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 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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Sales and Marketing of As-a-Service Products
- 1. Selling and Marketing As-a-Service Products Welcome to Lilia Shirman, Managing Director, The Shirman Group © 2012 The Shirman Group, Inc. All rights Reserved
- 2. In 2015 24% of all new business software purchases will be of service-enabled software - IDC © 2012 The Shirman Group, Inc. All rights Reserved
- 3. Today • Is it a Product or a Service? • How can Marketing impact as-a-Service metrics? © 2012 The Shirman Group, Inc. All rights Reserved
- 4. Product © 2012 The Shirman Group, Inc. All rights Reserved
- 5. Product Delivery Mechanism © 2012 The Shirman Group, Inc. All rights Reserved
- 6. Product Delivery Mechanism Unless you sell infrastructure as a service, the cloud is just a delivery mechanism. © 2012 The Shirman Group, Inc. All rights Reserved
- 7. A reliable, secure, responsive, high performing delivery mechanism is table stakes. © 2012 The Shirman Group, Inc. All rights Reserved
- 8. © 2012 The Shirman Group, Inc. All rights Reserved You want some of THIS? What market are you in? What is your value? Which audiencescare? What proof do you have? You still need to decide…
- 9. Product or Service? Products Services Products as Services Buy Process Evaluation Interaction Experience Marketing Role •Messaging •Brand awareness •Lead generation •Relationship development •Thought leadership •Referrals •Scalable relationships •Usage insights •Offers •Word of mouth catalyst •Churn prevention •Partnership promotion Sales Process Linear Circular Continuous © 2012 The Shirman Group, Inc. All rights Reserved
- 10. Products Services Products as Services Release Cadence Months or years Real-time Weeks or Days Role of Consulting • Planning • Deployment • Customization • Integration Value delivery • Value design • Managed services • Proactive usage guidance • Drive adoption & consumption • React to problems Role of Support React to problems n/a Education •Product administration •Product usage •Development Knowledge transfer Value delivery •Product administration •Product usage • Optimizing value © 2012 The Shirman Group, Inc. All rights Reserved Product or Service?
- 11. Product or Service? Neither © 2012 The Shirman Group, Inc. All rights Reserved
- 12. Product or Service? Neither • Scalability • Repeatability • High Transaction Volume • Whole Experience • Loyalty • Adoption & Consumption As-a-Service Success Factors © 2012 The Shirman Group, Inc. All rights Reserved
- 13. How Can Marketing Impact Key as-a-Service Metrics? Conversion Rate Customer Acquisition Cost (CAC) Average Recurring Revenue (ARR) Churn Rate Lifetime 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
- 14. First Experience First Sale Increasing Conversion Rate © 2012 The Shirman Group, Inc. All rights Reserved
- 15. First Experience First Sale Increasing Conversion Rate Free trial users still active on day 3were 4X more likely to convert Active trial users contacted by sales 70% more likely to buy Evaluators who had 3 users joint account in 1st 3 days were 12x more likely to convert Source: Totango © 2012 The Shirman Group, Inc. All rights Reserved
- 16. • Be easy to find • Send daily usage suggestions and tips • Contact trial users • Focus on prospects who are actively evaluating • Provide reason or means to engage multiple users in a trial • Connect evaluators with existing users in their network First Experience First Sale Increasing Conversion Rate Free trial users still active on day 3were 4X more likely to convert Active trial users contacted by sales 70% more likely to buy Evaluators who had 3 users joint account in 1st 3 days were 12x more likely to convert Source: Totango © 2012 The Shirman Group, Inc. All rights Reserved
- 17. Keeping CAC Low First Experience First Sale © 2012 The Shirman Group, Inc. All rights Reserved
- 18. Keeping CAC Low First Experience First Sale $1.00 $0.90 $0.45 $0.75 Field SalesInside Sales Internet Channel Median CAC Source: Pacific Crest SaaS Survey 2011 © 2012 The Shirman Group, Inc. All rights Reserved
- 19. Keeping CAC Low • Can you avoid high-touch selling? • Can your product sell itself? • How are you influencing the Buyer’s Journey • How many points of entry are there? • Are you driving positive word of mouth? • Can your partners’ products sell yours? • Is your product inescapably viral? First Experience First Sale $1.00 $0.90 $0.45 $0.75 Field SalesInside Sales Internet Channel Median CAC Source: Pacific Crest SaaS Survey 2011 © 2012 The Shirman Group, Inc. All rights Reserved
- 20. Increasing Recurring Revenue First Experience First Sale Increase Adoption (Number of users) Increase Consumption (Variety of services) Increase Usage (Activity volume) © 2012 The Shirman Group, Inc. All rights Reserved
- 21. Increasing Recurring Revenue First Experience First Sale Increase Adoption (Number of users) Increase Consumption (Variety of services) Increase Usage (Activity volume) $0.93 $0.28 $0.16 New ACV from New CustomerUpsell to Existing CustomerRenewals CAC by Sale Type Source: Pacific Crest SaaS Survey 2011 © 2012 The Shirman Group, Inc. All rights Reserved
- 22. Median Churn Rate* 5% Decreasing Churn *Source: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
- 23. Median Churn Rate* 5% Decreasing Churn Source: Totango Most cancellations were preceded by a period of non-use *Source: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
- 24. Median Churn Rate* 5% Decreasing Churn • Pre-sale readiness evaluation • Business process / usage analysis & guidance • Customer Success Officer – assist with adoption and value • Proactive support for infrequent users • Simple pricing and billing • Opportunity for feature requests and input Source: Totango Most cancellations were preceded by a period of non-use *Source: Pacific Crest SaaS Survey 2011© 2012 The Shirman Group, Inc. All rights Reserved
- 25. Increasing LTV More First Experience First Sale Increase Adoption (Number of users) Increase Consumption (Variety of services) Increase Usage (Activity volume) © 2012 The Shirman Group, Inc. All rights Reserved
- 26. Increasing LTV More Analytics-based Best Practice Consulting Insight / Data Mining Usage Intelligence & Process Enhancement Private Labeling Premium Infrastructure (Security, SLAs, Dedicated ) Advertising / Affiliate Sales First Experience First Sale Increase Adoption (Number of users) Increase Consumption (Variety of services) Increase Usage (Activity volume) Architect product with long-term revenue possibilities in mind © 2012 The Shirman Group, Inc. All rights Reserved
- 27. Value Stories Audiences Industries Solutions Integrated Marketing Channel Enablement Alliances Content Structure People DEVELOP ACTIONABLE STRATEGY PLAN & EXECUTE GO-TO-MARKET CREATE CUSTOMER RELEVANCE © 2012 The Shirman Group, Inc. All rights Reserved We believe real innovators are “tech-knowlegists” who create technology that matters to businesses and people
- 28. Resources • Consumption Economics by J.B. Wood • ForEntrepreneurs.com blog – David Skok http://www.forentrepreneurs.com/ • Chaotic-Flow.com blog by Joel York http://chaotic-flow.com/ (Guide to SaaS Metrics) © 2012 The Shirman Group, Inc. All rights Reserved
- 29. Web: www.ShirmanGroup.com Email: lilia@ShirmanGroup.com Blog: www.RevenueOrchard.com Twitter: B2BGuru Available on Amazon.com at http://amzn.to/RC5Xjm or 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
Editor's Notes
- 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.