Marketing numbers can lie

I barely passed an accounting course in college. The only thing I remember was a joke about "debits by the window and credits by the door."

I didn't understand the joke then, and I'm still confused by T accounts now.

Thankfully, in a stint as a bank credit analyst, I did finally gain some fluency with business numbers. I learned to cope with, if not exactly love, current ratios, inventory turnover, and return on equity calculations.

This experience with numbers can come in handy in marketing.

Measure, measure, measure

There's plenty of room in marketing for creative designers and copy writers. But if you're managing a marketing group, you'll also need to know your way around a spreadsheet too. Measuring is a big part of the job.

Marketers, and software-as-a-service (SaaS) marketers in particular, can't afford to make decisions based solely on gut feelings or anecdotal evidence. They need hard, quantitative data:

• Which marketing programs are driving the most traffic?
  
• What keywords are producing?
  
• What's the free trial-to-purchase conversion rate?
  
• What's the return on social media?
  

Proceed with caution

Yes, gather and analyze quantitative data, but proceed with caution. Be careful in how you measure and what you measure.

One common measurement flaw is assigning a lead to one particular source. Salesforce.com and other systems have wonderful mechanisms to identify the source of each individual lead. It will tell you tell how many leads were generated by each source. And using that data, you can calculate the cost per lead per source and then make decisions on which programs to continue funding and which to stop funding.

The problem is that identifying a single source for any particular lead isn't really as simple as that. The fact is that over the course of the purchase process, most business customers are likely to touch your company through multiple sources, not just one.

The first contact may be through a keyword search, but later they'll read your newsletter, download a white paper, attend a webinar, and perhaps meet you at a tradeshow. How do you identify which single one of these activities is the sole "lead source?"

Leads are just the start of the process

The focus on leads and lead sources can also distort your view of what programs are really having an impact on your business. "Leads" are only the entry point in the sales pipeline. "Leads" need to be nurtured into "qualified opportunities" and then converted to "closed wins" in order to generate revenue.

If your entire focus is on counting "leads," you may be missing the bigger picture. Besides calculating "leads per campaign" and "cost per lead," marketers should also be tracking "cost per qualified opportunity" and" cost per closed win." You may find that campaigns that generate few leads actually produce many qualified opportunities and paying customers.

Remember, the goal of marketing isn't "leads," "followers," "friends," or "contacts." The goal is revenues.




This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License.

The Amazon outage and SaaS marketers' response

I'm sure the recent service outage at Amazon Web Services (AWS) had lots of engineers scurrying around, looking for a fix. I've been at a software-as-a-service (SaaS) provider when the solution's gone down. The operations and support people work through the night and weekends.

Marketing people aren't completely off the hook, though. They should be doing some scurrying around too.

It's not all bad news

First, though, some good news on the reaction to the AWS outage. There's concern, but not panic. The SaaS and cloud market seems to be mature enough by now to withstand this kind of episode. People understand the risks, but they know they can be managed. Occasional downtime - as long as it is only occasional - can be tolerated.

Marketers' role

But there's a reminder here that prospective SaaS customers are legitimately concerned about performance and reliability. Good marketers should be prepared to address those concerns, especially in light of the AWS outage. If they don't ask, CIO's and IT people aren't doing their jobs.

For one, SaaS marketers should clearly explain their company's reliability and performance policies and procedures. A comprehensive document explaining security procedures, data back-up, redundancy, and other processes should be readily available. You might even prepare a short version that covers the highlights.

CIO's and IT professionals should be educated early in the sales process. The IT group might not be the entry point for your solution, but if it's to be deployed broadly through the organization, assume that IT will eventually be a part of the evaluation. Educating and gaining their confidence early on in the process can be very helpful.

By involving the IT people early, you may, in fact, find that the prospective customer can't or won't deploy a SaaS solution for this particular application. There are applications or organizations for which SaaS simply isn't a good fit. Better to find that out sooner rather than later.

Communication is essential

In the midst of the outage and after, AWS has been communicating with its customers about the problem. They reported regularly on system status and provided post-mortem reports to explain what went wrong. Salesforce.com and other large enterprise SaaS providers do the same.

Publicly exposing our companies' mistakes is not a natural act for marketers. But in the SaaS world, it's vital to building the trust required to win and keep customers.





This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License.

SaaS, Flexibility & Office Furniture

I learned something recently about software-as-a-service (SaaS) from a table.

This isn't just any table. This is a bivi table made by Turnstone, a division of Steelcase that specializes in office furniture for small, innovative organizations.

This table starts as a work surface. With an add-on "back pocket," it becomes a workstation. Drag two of them together and it's a shared work area. Push four into a group and it's a conference table.

As the good folks from Turnstone explained, it's all about flexibility. Their research shows that small, innovative organizations are trying different things all the time, which means they're constantly re-arranging their working relationships. When the relationships are re-arranged, the furniture needs to be re-arranged as well. Fixed cubicles or walls just don't suit fluid organizations.

SaaS offers this same kind of flexibility, in at least two ways.

The SaaS model gives vendors the ability to respond flexibly to customer requirements. Combining agile development with SaaS delivery, these companies can more quickly deliver product enhancements to all their customers.

Companies using SaaS gain the benefits of flexibility as well. They're not locked into expensive hardware and software that become obsolete over time. And they can flexibly scale their usage of the SaaS resources to fit their needs. There's no need to buy what's required for peak capacity and let it sit idle the rest of the time.

I've talked before about the hazards of selling SaaS on the advantages of price alone. Marketers have many more benefits and advantages to talk about than that: rapid deployment, remote access, regular enhancements, etc. Flexibility should be on that list too.




This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License.

Explaing SaaS and the Cloud on TV

Microsoft is running an ad on television that I think may be trying to demonstrate the value of software-as-a-service (SaaS) and cloud computing.

It shows a mother who's having a problem composing a family photograph. To cut and paste different images into the photo, a la Photoshop, she appeals for help "to the cloud."

Huh?

You know the story of the blind men, each touching a different part of an elephant. One touches the leg and insists it's a tree. Another one touches the tail and claims it's a rope. A third one touches the elephant's trunk and is convinced it's a snake, and so on.

If we added the woman from the Microsoft "cloud" ad into this story, she'd be touching a discarded peanut shell that the elephant dropped a long way back on the trail. In other words, not even close.

It's sometimes difficult to explain SaaS and the cloud. One of the challenges confronting SaaS marketers is to educate all the buyers in the decision making process about this new mode of computing. Education is essential to winning the prospective customer's trust, and winning their trust is essential to winning their business.

In this effort to educate prospective buyers, the Microsoft "to the cloud"/photo-editing/discarded peanut shell TV ad doesn't really help. Sorry.

"It's bigger than the application"

A different ad running on television is actually more helpful to SaaS marketers... and it doesn't involve SaaS, the cloud, or even technology. It's from Starbucks.

The ad shows the process of creating a single cup of coffee for an individual customer, all the way from the plantation to the cup labeled with the customer's name, "Sue."


It closes with the tag-line: "You and Starbucks: It's bigger than coffee."

The message here: Starbucks is not just about the coffee. It's about the entire experience. They're marketing a relationship with the customer that goes beyond the product. In fact, they've even gone so far as to remove the word "coffee" from their logo.

That's a useful lesson for SaaS marketers. When it's done well, SaaS is marketed as more than just the application. It's about the entire customer experience: it's easy to purchase and deploy, simple to use, and painless to upgrade and maintain.

In addition to the features and functions, SaaS is about a commitment to deliver an increasingly useful solution reliably and securely over the life of the subscription.

It's bigger than the application.




This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License.

Building connections to your SaaS customers

I'm one in a million.

Actually, I'm number 172,370 in a million. So says the thank you note I recently received from Reid Hoffman, Co-founder and Chairman of LinkedIn, as a way of showing his appreciation to me and the other first million LinkedIn users. His note says, "I want to personally thank you because you were one of LinkedIn's first million members (member number 172370 in fact!*)"

The company just added its 100 millionth member and it wanted to celebrate the milestone by recognizing and thanking the first million LinkedIn early adopters.

Believe me, I'm not one of the most high-profile LinkedIn users, nor am I one of the most sophisticated users. And I'm definitely not one of the users spending lots of money with LinkedIn. But I've been recognized nonetheless.

OK, it's not exactly personal. My notification came via a mass email, over Mr. Hoffman's electronic signature, and with my name filled in via that "automatically fill in name here" function.

But there's something in this recognition gimmick that I like.

For one thing, I get to brag to you that I'm LinkedIn member number 172,370, and I can lord it over all of you who are 172,371 and higher.

But besides that, there is a lesson here that could be useful to software-as-a-service (SaaS) marketers.

It's about how to treat your customers. Remind them that they matter to you. Recognize them as special. Look for excuses to say "we know you're out there and we appreciate you."

With some thought, you could surely come up with a list of reasons to recognize them for some special achievement: people who use your application in an unusual way, most active users, newest users, users from places we'd most like to visit... whatever.

And you could probably find more personal ways to convey this recognition and appreciation than a mass email to one million of them.

There's the tried & true annual customer conference - always a great excuse to get to Orlando or Las Vegas.

But there are things that you can do besides these annual events to build an on-going relationship. For example, many SaaS companies find it valuable to host online customer communities, a place for the people using a solution to share ideas, ask questions, suggest enhancements, and interact with each other and people inside the company. See Constant Contact or Concur for examples.

Why do they bother setting up and maintaining these online communities? Because it helps the company. It builds an on-going connection, a stronger relationship between the company and the customer. The result - deeper loyalty, more positive referrals, a better understanding of customer requirements, higher renewals, and fewer defections. These are essential ingredients for a successful SaaS business model.

One more thing: To all you LinkedIn users who aren't in the first million, maybe you'll get your "thank you" note when the company adds its 200 millionth member.


Note: SaaS Marketing Strategy Advisors provides marketing services to Constant Contact.



This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License.

Please don't sell me stuff I don't need

My regular readers can skip the next two paragraphs. I need a minute to talk to my brethren in the PR community... privately.

To the PR folks who have been pitching me on stories about computer viruses, streaming music to cars, online advertising solutions, and 3D mice, please stop. If you've read my blog or newsletter, you'd know that I do not write about these topics. While I appreciate your generous invitations to talk with the CEO, download screen-shots, or receive a review copy of your client's book, they're wasted on me.

Let me pass along some advice that I was lucky enough to get from a seasoned PR pro and mentor early in my career. "Read the papers!" Read what the editor, analyst, pundit, or blogger writes about before you pitch a story to them.

Identify your buyers

OK, regular readers, you can come back now. I was just asking PR folks to please stop sending me stuff I don't care about. Actually, that's a good practice for all marketers. Know who your prospective buyers are and identify them explicitly. Skyward, for example, does a good job of this:



This item sits on the top of their home page. If you're not responsible for student, finance, or human resource administration for K-12 school districts, you're in the wrong place.

And what about companies that have multiple audiences? They can try to sort out each audience and direct them each down the right path. Concur, for example, asks on its home page whether visitors are a "small business" or "medium & large business."

Coupa takes this a step further and asks visitors to identify themselves by their needs, their company's size, and their role in the organization:




Why we "spray & pray"

Targeting is much more effective than a broad, undifferentiated approach, where you blast your offering out to anyone with an email address. But the 'spray & pray" approach persists. Why?

For one thing, it's cheap and easy. The marginal cost of adding 1000, 10,000, or 100,000 email addresses to your distribution list is insignificant. That's the secret behind spam.

Another explanation is poor metrics. If marketers are rewarded for "impressions," "visitors," or "contacts," they're more likely to focus on activities that cast a wide net. This, despite the fact that most of the "catch" has no use for the product and will never turn into a paying customer. Rather than rewarding marketers by "how many people walk in the door" or "visit the web site," measure "qualified opportunities" and "wins."

There's also the fear that marketing to a well-defined audience will scare off some prospects who are excluded from the explicit target. Marketers don't want to rule anybody out.

The truth is, though, there really aren't a lot of enterprise software-as-a-service (SaaS) solutions that can be used by everybody. When someone tells me that "this product can be used by anyone," I'm skeptical.

My advice: Find the people who truly can benefit and focus your marketing efforts on reaching them.



This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License.

Social media is a good fit for SaaS

NPR's Fresh Air host, Terry Gross, recently interviewed Biz Stone, the co-founder of Twitter. She asked him, once the founders created Twitter, how did it catch on.

Stone's candid answer, "Well, it didn't at first."

He explained that for the first nine months of the product's existence, the only people using it were friends and family. Most people they talked to about it decided that "Twitter is not useful" and "it's the most ridiculous thing we've ever heard of."

Now that the small group of "family and friends" has grown to about 200 million user accounts , it appears that somebody somewhere has found something useful to do with Twitter after all.

Besides letting followers know that you've just ordered pepperoni and pineapple on your pizza, your flight from SFO to Logan is stuck on the tarmac, or that you're heading to Tahrir Square to protest against the government, Twitter and the other social media networks can be useful for businesses as well.

And they're an especially good fit for software-as-a-service (SaaS) businesses.

Social media allows back & forth and side-to-side

For one, social media is interactive. Unlike more traditional outbound broadcasts, it allows conversations that go back & forth, and side-to-side. Companies can talk to customers, customers can talk back to companies, and customers can talk to other customers. In fact, it's possible that customers can talk to prospective customers.

This fits the SaaS model, which benefits from close proximity to customers. When companies stay close to customers, they're better partners: more responsive, more engaged, and better able to deliver what the customers want. This is essential to the long-term relationship and high renewal rates that are required for most SaaS businesses to be profitable.

Speak"humanese"

Social media communications tend to sound more human, less corporate. That's usually good for a long-term relationship. If customers sense that they're dealing with real people, not an anonymous corporate entity, they're probably more likely to renew. Even though you're marketing a business-to-business solution, you're still communicating person-to-person.

Let current customers help acquire new customers

Social media's viral nature is also a good match for SaaS companies. At its best, social media lets current users "sell" the service to prospective customers. One user loves your product and tells ten other Facebook friends, Twitter followers or LinkedIn connections. They in turn tell their friends, followers and connections. All of this holds down your customer acquisition costs and accelerates your sales cycle... both very important to the SaaS business model.

It's not just about technology

If you've not already adopted some of these social media tools to help market your SaaS solution, pick one and give it a try. You can find lots of resources about how to use these tools.

But don't just adopt the tools. Adopt the attitude. To engage with customers, nurture a long term relationship, and act and sound like a real person isn't just about technology; it's a state of mind.

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Photo of the week

I know some folks liked the photo from my neighbor's farm taken over the summer. Here's what it looks like in February.