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