors, and accessories are available from the manufacturers' sites, and detailed pricing information is readily accessible from sites like Edmunds.com.

You can also find out about particular dealers. Better yet, that information comes from actual buyers. These folks will tell you about their entire experience buying and servicing their new cars. A simple Google search led me to these candid reviews of my local VW dealer on Yelp!

Some they should be proud of...

I went into the dealer with all these worries, and the sales guy, John, was quick to show me that there nothing to worry about there. No sales pressure whatsoever. No haggling, no tricks, and they were very nice and patient through the whole process. Brandon V.

Others not so much...

Super rip off and no customer care - this place charged me 2 hours of labor for a 0.5 hour job, and were unapologetic when I argued about it.... I talked to the service manager and he defended the 2 hours to bolt two pieces of metal to the frame. This place is worthless. I'd never go back. Ken H.

Ouch!

SaaS providers should let their customers talk to prospects, too

As you might expect, most of the customer opinions you'll find online relate to B-to-C businesses. But there's an opportunity for companies selling to enterprises to jump in here, too. In fact, for SaaS companies it might make a lot of sense.

For one, SaaS providers should be conscientiously attending to the needs of their existing customers as a on-going imperative. Renewing existing customers when their subscriptions expire is usually critical to the success of the business. If they're doing their job properly, SaaS providers should have a large pool of satisfied and well-informed customers willing to express positive opinions.

Relying on happy existing customers to help sell new customers should also help SaaS companies with another business requirement: cutting the cost of customer acquisition.

Let your prospects connect directly to existing customers. Don't ask your Sales folks to carry the entire burden of closing a prospect. SaaS providers should open their customer forums to anyone, and actively encourage their prospects to log in and ask questions. Besides the usual link to Sales - "Contact us for more information", why not add "Contact our customers for more information," and provide a direct link to the Customer Forum?

I know that can be a scary notion, and you shouldn't expect customers to shill for you. But they will tell a credible story. And if, on balance, they report that their vendor (that's you) has treated them fairly and delivered good value, you've got nothing to fear.

Proximity to market

I've heard of CEOs delivering pizzas and Jolt Cola to software developers. I know about companies that have sent flowers to developers' families, with apologies for keeping them away from home on nights and weekends. I've even seen a company treat the entire development team to a week-long Caribbean resort vacation, all-expenses-paid.

Why this largess? Believe me, it's a lot more than just an outpouring of TLC to the folks who design, write and test code.

No, it's all about time. Specifically, time-to-market. Companies see value in prodding, cajoling and rewarding development teams for shipping product and hitting a deadline. The thinking goes that faster-to-market equates to competitive advantage.

I'm not convinced that time-to-market, and specifically first-to-market, always conveys much advantage over the long term. There are plenty of examples where the second or third vendor into a market eventually walks off with the lion's share. Think Microsoft in desktop applications or Google in search.

Proximity-to-market more important that time-to-market

Time-to-market is probably even less important for software-as-a-service (SaaS) companies. What matters more for them is proximity-to-market.

"Proximity-to-market" refers to the ability of SaaS providers to stay close to customers so as to be in a position to accurately read and analyze customer needs and to respond quickly.

The SaaS model presents providers with at least two significant proximity-to-market advantages:

1. The ability to observe customer behavior closely

A hosted SaaS solution provides the vendor an opportunity to know precisely how the customer uses it. The provider can directly observe, for example which features are being used, which are neglected, and which cause customers to review the "support" FAQs? On-premise solution vendors can try to accumulate this same information by observing behavior or through customer surveys, but it's more difficult and less accurate.

2. The ability to respond quickly

SaaS providers that follow agile development methodologies typically have the ability to respond rapidly to signals from customers. They can develop new features or fix existing ones. Moreover, they have an effective mechanism to deliver these enhancements quickly and without significant disruptions. SaaS vendors typically don't face the long development cycles and upgrade issues that confront on-premise vendors.

SaaS providers should leverage these proximity-to-market advantages. Stay in touch with customers through moderated forums or social media networks, analyze customer support requests, track usage patterns, and use whatever other means you have to observe customer behavior and sentiment. Analyze and prioritize the information, and feed it to the development team. It goes well with pizza.

Customer Service: Timing is Everything

In an ideal world, you'd all be delivering software-as-a-service (SaaS) solutions so simple to learn and easy to use that customers would require no help. And you'd be so flawlessly reliable that users would never experience any service downtime or performance flaws.

The fact is, though, most of us live in the real world, not the ideal world. And in the real world, bad stuff sometimes happens: Customers get confused, a feature doesn't work, service goes down.

How you respond to these inevitable events matters especially in a SaaS business. Success depends on existing customers renewing their subscriptions. One quick way to lose existing customers is to deliver poor customer service.

When it comes to customer service, timing is everything, or at least it's really important. Two recent experiences will help illustrate my point.

Get out in front of the problem

I use an on-line service from Carbonite to back-up my files. The process happens automatically in the background, and unless I need help restoring data (not yet, fortunately), I have no reason to contact them for support.

Apparently, though, as the company upgraded its software, some customers did have reason to call, and they experienced delays in getting through to support people.

Carbonite's CEO, David Friend, addressed the issue publicly and proactively, sending this note to all customers.

Dear Peter,

In the past couple of weeks our response time to customer inquiries has been much too long. This is because a major upgrade to our software, which includes a wide array of improvements, generated much more demand than we anticipated. With that came a surge of questions that had to be fielded by our customer support team, which in turn lengthened our response times.

As the only online backup company that provides free chat, email and phone support, the quality of the support we provide is very important to us. So if you had to wait a long time for a response from us, we’re very sorry to have let you down. As of today customer support answer times have improved greatly and will soon be back to normal.

Thank you for your business, and again, we appreciate your patience and understanding.

David Friend, CEO
Carbonite, Inc.

P.S. If your Carbonite software hasn’t yet been upgraded to version 4.0, it will be upgraded automatically soon. If you have any questions or concerns, please contact us or simply reply to this email.

I'm putting lots of trust in this company to protect my vital data and to help me restore it if I have a problem. I pay them for peace of mind. This kind of note - candid, reassuring, and proactive - bolsters my confidence in them. When it's time to re-subscribe, I'll have no reason to look elsewhere.

It's not always the right time to sell something

My web site, SaaS Marketing Strategy Advisors, is hosted by Network Solutions. I selected their service because it provided a complete package, including domain names, a web site builder, web hosting, and email addresses, plus 24-hour, 800# customer support.

With my limited HTML expertise, I usually call the customer support line at least once every month for help. I'd grade the support "barely satisfactory." Their agent usually gets me through a partial solution... and then I figure out the rest through trial & error on my own.

Though I can live with the mediocre service, at least for now, what I have an especially hard time with is the pivot into "sell mode" at the end of every single customer support call. No matter whether my problem has been completed resolved, or I'm more confused and frustrated than when I started, the agent invariably pitches, "Renew your subscription now, and I can save you money."

A bit of advice: This is not always the best time to try to sell something. Confused and frustrated customers just want to fix their web site and get on to running their business. They aren't really in the mood to pull out their credit card to re-up for another year.

I know it's in the script folks, but can you please make room for some common sense?

SaaS market consolidation; Blame Wimpy

There’s been a lot of consolidation in the software-as-a-service (SaaS) market lately, and I think I know who’s to blame: Wimpy. You may remember that he’s the character in the Popeye cartoons famous for promising “I’ll gladly pay you on Tuesday for a hamburger today.” Stay with me and I’ll explain.

It’s easy for new SaaS firms to get rolling

The SaaS model makes it much easier and less expensive for companies to build new solutions. By leveraging resources available in the cloud and agile development techniques, it is usually takes much less money and less time to develop a new SaaS application than it took to build a traditional on-premise application.

Forget about spending several million dollars over two or three years. I've seen companies with a handful of clever developers bring highly-functional products to market in a few months.

It’s growing a customer base that’s difficult

But getting a functional product out the door is just the start. Once the solution is ready for market, there’s lots of difficult and expensive work still to be done - namely, acquiring and retaining customers.

Look at any of the well-established SaaS firms and you’ll see that customer acquisition expenses far exceed product development expenses. According to financial statements of nine large SaaS companies, sales and marketing expenses average 44% of annual subscription revenues. By contrast, product development expenses average only 12% of annual subscription revenues.


In customer acquisition, size matters

In the effort to acquire and retain customers, size matters. For SaaS companies, being bigger has several advantages:

1. Bigger usually means deeper pockets.

Here’s where the “Wimpy Effect” -“I will gladly pay you on Tuesday for a hamburger today” - applies.

To acquire customers, SaaS providers have relatively large expenses for sales and marketing people and programs, and most important, these expenses are incurred up-front. But the payback occurs over the life of the subscription.

Or as Wimpy might explain, "I'll gladly pay you over the next several years for lots of delicious sales and marketing today."

SaaS providers need to pay for sales and marketing now, while they’re waiting for revenue later. They need resources, notably cash, to bridge this gap.

Larger companies with greater resources can usually cover a larger gap. They can wait longer for revenue and cash flow than smaller companies.

2. There are economies of scale.

Even with effective inbound marketing and the availability of relatively low-cost vehicles like webinars, electronic newsletters, blogs and other social media outlets, marketing can be expensive. These new tools and techniques still require resources: people to set them up, develop content, assess impact, convert leads into qualified prospects into customers, etc.

But it’s usually more cost-effective for larger companies to use these tools and techniques than small companies. Why? Because the marginal cost of reaching additional prospects can be low or even zero.

The cost of preparing and sending an email newsletter to 10,000 people isn’t much higher than sending it to 100 people. Whether a business has thousands of “friends” or “followers” or only a dozen, the cost is virtually the same.

What this means is that larger providers can spread the sales and marketing costs over a large base. In effect, they have a lower average customer acquisition cost. Low average customer acquisition cost/customer lifetime value is a formula for SaaS success.

3. Credibility matters.

When customers purchase a SaaS solution, they’re not just buying a product; they’re buying a promise. They are entrusting the SaaS provider to deliver a reliable, high-value, frequently-enhanced solution over the life of the subscription.

And because buyers are committing to a long-term relationship, they are particularly scrupulous in assessing the reputation and credibility of the SaaS provider. In general, buyers are more comfortable acquiring solutions and entering relationships with larger, more established, better financed providers. It may not be fair, but that’s how it goes.

The SaaS business model favors consolidation

The economics of the SaaS business model and the advantages of size help explain the inclination toward consolidation in the SaaS market. We’ll continue to see plenty of small SaaS companies come to market, and some will get large enough, fast enough to go it alone.

But as they try to grow and finance the cost of acquiring customers, many of these companies will find that it makes more sense for them to be part of a larger company, and they’ll get bought.

Blame it on Wimpy.

Bad SaaS nearly killed my fantasy football league

My fantasy football league has survived an NFL strike, pre-Internet scorekeeping, and 30 years of trash talk. But we were nearly sacked this season by lousy software.

A few years ago our league moved away from manually tabulating results. We got tired of checking the newspaper on Monday, Tuesday and sometimes Friday mornings, calculating scores with a calculator, updating the standings, adding the league Commissioner's colorful commentary, and mailing it out via U.S. Postal Service. (I did mention this league has been around for 30 years, right?)

We moved into the modern world with a software-as-a-service (SaaS) application that automatically keeps track of rosters, scoring and standings. We chose this particular web-based fantasy football league management application mostly for its simplicity. It had enough functionality for our purposes and, more important, it was easy to use. It was perfect for guys like me that spend less then 3 minutes per week on it, and only for 16 weeks per year. We've even been willing to pay an annual fee for the application to avoid the advertising clutter that comes with the “free” services.

Don't forget who you're selling to and why they buy from you

Apparently, our SaaS provider forgot about who they were selling to and why we were buying. Sometime in between last season and this one, they larded up their application with non-essential functions and a cluttered user interface. Lots of radio buttons and drop-down menus, a smattering of drag-and-drop, and an array of timers and alarms that didn't seem connected to any particular action.

Which brings me to our league's near-death experience. All these changes made it extremely difficult for us to conduct our player draft for the season. Only through extraordinary patience, an exhaustive search of the site’s FAQs, and lots of trial & error, did we finally complete the process... just moments before the start of the season.

Keep it simple and avoid surprises

Listen up, SaaS providers!

1. Don't load your application with lots of bloat-ware that most people don't use. One of the reasons people buy SaaS applications is because they're easy to learn and easy to use.

2. Keep user interfaces simple and easy to navigate. Avoid needless clutter. This is especially true for applications that are used only occasionally.

3. Avoid wholesale changes to the user interface. Make changes gradually. The SaaS delivery model makes smaller, more frequent releases practical.

4. If you are going to make major changes, provide your customers ample notice beforehand. Customers don't always like surprises.

5. Think about offering guidance to your customers on how to navigate the new interface or use the new features. Provide a short instructional video, for example.

6. Stay in touch with your customers. Listen to what they want and pay attention to what they do. The ability to monitor user behavior is one of the great advantages of SaaS.

A bad user interface is bad for business. If you make your product hard to use, you should expect lower revenues, a longer sales cycle, higher support costs, and lower retention.

An accessible user interface doesn't mean limited functionality

I'm not saying that you should omit necessary functionality. But if you think high functionality requires a complicated user interface, think again. At a Mass Innovation event earlier this month, I saw a sophisticated screen-sharing application, JoinMe, with a control panel that looks like something from an old cassette recorder. They called it “ridiculously simple,” and it was.

I’m happy to report that we did navigate our way through the SaaS provider's poor user interface and our Creep Football League lives on for another season. It’s too early to tell how my team, the Out-of-Staters, will fare, but we’re already looking at new SaaS solutions to manage the league.

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A post-script to this story. A few days after I published this post, Constant Contact, a SaaS provider I work with to publish a monthly newsletter, provided an excellent example of how to notify customers in advance of changes to the user interface.

Dear Peter,

As we told you recently, we've improved the editing tool that lets you create and format your email newsletters. You should see it in your account in the next few days.

Here are some things you should know beforehand:

Check out the tutorial and FAQ about the improvements so you can get a jump on using them. Important! Be sure to read our recommendation about copying some of your campaigns in the blue box to the right.

It looks a lot like the previous editor, so it should feel familiar to you. It's now just easier to use.

Just in case, we've set up a special dedicated support line for you to call if you have questions about copying your campaigns or using the editor. That number is 800-275-3019.

Again, you will have the new editor in your account very soon. Thank you for your patience as we bring this new improvement to you, and thank you for being our customer. We're here to help you get up to speed with a better way to build your emails.

Important note: Older browsers do not support some of the technologies used in the updated editor. For the best experience, if using IE or Firefox, please upgrade your browser to the latest version.

Sincerely,
The Constant Contact Team

SaaS let's you see where you're going

The Commonwealth of Massachusetts recently passed legislation prohibiting texting while driving. I’m hoping they’ll soon outlaw texting while walking.

I just came back from a short, but harrowing drive that took me past our town’s high school, just after the end of the school day. The scene reminded me of old episodes of Mr. Magoo - kids fixated on the small screens of their mobile phones, thumbing away furiously on the mini-keypad, while wandering obliviously across heavily-trafficked intersections.

On behalf of all my fellow parents and drivers, I wanted to yell, “Look up! There’s a real world out here, and if you’re not careful, it can really hurt.”

NIHITO

The same advice applies to marketers. You need to look up from the screen and talk to customers and prospects to understand what’s really going on. It can be too easy to focus entirely on what's happening inside your company. I know; I've been there. But as one particularly useful marketing course I've taken explained, “NIHITO”: “Nothing interesting happens in the office.”

Software-as-a-service (SaaS) should make it easier for marketers to avoid this hazard and closely observe customers’ behavior. Because customers are using the application online, it’s possible for marketers and others to see exactly what they’re doing. Though you need to be careful about observing individual behavior, you can see, in aggregate, which features customers are using and which are they avoiding. You can see periods of peak demand, identify particular kinds of users, and see other useful patterns. Along with whatever other analytic tools you're using, this information on product usage can be extremely useful. Don’t ignore it.

Executives at companies that have made the transition from an on-premise application to a SaaS solution point out that one of the most valuable benefits they’ve gained is a better understanding of their customers’ behavior and needs. They have established a much closer, ongoing relationship and a built-in feedback loop. They can much more easily track what's working and what's not.

The result is better focused product development, more attentive customer service, and more effective marketing. For the business, it means greater efficiency, lower customer acquisition costs, and higher renewals.

It also means you’re less likely to make mistakes. Or if you do make a misstep, at least you’ll see where you’re headed before you stumble into real danger.

SaaS marketing lessons from the New York Yankees

Connecticut has no major league baseball team of its own, so it splits its loyalties between the Boston Red Sox and the New York Yankees. The boundary between Red Sox Nation and the Yankee Universe meanders through the state in a fuzzy line that runs roughly northwest from Old Saybrook to Canaan. I grew up on the New York side of the boundary, and am still a devoted Yankees fan… though I’ve lived in Boston for more than 25 years.

This long-standing dedication explains my recent pilgrimage to Yankee Stadium. (That, and the fact that getting tickets to see the Yankees play the Red Sox in Fenway Park in Boston is about as easy as securing a seat on the space shuttle.) Joined by two Red Sox fans (my son wearing his Youkilis jersey!), an Oriole fan and a fellow Yankee fan, I drove to the Bronx to see the Yankees play the Detroit Tigers in a day game.

I came back with a sunburn on my nose, a renewed appreciation for the new Yankee Stadium and – surprise - a couple lessons that are useful for software-as-a-service (SaaS) marketers.

Market the entire experience

Not being particularly familiar with the Bronx, I was worried about parking on game day. Not to worry. Immediately upon buying my tickets online, I was directed to a site to make parking arrangements. It automatically recognized the date we’d be attending a game, presented a selection of parking lots adjacent to the stadium, and allowed me to reserve and pay for a guaranteed parking spot.

Along with the bar-coded reserved parking permit, came driving directions, relieving me of my second concern: how do I get there?

And I received a reminder about parking and directions in an email the day before the game.

Someone within the Yankee organization has actually thought through the entire fan experience. It’s much more than the game that goes on between the foul lines. It extends into the parking lots and up the Major Deegan Expressway.

SaaS marketers should think the same way. The user’s experience with their solution is much broader than the features and functions that they’ve built into the product. It extends to the way the solution is sold, deployed, accessed, configured, supported, upgraded, and renewed. SaaS providers should market all of those benefits - the entire customer experience - as part of their value proposition.

Establish an on-going relationship

The day after the game, I received a “Thank you and Game Recap” email from the Yankees. It included the box score, links to video highlights, and a schedule of upcoming games. They also asked for feedback on my experience.

Lesson two for SaaS marketers: Stay in touch with your customers. Loyal, connected customers will provide useful input on product enhancements, serve as more valuable references and advocates, and will be more likely to renew their subscriptions.

By the way, the Yankees beat the Tigers that day, 11-5.