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.





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. 


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.


Creative Commons License

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.

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.

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 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.