Good content marketing requires good content

Content marketing isn't just a good idea.  It actually works.

I've seen it work for my clients and I've seen it work for my own business.  Most folks find me by
way of my blog or my newsletter.

When it's done well, content marketing can boost visibility, enhance credibility, and generate inbound leads.  There's a reason it's sometimes called "inbound marketing."

It can be especially effective for software-as-a-service (SaaS) companies, where keeping the cost of customer acquisition is critical.

But here's the thing about content marketing:  It requires good content.

Seems obvious, but lots of SaaS companies have a hard time getting this right.

First explain the problem

Too often, companies think "content" means a product brochure, a demo, a data sheet, or something else that's all about the solution.


But most prospects are not yet ready to hear about the solution.  They first need to learn more about the problem.

  • What's wrong with their existing process or product?  
  • Who exactly has this problem?  
  • How costly is it?
Until prospective customers acknowledge that they have a costly problem and recognize that there's a better approach, they're not yet ready to pay attention to any vendor's particular solution.

Many of my blog posts and newsletter put the problem right in the headline, e.g. "Most demos are useless," or "Avoid random acts of marketing."

Once prospects recognize that they have an urgent project, then - and only then - should you start talking about how your product works.

Educate and earn the right to promote

At the beginning of the evaluation process, content that helps educate the prospect will be more effective than promotional product brochures.

The vendor has two tasks at this early stage of the process.

For one, they need to educate the prospect.  Besides helping them to understand the scope of the problem, the vendor can help explain to the prospective customer how to evaluate solutions.
  • What criteria should be used?
  • Who should be involved?
  • What are good sources of information?
The second goal for the solution vendor is to establish credibility.  The prospect must have confidence that they are working with a knowledgeable expert, a company that truly understands the needs of customers.

This is especially important for SaaS as the prospects will be relying on the vendor to deliver reliably over the life of the subscription.  (See "SaaS marketing is about promises, not products.")

Of course at some point in the prospective customer's evaluation process, they'll need to see material specifically about the product and how it works: data sheets, technical specs, etc.  But first the vendor needs to show they're knowledgeable and credible.  They need to earn the right to show their product to the prospect.









Where Up-Selling Goes Wrong

Up-selling can be a very good thing for software-as-a-service (SaaS) companies. It’s a winner on two counts:
  1. It boosts revenue per customer
  2. It usually lowers the cost of customer acquisition. 
According to one critical SaaS metric - Customer Lifetime Value/Cost of Customer Acquisition - up-selling is a formula for success.

But selling to existing customers isn’t always easy and there are few ways it could go wrong.

Unhappy customers

Before you can sell new services to an existing customer, they need to be happy with the old services.  That sounds obvious, but it’s easy to see how companies can get it wrong. 

Imagine a sales team that’s not connected to the support team.  In that instance, the sales person may have no idea that a customer is in the midst of a long unresolved support issue.  When the sales person calls on that account to sell add-on services, that might not go so well.

Bad timing 

Sometimes the up-sell effort is simply mistimed.  There's both a good time and a bad time to try sell new services.

I purchase services from one particular SaaS company that insists on pitching me new services every time I call in to their support people about a problem I'm having with their service.  I’ve just called with a complaint, and you want me to buy more stuff?!  Not right now, thank you.

Hidden cost

Customers don’t react well when the additional service you’re offering really ought to be part of the standard subscription fee.  If it's something that’s fundamentally necessary to make the solution function effectively, the customer rightly expects it to be included... not an add-on that they need to pay extra for.

I’ve even seen SaaS companies that charge extra for an add-on service... and then require the customer to buy it. That doesn't sound like the way you want to treat new customers.

Wrong offer

Offering to provide an add-on service to an existing customer is usually most effective if it’s targeted to their particular needs.  If the add-on is best-suited to your larger customers, for example, focus the up-sell effort on your larger customers.  Offer something else to your smaller customers.

This is one of the advantages of offering a SaaS solution.  You actually do know quite a bit about your customers and how they use the solution.   You should be able to target precisely those that might be most interested in particular add-on services.

In fact, trying to up-sell everything to everyone can backfire on you.  When you present them services that aren't appropriate for them, your customers get the impression that you really don’t know much about them.  That's not good for a long-term relationship.





FIve mistakes with free trials

It’s common for software-as-a-service (SaaS) companies to offer free trials.  That’s because a lot of times they work.  Done well, free trials can be a very effective way to attract new customers. 

But done poorly, they can be an expensive failure. 

I’ve seen SaaS companies make several common mistakes with their free trials.

1.  “Free” isn’t really “free”

Sure, it’s called a “free trial.”  But to the SaaS vendor, it’s not really free.  They’ve paid to build and host the solution, and attract and support the trialer.

And it’s not really free to the trialer either.  They’ll invest a fair amount of time learning and evaluating the solution.

So if you’re going to offer a “free trial,” recognize that it actually will cost something. 

2.  A free trail doesn’t always make sense


Free trials make sense for certain solutions and markets, but not all of them.  For example, customers might not be eager to deploy a critical enterprise application throughout the entire organization as a free trial.  There’s just too much at stake.

Talk with your prospective customers to see if they’d consider taking on a free trial.  You might find that they’re not as eager as you might expect. 

3.  Free trialers need guidance

If you want free trialers to see the value in your solution, you need to take them by the hand and show them.  If you let them just wander around, don’t expect they’ll see what you want them to see. 

Whether through a phone call, email, video, sign-posts in the trial, or some other way, walk the free trialers to the handful of awesome features and benefits that you think will cinch the deal.  And try to get them there in less than a few minutes.

4.  Free trialers don’t convert automatically

Just because someone signed up for the free trialer doesn’t mean the marketing and sales job is done.  It takes some work to convert them into a paying customer.  They need to be shown the value in the solution (see item 3, above), push it to the top of their to-do list, allocate budget, and trust the vendor. 

All that might not happen by itself.  It requires some effort.

5.  “Lost trialers” aren’t really “lost”

Just because a free trialer didn’t convert to a paying customer at the end of the trial doesn’t necessarily mean they’re no longer a prospective customer.  It doesn't always mean that they've purchased another vendor’s solution or changed their mind.  They simply got distracted by other priorities and the trial period expired.

Stay in touch with these “lost" trialers.  At some point, whatever problem they had that caused them to sign up for the trial in the first place will probably bubble back up to the top of their priority list.

When that happens, you want to be top-of-mind and give yourself a second chance.

 

SaaS Marketing is About Promises, Not Products


If you’re a software-as-a-service (SaaS) marketer and you think you’re marketing a product, think again.

What you’re really marketing are promises.  You’re promising to customers that you’ll deliver value over the life of the subscription. 

Though part of that value includes making available a certain set of functionality on day one - features to track a sales pipeline, manage inventory, handle HR, etc. - it goes way beyond that. 

You are also promising that you’ll deliver:
  • Hassle-free deployment
  • Reliable performance and instant access
  • Security for the customer’s data
  • Expert customer support
  • An ongoing stream of enhancements

Earning trust means more than showing features

That’s a lot of promises, and marketing them requires that you win the prospective customer’s trust.  They need to believe that you'll make good on them.  There's a lot more to it than just showing that the features work.

You need to show customers that you’re committed to a long term relationship… something that extends beyond a one-time transaction.

You need to show them other customers that you’ve kept satisfied over a long period. 

You need to show proof of reliability and security, and a track record of enhancements.   

In short,  you need to show them you’re a company they can trust.

There are several critical differences between marketing SaaS and traditional on-premises software:  different buyers, different messages, and different processes.  Marketing SaaS requires a different strategy, something fit for selling promises, not just a product. 


Customers Don't Really Care About SaaS

It wasn’t that long ago that just describing your application as a "software-as-a-service (SaaS),"  or saying that it ran “in the cloud” was enough to get attention.

Companies like salesforce.com and a few other pioneers could differentiate themselves largely by saying they weren’t traditional on-premises software.  'Why buy applications built on old technology when you can buy solutions built on new technology?'

Not anymore.

SaaS just isn't so new and different anymore.  In almost any market these days, people are well-aware of SaaS, and they have a decent choice of cloud-based solutions for HR, CRM, ERP and a whole range of other acronymed applications. 

"SaaS" doesn't make you different anymore

If your goal as a marketer is to differentiate yourself, simply highlighting the fact that your solution is "SaaS,""runs in the cloud" or is “web-based”  really doesn’t do much for you anymore. 

In your marketing messages, there’s no point in putting your “SaaS-ness” or “cloudiness (?)” front & center anymore.  

For customers, it’s just not the most important thing.

Instead, focus on what customers really care about.  Explain what SaaS really means for them:

  • They can deploy the solution quickly without adding lots of new hardware
  • They can access the application from any device connected to the internet
  • They can rely on regular updates
  • They can avoid a large up-front license fee
  • They can let experts worry about uptime and security.

SaaS buyers aren't techies

Highlighting benefits, not the technology itself, is an especially good idea for most prospective SaaS solution buyers.  Usually they're professionals in HR, sales, marketing, or finance.  They're not technologists. 

Of course they care about security, access, performance and other benefits that depend on the platform.  And sometimes a SaaS primer can help. (Call me if you need help with a primer.)  But most SaaS solutions are not a technical sell.

Talk so the customer will listen

Of course you’re proud of the solution you’ve built and how you’ve built it, and you'd love to tell everybody about your clever technology.

But if you want to get the attention of prospective customers, don’t talk about what you want to say.  Talk about what your customers want to hear.

Avoid random acts of marketing

After months or years of development, your software-as-a-service (SaaS) solution is finally ready.  Now you just need to find customers.

So you put up a website, attend a tradeshow, and produce a video.  Then you host a webinar and
post to a blog.  On top of that, you toss in a bit of search engine marketing and prepare a couple of press announcements.

You could call this an "all of the above" customer acquisition plan.

But it might just be random acts of marketing.

Poor connections, poor results

Though the individual elements may be executed well, this shotgun approach to customer acquisition usually doesn't produce much in the way of results.

You end up with an attractive website, a beautifully-produced video, and well-written blog.  Unfortunately, you don't end up with lots of paying customers.

That's because the individual elements are not connected and don't fit into a logical process.  They don't move a buyer step-by-step toward a purchase.

You might generate lots of visibility and web visitors, for example, but unless there are elements in place to capture contact information from the visitors, all that web traffic doesn't mean much.  Unique visitors, by themselves, do not generate revenue.

Or maybe the website is, in fact, capturing contact information.  But there's nothing in the marketing plan to cultivate those leads and convert them into qualified opportunities and buyers.  In that case, you've collected an impressive list of contacts, but no revenue.

Or maybe the tactics in place are effectively leading prospects far enough through the process that they actually purchase your solution.  But there's nothing in place to retain these paying customers.  So you end up with lots of customers that go away after a few months.  

Why does this happen?

These kinds of gaps in the process happen all the time and it's very understandable.


By the time they're ready to go to market, companies have spent lots of time and money building their SaaS solution.  They're proud of what they've built and eager to tell the world about it.  And they're in a hurry to start selling it.

So they just starting "doing marketing stuff."  There's lots of scrambling to put up a website, get out emails, crank out press announcements, post videos, and do whatever else seems like it might be a good idea.

Some of these might actually be good ideas.  And I'm all in favor of trying different tactics to see what works and what doesn't.  (See "There is no marketing magic bullet.")

But companies really need a plan in place before they start executing on all these tactics.  Otherwise all that activity is a waste of money.

That's money no company can really afford to waste, especially SaaS companies.  The website, email, webinar, video, tradeshow and whatever else seems like a good idea costs money now that they need to earn back over time.   That's how the SaaS business model works.  

Step back and put together a plan

When it comes to marketing, resist the urgency to "just do something... anything, and let's do it
ASAP!!"

There's a better way.

Start with a plan.  Specifically, put together a plan that meets three criteria:

  • Make sure the individual elements fit together.  For example, if an email campaign is intended to drive visitors to the website, make sure there's a way to capture contact information from those visitors.

  • Cover all steps in the customer acquisition and retention process.  Don't focus exclusively on programs that generate leads, but neglect tactics to convert leads into customers.  Don't work hard to acquire paying customers, but forget about programs to retain them.

  • Match up with your prospects' behavior.  If your customers look for your kind of solution at tradeshows, for example, go to tradeshows.  If they don't use Facebook to evaluate solutions, don't spend time with Facebook.  To know how customers buy, it's best to ask them.  (Call me if you need help.)
For most SaaS companies, it shouldn't take more than a few weeks to put together a workable plan.  It's time well spent.










Two essentials for SaaS marketing

If you're marketing a software-as-a-service (SaaS) solution, where should you start?

It's obviously something SaaS companies about to bring their solution to market for the first time should be thinking about.

But established SaaS companies should be asking a similar question:  Do we have the basics in place?

Most companies should have two essential items in place as the foundation for their customer acquisition efforts:
  1. a value proposition & messages document
  2. a customer acquisition plan.
A compelling value proposition and messages document

Before you start promoting your solution, you need to have a clear message on what you’re
promoting and why anybody should care.  That's exactly what an effective value proposition and messages document can do.

It answers a few fundamental questions:
  • What is the solution?
  • Who should buy it?
  • What problem does it solve for them?
  • How costly is that problem?
  • Why should they buy it from you instead of someone else?
And it should answer these questions very succinctly.  A condensed version should be able to cover the basics in a few lines.

It's best to capture the value proposition and messages in a single document.  (Some people refer to it as their "messaging bible.)  That way you can “cut & paste” from it and be consistent.

A customer acquisition plan

The customer acquisition plan spells out who you intend to reach with your value proposition and how.  It specifies which tactics you’ll use to reach your audience at each point in the customer acquisition process. 

A plan is much more effective than random acts of marketing:  firing off an occasional press announcement, showing up at a trade show,  pushing out an email from time to time, etc.

A plan helps avoid gaps or bottlenecks in the process.  For example, you don’t end up generating lots of leads… with no means to follow up.  Or attracting lots of free trials… with no way to convert them to paying customers.

Putting a plan in place beforehand can save you lots of time and money.

Start sooner rather than later

Putting together a compelling value proposition and messages document and an effective customer acquisition plan takes a good amount of thought and time. 

If you’ve not yet made your solution widely available, you should try to put this material together well before you go live.  It will make the launch process much easier and more productive. 

But if your solution is already in the market and you’re actively promoting it, it’s still worthwhile to prepare a value proposition document and a customer acquisition plan.  You’ll fill in critical gaps and get a better return on the time and money you’re already investing in marketing and sales.

Of course feel free to contact me if you need help.




SaaS Buyers are Quick to Buy

Most SaaS buyers make their purchase decision quickly. 

When they need a solution, they do some online research, maybe ask a colleague, try the solution or
watch a demo, and then buy.

The whole process might take a few days, maybe a few hours.

There’s no long, drawn out sales engagements, RFIs and RFPs, head-to-head “bake-offs,” contract negotiations, blah, blah, blah.  Customers find it, they see it, they like it, they buy it.  Done.
 
Neither vendors nor buyers can afford a long sales process

Why the quick decision?

For one thing, lots of SaaS vendors won’t engage in a long sales cycle.  All that schmoozing, demo’ing, and negotiating is too expensive and doesn’t fit their low-touch sales model.  They can’t afford it.

More importantly, SaaS buyers can’t afford it either.  Or at least they can’t afford all the time.

Remember the SaaS buyer is usually someone whose main job isn’t evaluating and buying technology solutions.  It’s not like traditional on-premises software where IT was the gatekeeper and did most of the evaluation. 

With SaaS solutions, the end-user is often doing the evaluation.  It’s the sales manager who’s evaluating a SaaS sales tool, the finance manager who’s evaluating expense reporting solutions, or the HR manager who’s evaluating a time & attendance tracking solution.

Besides evaluating software, these people have a day job.  They manage sales, or finance, or HR.  
 
Rapid deployment and no long-commitment speed up the process
 
The fact that SaaS is a lot easier to install and deploy and that there’s often no long-term commitment also speeds up the evaluation cycle.  Buyers figure they can try something for a few months, and if they’re not happy, they can walk away without much lost.

 Enterprise sales could be an exception

Of course there are exceptions to this scenario.  Larger enterprises may go through a more formal evaluation process than small or mid-sized businesses.  And companies might take more time with applications that they’ll be distributing broadly throughout their organization, those that will need customization, or require a long-term commitment. 

But that still leaves a lot of SaaS solutions that will be bought PDQ. 

Good news and bad news for SaaS vendors

A shorter evaluation cycle can be good news and bad news for SaaS solution providers.

The good news:  They can cut some of the time and expense from the process.  Most buyers won’t force vendors through an arduous RFP, a months-long evaluation process, and innumerable exchanges of red-lined contracts.

The bad news:  Vendors need to be quick.  The evaluation window is only open for a short time.  Jump now… or miss your chance.

Once a prospective buyer expresses interest - they call the vendor, download a free trial, ask for information, whatever - the SaaS vendor needs to respond.  Not in a few days… now!

That doesn’t always mean they need to get on the phone ASAP.  A free trialer might be eager to get a
call from the vendor, but other prospects might not be so far along in the process.  

But companies should at least acknowledge the person’s interest and provide a way for them to move ahead in the process. 

Make a positive impression... quickly

Once vendors do get an opportunity to put their solution in front of the prospective customer - with a demo or a trial, for example - don’t waste that precious time.  Knock their socks off in the first few minutes, showing off high-impact features and benefits.  There's no need for a plodding walk-through of every feature and function.

Lost prospects often aren’t really lost

If SaaS buyers didn’t purchase the solution, SaaS vendors shouldn’t necessarily count this as a “lost” sale.  In many cases, the prospect just got distracted by other priorities (a.k.a. their real job.) 

Once they work through those “distractions” and focus on SaaS solutions again, the vendor wants to still be in front of them.  Newsletters, invitations to webinars, news of valuable white papers, for example, can be cost-effective ways to do that.

I often explain to people that marketing SaaS solutions is strategically different from marketing traditional software.  Different audience, different message, and different process.  The shorter evaluation process is one of the key differences. 

Get in sync with your prospective customers.  If SaaS buyers are quick to buy, SaaS marketers can’t be slow.



Acquiring Customers Ain't Cheap

It costs SaaS companies $1.07 in sales and marketing expense to acquire $1.00 in annual contract revenue.

So says excellent research on the experience of SaaS companies, prepared by David Skok along with Pacific Crest Securities. 

The SaaS companies included in their survey spent, on average, $1.07 on sales and marketing to win a customer that would be worth $1 in annual contract value.

Some might react with horror at that news.  “To grow a SaaS business to $100 million in annual contract value, I need to spend $107 million to acquire customers!!”

Not me. 

Spending $1 to earn $3 is a good thing

That ratio - $1.07 in customer acquisition costs (CAC) delivers $1 in annual contract value (ACV) - is great news.

Here’s what that number means.  If a SaaS business wisely invests $100 million in customer acquisition costs, they’ll earn nearly all of it back from customer revenue in the first year. 

And if they can hold onto those customers for a second year, they’ll earn another $100 million in revenue, and in the third year, another $100 million. 

In other words, the first $100 million in CAC earns nearly $300 million in contract revenues over three years.

With that kind of return, the SaaS company should put as much money into CAC as it can get its hands on.

Before folks bombard me with objections, let me be clear on a couple of points.  For one, I’ve made an assumption that the money spent on sales and marketing to acquire customers is spent efficiently.  (Call me if you need help with that.)

And second, for the sake of making a point, I’ve omitted the cost of retaining an existing customer.  The Skok survey shows that companies will pay 12 cents annually to retain an existing contract worth $1.00.    Factoring that in, the cost to acquire $300 million in contract value over three years is closer to $131 million.  Still not too shabby.

SaaS is a "pay now, collect later" model

So with such an impressive return, why the resistance to spending on customer acquisition?

It may come from a couple sources.

Perhaps there’s some misunderstanding about the SaaS business model.  SaaS companies spend money on customer acquisition in the present in order to generate revenue over the life of the customer.  (See "SaaS customer acquisition:  Feed it or starve it?")  It may take 2 or 3 years to recover the sales and marketing costs.  (If you need more than 3 years to recover CAC, let’s talk.) 

That’s a lot different than the traditional on-premises business model that charges large up-front fees for software, plus on-going maintenance fees.  In that scheme, companies might allocate 4, 5, perhaps 6 percent of annual revenues to marketing. 

Effective sales and marketing costs money


There might also be a misperception about how much sales and marketing really costs.  Companies should expect to pay well if they want it done well.  
  • It costs money to design and maintain an effective website.  
  • It costs money to prepare compelling content.  
  • It costs money to design an effective customer acquisition plan.  
  • And it costs money to execute effective search engine marketing and social media campaigns.  
The experts who do this work don’t do it for free.
Of course, companies should take advantage of newer sales and marketing tactics, like social media and inbound marketing.  These can get them in front of prospective customers much less expensively and more effectively than they could have done several years ago.

And for some solutions, building a viral component into their product can be a powerful way to gain customers. 

But even with greater efficiency, customer acquisition still isn’t cheap.

SaaS companies pay a lot for excellent developers and UX designers.  They should expect to pay a lot for excellent sales and marketing people too.

There’s a reason that sales and marketing expenses at even well-established SaaS companies account for their single largest on-going expense.  Workday’s sales and marketing expenses, for example, represented 56 percent of their annual revenue according to their most recent annual financials.

Instead of looking at customer acquisition costs as an expensive burden, people should be looking at them as an investment.  And with returns of 200, 300, maybe 400 percent, a fairly lucrative investment at that. 

Your message should be boring

Why in the world would I want a box of business cards with a different design on each one?

In radio ads, I’ve heard a company that sells business cards promoting that very feature: “Business cards with a different design on each one.”

I’m sure they use some very nifty software to make this happen.  But why?
  • Do people expect me to hand over more than one card when I introduce myself? 
  • Are they comparing the card that I gave to them with the ones I gave to others in the room?
  • Are people collecting my business cards to have a complete set? 
  • Do they swap them on some secondary market?
Probably not. 

If they’re like me, they enter the info into their contacts app, put the business card in the stack of other cards bound by an elastic band, and stick them in a desk drawer.

So why tout "a different design on every card?" Here’s the only explanation I can come up. 

The company thinks that a person gets bored looking at the same, same, same business card every time they hand it out.

Boredom can be a good thing

Maybe people do get bored. 

But here’s some news:  They should be getting bored.  They should be getting tired of showing the same thing every... single... time.

When it comes to your business card, boring is OK.  In fact, whenever you're talking to someone about what your business does, boring yourself is actually a good thing.

You should be saying the same thing over and over and over.

Note that I said “boring yourself,” not “boring the other person.”  Just because you've delivered the same message a thousand times doesn't mean you can't muster some passion.  This is your business after all.

Stick with the core messages

Once you’ve figured out the core value proposition and messages - who should be buying your solution, what problem does it solve, and why is it better than alternatives - you should tell that same story... every time, everywhere.

Why? 

Because the folks who you want to hear your message are hearing lots of other messages along with yours.  They’re positively bombarded with messages.

Repeating your message consistently is the only way that your value proposition can possible get through.  It's the only way people will remember it.

They should see it on your website, your blog posts, your presentations, your demos, your ad campaigns, and yes, even your business cards.

Staying on script improves impact, saves time & money

Believe me, I’ve been doing marketing for a long time and I understand the urge to step out, go off script, get a little crazy. 

And by the way, it’s perfectly OK to be creative.  There are ways to present the same fundamental message in different ways.

But if you wander from the basic message, you’re losing impact and squandering resources. 

If every time you want to prepare a video, a press announcement, a white paper, or any other kind of marketing material, you need to figure out the basics - who’s the audience, what’s the problem, how do we solve it, why should you buy from us - you’re going to waste a lot of time and money.

That’s bad for all companies and especially bad for software-as-a-service (SaaS) companies.  They have no time and no money to waste.  (See "SaaS customer acquisition:  Feed it or starve it?")

SaaS companies are much better off developing a compelling value proposition and message... and sticking to it.

Sure, the same message every time can get boring to you.    But you are not the person you’re talking to.

A Free Trial Isn't Really Free

Free, free, free. 

It sure is a powerful word.  Which probably explains why “free trial” is used so often by software-as-a-service (SaaS) marketers.

Lots of SaaS solutions, whether they’re for business or for personal use, let prospective customers use the solution for free.  And then after 15 days, 30 days, maybe 60 days, they ask them to actually pay for it.

(For now, I’ll focus on free trials.  I’ll leave the subject of “freemium” or “free forever” for another day.)

Here's one reason free trials are so common:  they work.  They can attract lots of users, and even lots of paying customers, if they’re done properly.

I’ll let you in on a secret about free trials, though.  They’re not really free.

Not free for solution providers

Free trials cost money for the SaaS providers.

There’s the cost of developing, hosting, and maintaining the solution. 

There’s the cost of supporting the solution if you offer help to the  trailers.

There’s the cost of attracting prospects to the free trial in the first place.  Search engine optimization, pay-per-click, email, PR, or whatever other tactics you’re using to drive people to find your free trial cost time and/or money.

And then there’s the cost of trying to convert the free trialers into paying customers.  Whatever you’re doing, it’s not free. 

If you’re not doing anything to convert trialers to paying customers, we should talk... soon.

Not free for the customers

Free trials aren’t really free for prospective customers either.

It takes time for them to find the solution and figure out if it’s something worth trying.

It takes time to register and then download the solution.

It takes time for trailers to learn to use the solution

And then it takes time for them to input some data and actually work with the solution enough to see
any value in it.

None of these activities are costing customers cash out-of-pocket.  But their time isn’t free.  

These prospective customers evaluating your solution are busy folks.  They've got a long list of things to take care of during the course of a day.  If they want to use the free trial, they’ll need to make time to do that.

By the way, if the folks using your free trial have all the time in the world, you might wonder whether they have the authority and budget to eventually make a purchase.

Think before you go free

If you offer a free trial, or you’re considering one, keep the costs in mind… both the costs to you and to the customer.  Ignoring them usually leads to failure... namely, high costs and low revenues.

Free trials, done well, can be effective.  But they’re not really free.

The human touch wins SaaS customers


Lots of smaller software-as-a-service (SaaS) businesses are tempted to try to sound “corporate” or
hide their real personality when they talk to prospective customers.

They act impersonal, like some alien borg.

They think that “sounding bigger” makes them more credible.

It's a bad idea that usually doesn’t work.


How can I trust you?

It’s hard to gain the trust of prospective customers if the provider is faking it.  People usually see through that.

And it's hard to sell SaaS without trust.

When customers buy a SaaS solution, they’re not buying a product;  they’re buying a promise.  They are relying on the vendor’s promise to deliver certain functionality and service over the life of the subscription. 

Which means that before they subscribe, the customer needs to trust the provider.   They need to believe that the SaaS provider will deliver as promised.


Instead of faking it, SaaS companies would be better off acting naturally.  If a company is smaller, friendlier, and can treat customers with a more personal touch than its larger competitors, it should flaunt it, not hide it.


The buyers are also the users
 
The prospective customers care about the kind of people they'll be working with over the life of the
subscription.

Whether they're in HR, sales, marketing, finance, or somewhere else in the organization, the people that are evaluating the SaaS solution before its purchased are often the same people who will actually be using the solution after its purchased.  There’s often no “intermediate buyer” in IT or procurement.

What that means is that the people making the purchase decision will also be considering the “personality” of the SaaS provider.  Besides thinking about features and functions, they’ll be asking themselves, “Are these the kind of people I’m going to want to work with if I subscribe to this solution?”

In most cases, they'll prefer friendly, personable experts over an impersonal, corporate borg.

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.



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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.


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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.


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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.

Creative Commons License

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.

2011: More of the same... only worse

What's new for 2011?

Not much, really.

If you were looking for my "top ten" list of dramatically new trends for the new year, sorry to disappoint you.

What I expect is that we'll see many of the same things we've been seeing for awhile in software-as-a-service (SaaS) marketing... only more of it.

More confusion

Customers will confront more confusion about SaaS, PaaS, IaaS, cloud computing, private clouds, public clouds, hybrid clouds, etc. Much of that is a natural consequence of a still-emerging market, with every vendor, analyst, pundit, and guru trying to put their own spin on things.

For SaaS marketers that means you should continue to educate prospective customers. To put a twist on the old Sy Syms maxim, "an uneducated consumer isn't likely to be a customer at all." Help prospects to understand the basics of SaaS and you'll gain their confidence and accelerate the sales process.

More noise and distractions

It will be even more difficult to cut through the clutter this year and capture prospects' attention. Speaking from my own experience, there's ever more stuff coming at me through my email, phone, mobile device, web browser and TV screen. And at the same time, I think my attention span is getting shorter.

Marketers will need to get their messages across with laser-sharp clarity. If prospects can't figure out in less than a minute what problem you solve and why they should pay you money for it, they'll move on.

Over the course of the year, I'm planning on doing a "one-minute drill" on selected SaaS vendors' marketing messages to assess how well they articulate their benefits and advantages in under 60 seconds. Stay tuned.

More pressure on marketing costs

Companies learned a lot about cutting costs in the past couple of years, and many learned to do marketing on a shoestring. Be assured that our friends in the finance group noticed that marketing folks could do more with less. Or at least we could do something with less.

Bottom line, don't expect a huge marketing budget windfall in 2011.

If they haven't already, marketers will need to put processes in place to regularly measure the success of each program. The cardinal rule still applies: the cost of acquiring a customer can't exceed the lifetime revenues that the customer will generate.

And keep in mind that programs and tactics that worked well last year may not work so well this year.

More competition

One great thing about SaaS is that it's getting easier and less expensive for new companies to build an application. One terrible thing is that it's getting easier and less expensive for new companies to build an application.

I've seen a handful of clever developers build an application on top of Force.com in a matter of months. Easy access to outside platforms and infrastructure at "pay-as-you-go" costs makes it lots easier, cheaper and faster.

For existing SaaS solution providers, expect a continuing influx of start-up competitors who think their solution is a little bit better than yours.

Add to this that more large, on-premise application vendors won't ignore the SaaS challenge any longer, and those that have been dipping their toe in the water will likely take the full plunge soon. If they do it well, these deep-pocketed vendors can make a big splash.

For you existing SaaS vendors, prepare yourselves: sharpen your value messages, hone the customer acquisition process, and engage your existing customers.

More engagement with existing customers

With the growing use of social media, customers expect more interaction with their vendors. They want to know more about what features are available, how best to use them, and what's coming in the future. And they want an opportunity for a conversation, not a one-way outbound broadcast.

SaaS marketers should communicate regularly with customers through all appropriate channels. For SaaS businesses that rely on renewals (and that's most of you), existing customers are also prospective customers.

In addition to email, newsletters, events or whatever else has worked in the past, try out social media. Facebook and Twitter are becoming more widely used, even for business-to-business companies. Though you want to be careful not to be too casual, you may find that the more "human," less "corporate" tone of social media is refreshing.

Have a happy and prosperous new year.

3½ ways to lose customers in 2011

If you’re marketing a SaaS solution and have had enough with year-end wrap-ups, predictions for the new year, or sure-fire tips for success in 2011, here’s the antidote:


3 ½ ways to lose customers in 2011.


Ignore them


Once you’ve won a customer, consider your marketing job complete. Focus on the prospects, not the ones who are already sending in a check every month. Leave them out of the loop on product and service enhancements, and ignore their suggestions for improvements. Just remember to turn on the charm a few weeks before the end of the subscription.


A corollary to ignoring existing customers: oversell them


Pitch them on renewing and upgrading with every single interaction. That includes unresolved customer support issues. Nothing an exasperated customer wants to hear about more than a discount… if they renew their service for another 3 years.


Hide from them


If your service goes down, your communications to customers should go down as well. Keep them guessing about your system’s status, and let them rely on other uninformed customers for information. Shrug off their concerns and don’t even consider an apology.


Surprise them


Add new features and functions without warning. Better yet, remove certain features without warning. Make major changes to the user interface. These are especially effective for applications used only occasionally, such as annual performance review solutions.


OK, back to the traditional new years' self-improvement resolutions. Pardon the interruption.

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.