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Sales and Marketing of As-a-Service Products
 

Sales and Marketing of As-a-Service Products

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Companies launching or moving their product to be delivered as a service via the public cloud require a unique set of marketing competencies that are distinct from traditional product, services, or ...

Companies launching or moving their product to be delivered as a service via the public cloud require a unique set of marketing competencies that are distinct from traditional product, services, or solution marketing. See how as-a-service sales and marketing is different, and how marketers can address the challenges of micro-size deals and high churn, drive broader and deeper consumption, and leverage user data to impact key as-a-service metrics.

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  • 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.
  • 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.
  • 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%.
  • 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%.
  • 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.
  • 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.
  • 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.
  • 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.

Sales and Marketing of As-a-Service Products Sales and Marketing of As-a-Service Products Presentation Transcript

  • Selling and MarketingAs-a-Service ProductsWelcome toLilia Shirman,Managing Director, The Shirman Group© 2012 The Shirman Group, Inc. All rights Reserved
  • In 201524%of all new business software purchaseswill be of service-enabled software- IDC© 2012 The Shirman Group, Inc. All rights Reserved
  • Today• Is it a Product or a Service?• How can Marketing impact as-a-Servicemetrics?© 2012 The Shirman Group, Inc. All rights Reserved
  • Product© 2012 The Shirman Group, Inc. All rights Reserved
  • ProductDeliveryMechanism© 2012 The Shirman Group, Inc. All rights Reserved
  • ProductDeliveryMechanismUnless you sell infrastructure as a service, the cloud is just a delivery mechanism.© 2012 The Shirman Group, Inc. All rights Reserved
  • A reliable, secure, responsive, high performing deliverymechanism is table stakes.© 2012 The Shirman Group, Inc. All rights Reserved
  • © 2012 The Shirman Group, Inc. All rights ReservedYou want someof THIS?What market are you in?What is your value?Which audiencescare?What proof do you have?You still need to decide…
  • Product or Service?Products ServicesProducts asServicesBuy Process Evaluation Interaction ExperienceMarketingRole•Messaging•Brand awareness•Lead generation•Relationshipdevelopment•Thoughtleadership•Referrals•Scalable relationships•Usage insights•Offers•Word of mouthcatalyst•Churn prevention•Partnership promotionSales Process Linear Circular Continuous© 2012 The Shirman Group, Inc. All rights Reserved
  • Products Services Products as ServicesReleaseCadenceMonths or years Real-time Weeks or DaysRole ofConsulting• Planning• Deployment• Customization• IntegrationValue delivery• Value design• Managed services• Proactive usage guidance• Drive adoption &consumption• React to problemsRole ofSupportReact to problems n/aEducation•Productadministration•Product usage•DevelopmentKnowledgetransferValue delivery•Product administration•Product usage• Optimizing value© 2012 The Shirman Group, Inc. All rights ReservedProduct or Service?
  • Product or Service?Neither© 2012 The Shirman Group, Inc. All rights Reserved
  • Product or Service?Neither• Scalability• Repeatability• High Transaction Volume• Whole Experience• Loyalty• Adoption & ConsumptionAs-a-ServiceSuccessFactors© 2012 The Shirman Group, Inc. All rights Reserved
  • How Can Marketing ImpactKey as-a-Service Metrics?Conversion RateCustomer Acquisition Cost (CAC)Average Recurring Revenue (ARR)Churn RateLifetime Value (LTV)Images from Forbes article by David Skok and from Chaotic Flow blog by Joel York© 2012 The Shirman Group, Inc. All rights Reserved
  • FirstExperienceFirst SaleIncreasing Conversion Rate© 2012 The Shirman Group, Inc. All rights Reserved
  • FirstExperienceFirst SaleIncreasing Conversion RateFree trial users still active on day 3were 4Xmore likely to convertActive trial users contacted by sales 70%more likely to buyEvaluators who had 3 users joint accountin 1st 3 days were 12x more likely to convertSource: Totango© 2012 The Shirman Group, Inc. All rights Reserved
  • • Be easy to find• Send daily usagesuggestions and tips• Contact trial users• Focus on prospects whoare actively evaluating• Provide reason or meansto engage multiple users ina trial• Connect evaluators withexisting users in theirnetworkFirstExperienceFirst SaleIncreasing Conversion RateFree trial users still active on day 3were 4Xmore likely to convertActive trial users contacted by sales 70%more likely to buyEvaluators who had 3 users joint accountin 1st 3 days were 12x more likely to convertSource: Totango© 2012 The Shirman Group, Inc. All rights Reserved
  • Keeping CAC LowFirstExperienceFirst Sale© 2012 The Shirman Group, Inc. All rights Reserved
  • Keeping CAC LowFirstExperienceFirst Sale$1.00 $0.90$0.45$0.75Field SalesInside Sales Internet ChannelMedian CACSource: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
  • Keeping CAC Low• Can you avoid high-touchselling?• Can your product sell itself?• How are you influencing theBuyer’s Journey• How many points of entryare there?• Are you driving positiveword of mouth?• Can your partners’ productssell yours?• Is your product inescapablyviral?FirstExperienceFirst Sale$1.00 $0.90$0.45$0.75Field SalesInside Sales Internet ChannelMedian CACSource: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
  • Increasing Recurring RevenueFirstExperienceFirst SaleIncrease Adoption(Number of users)Increase Consumption(Variety of services)Increase Usage(Activity volume)© 2012 The Shirman Group, Inc. All rights Reserved
  • Increasing Recurring RevenueFirstExperienceFirst SaleIncrease Adoption(Number of users)Increase Consumption(Variety of services)Increase Usage(Activity volume)$0.93$0.28$0.16New ACV from New CustomerUpsell to Existing CustomerRenewalsCAC by Sale TypeSource: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
  • Median Churn Rate*5%Decreasing Churn*Source: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
  • Median Churn Rate*5%Decreasing ChurnSource: TotangoMost cancellations were preceded bya period of non-use*Source: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
  • Median Churn Rate*5%Decreasing Churn• Pre-sale readinessevaluation• Business process / usageanalysis & guidance• Customer Success Officer– assist with adoptionand value• Proactive support forinfrequent users• Simple pricing and billing• Opportunity for featurerequests and inputSource: TotangoMost cancellations were preceded bya period of non-use*Source: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
  • Increasing LTV MoreFirstExperienceFirst SaleIncrease Adoption(Number of users)Increase Consumption(Variety of services)Increase Usage(Activity volume)© 2012 The Shirman Group, Inc. All rights Reserved
  • Increasing LTV MoreAnalytics-based BestPractice ConsultingInsight / Data MiningUsage Intelligence &Process EnhancementPrivate LabelingPremium Infrastructure(Security, SLAs, Dedicated )Advertising / AffiliateSalesFirstExperienceFirst SaleIncrease Adoption(Number of users)Increase Consumption(Variety of services)Increase Usage(Activity volume)Architect product withlong-term revenuepossibilities in mind© 2012 The Shirman Group, Inc. All rights Reserved
  • Value StoriesAudiencesIndustriesSolutionsIntegrated MarketingChannel EnablementAlliancesContentStructurePeopleDEVELOP ACTIONABLESTRATEGYPLAN & EXECUTEGO-TO-MARKETCREATE CUSTOMERRELEVANCE© 2012 The Shirman Group, Inc. All rights ReservedWe believe real innovators are “tech-knowlegists” whocreate technology that matters to businesses and people
  • Resources• Consumption Economics by J.B. Wood• ForEntrepreneurs.com blog – David Skokhttp://www.forentrepreneurs.com/• Chaotic-Flow.com blog by Joel Yorkhttp://chaotic-flow.com/ (Guide to SaaS Metrics)© 2012 The Shirman Group, Inc. All rights Reserved
  • Web: www.ShirmanGroup.comEmail: lilia@ShirmanGroup.comBlog: www.RevenueOrchard.comTwitter: B2BGuruAvailable on Amazon.com at http://amzn.to/RC5Xjmor at the 42 Rules Publisher page: http://42rules.com/book/42-rules-for-growing-enterprise-revenue/MarketingCamp Discount: ADD12© 2012 The Shirman Group, Inc. All rights Reserved