The document discusses how to market software-as-a-service products, noting that 24% of new business software purchases will be service-enabled. It outlines the differences between marketing products versus services, and how to impact important metrics for as-a-service products like conversion rate, customer acquisition cost, average recurring revenue, and churn rate through strategies like increasing trial conversion, reducing sales touches, and focusing on adoption and ongoing value.
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Marketing strategies for as-a-service products
1. Welcome to
Selling and Marketing
As-a-Service Products
Lilia Shirman,
Managing Director, The Shirman Group
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and notes from today’s discussion
11. Conversion Rate
Customer Acquisition Cost (CAC)
Average Recurring Revenue (ARR)
Churn Rate
Lifetime Value (LTV)
How Can Marketing Impact
Key as-a-Service Metrics?
Images from Forbes article by David Skok and from Chaotic Flow blog by Joel York
12. Increasing Conversion Rate
First • Be easy to find
First Sale
Experience
• Send daily usage
suggestions and tips
• Contact trial users
Free trial users still active on day 3 were 4X • Focus on prospects who
more likely to convert
are actively evaluating
Active trial users contacted by sales 70% • Provide reason or means
more likely to buy
to engage multiple users
Evaluators who had 3 users joint account
in a trial
in 1st 3 days were 12x more likely to convert
Source: Totango
13. Keeping CAC Low
• Can you avoid high-
First
Experience
First Sale touch selling?
• Can your product sell
itself?
• How many points of
Median CAC entry are there?
$1.00 $0.90 • Can your partners’
$0.75
$0.45
products sell yours?
• Is your product
inescapably viral?
Field Sales
Inside Sales Internet Channel
Source: Pacific Crest SaaS Survey 2011
14. Increasing Recurring Revenue
Increase Adoption
(Number of users)
First Increase Consumption
First Sale
Experience (Variety of services)
Increase Usage
(Activity volume)
CAC by Sale Type
$0.93
$0.28
$0.16
New ACV from New Customer
Upsell to Existing Customer
Renewals
Source: Pacific Crest SaaS Survey 2011
15. Decreasing Churn
Median Churn Rate* • Pre-sale readiness
evaluation
5% • Business process / usage
analysis & guidance
• Customer Success Officer
Most cancellations were preceded by
– assist with adoption
a period of non-use
and value
• Proactive support for
infrequent users
• Simple pricing and billing
• Opportunity for feature
requests and input
Source: Totango
*Source: Pacific Crest SaaS Survey 2011
16. Increasing LTV More Premium Infrastructure
(Security, SLAs, Dedicated )
Increase Adoption
(Number of users)
Analytics-based Best
Practice Consulting
First Increase Consumption
First Sale
Experience (Variety of services)
Usage Intelligence &
Process Enhancement
Increase Usage
(Activity volume)
Insight / Data Mining
Architect product with
Private Labeling
long-term revenue
possibilities in mind Advertising / Affiliate
Sales
17. Resources
• Consumption Economics by J.B. Wood
• ForEntrepreneurs.com blog – David Skok
• Chaotic-Flow.com blog - Joel York
– Guide to SaaS Metrics
18. Web: www.ShirmanGroup.com
Email: lilia@ShirmanGroup.com
Blog: www.RevenueOrchard.com
Twitter: B2BGuru
Available on Amazon.com or
at http://42rules.com/book/42-rules-for-growing-enterprise-revenue/
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Hinweis der Redaktion
Global SaaS app revenue $11.8B in 2012 – $26.5B in 2016Fastest growth Segments (CAGR) Office Suites (40.7%)Digital Content Creation (32.2%) Business Intelligence applications (27.1%)
Unless you are selling infrastructure as a service (e.g. you’re with Cloudera or Amazon or similar) the Cloud is not the product, it’s a delivery mechanism. You still have to understand your market and your audiences, and demonstrate tangible, relevant, and unique value.
Granted, the delivery mechanism has to be up to the job. The exact requirements will depend on what markets you are selling into, but table stakes typically includeService level (availability, response times, uptime) – sometimes with SLAsSecurityDisaster recovery
Evaluation : Superiority of technology & featuresInteraction: Ability to solve problems Experience:Enable customer to solve problemsLinear - Marketing stops when customer enters sales funnel, Sales stops when purchase made, support stops when issue resolvedCircular - Marketing & Sales continue during engagement to id & sell follow-on Continuous – up-sell and cross-sell are integrated into product usage
I’ve seen multiple definitions of CAC – And of course it depends first and foremost on the sales model. - Direct sales model – sales rep cost + marketing cost / customers acquired - Indirect model, SaaS companies should target average payback of 1 year on sales and marketing costs. Bessemer surveyed a number of SaaS companies in 2008 and found an average CAC ratio of 0.6.Churn is the percent of customers who cancel each year. Ideally, a SaaS company should target a churn rate of less than 12% of CMRR.Cash flow is of course important for any company, software or SaaS or anything else. But because so many of the costs are front-loaded in the SaaS model, it is a critically important metric to track and manage.
Softletter’s 2012 SaaS Report 51% of SaaS companies report to use a direct sales force. It is still high but down from 60% last year. Indirect (zero touch) selling on the other hand jumped to 25%.
19% Average Percentage of New ACV from Upsells to Existing CustomersUpsell / Cross-Sell Focus Will Vary by Pricing Model:Number of SeatsUsage or TransactionsNumber of SitesAlso – total employees, database size, etc.
Low switching costprice Low Service Levels (response times, downtime, service and support) Product quality (missing features or bugs)From Dennis Howlett:Misalignment between cost and value deliveredInsufficient functionalityLack of individually required functionalityPerceived poor performancePerceived poor servicePerceived poor supportPerceived poor response timesUnacceptable downtimeSecurity breachesBilling problemsUnresolved software bugsUnexpected chargesUnexpected or unacceptable price risesGone out of businessService no longer requiredKeyStone On Demand, an online training application, analyzed the main reasons why customers cancel: low organization adoption, not enough customer stakeholders app is not utilized properly to gain full potential.