In this URL od6 represents the first sheet in the book/spreadsheet. Someone said that other sheets are represented by od8, od10 and so on, but that didn’t work with me. So dug around the comments on different posts and here’s the answer: simply use numbers instead of od6.
When you say “reduce SaaS churn”, most people will immediately imagine tactics like drip email campaigns, great onboarding, customer marketing, gamification and automated alerts when users show signs of leaving. But this post is not about tactics. This post recognizes that users are smarter than any of the cute tricks we can come up with, and it attempts to get to the core of why there are some products that business users keep paying for, and others they discard.
If you’re a founder or product manager, I’ll encourage you to think deeply about this stuff, versus thinking about your next “growth hack”.
Products on which company processes are based
There are products on which organizational functions are dependent and processes are built. These are usually CRMs, Marketing Automation, HR software and Support software. The defining features are
they’re used by decision makers for reporting purposes and are often used to track teams’ KPIs and goals
they’re used to run day-to-day functions of the team and organization, for example, the process of applying for and approving employee leaves, or changing the stage of a sales opportunity
some people are logged in to the system during their entire working day
others log in once in a while to complete certain tasks
the system collects and retains valuable data that companies are not comfortable losing
Some observations about these products are
the sales cycles are usually longer than a month
customers will rarely buy these products without first being sure of the processes that are dependent on them
they need extensive API support and data integrations, because the data they collect becomes more valuable once combined with other data
heavy cross-functional training is required after the sale, and the product takes the blame if a customer org. doesn’t adopt and use it to the best of its capability
you need a lot of quality documentation so that you’re not overburdened with support tickets
An important note about products used by decision makers
When I started out at VWO a few years ago, the most important metrics were “free-trial signups” and “paid customers” (about 95% were self-service monthly subscriptions). Back then, Google Analytics (GA) was our most important source of data. We recorded free-trial signups, upgrades to a paid subscription and revenue in GA so it was what we looked at everyday.
In the past couple of years, we’ve started serving more mid-market and enterprise customers. Because of this, a few things have changed:
The average deal size has increased from $x00 to $x0000
The quality of free-trial signups matters as much as the quantity
A large amount of revenue comes from payments made through bank-transfers and other offline methods
“New MRR” is now more important than “new customers”
Because of all these changes, Google Analytics isn’t important anymore. Instead, the big decision are made after looking at reports in the CRM and our database, where all lead/deal/customer/revenue data sits. Through this shift I observed how when businesses evolve, the metrics that matter to them change, and this has a domino effect on the SaaS products that fall in and out of favor.
Now here’s another interesting anecdote: VWO has a large number of ecommerce customers. For the majority of these businesses, Google Analytics is the “source of truth”, so we simply had to build an integration with GA. In fact, we once lost a big customer because their VWO test reports didn’t agree with their GA data (completely possible and for good reasons, read this to understand why). The internal VWO champion tried to fight it out and explain the difference to management, but we lost the customer after some time.
So my point is this… it is well worth your while to build capabilities that will be used to make the important decisions, and if that’s not possible, then align your product with the primary reporting tool used by your target market.
Products that give results with minimal effort after initial setup
Some of these are:
Lead generation pop-ups, sidebars
Landing page software (specially when tied to on-going PPC campaigns or SEO keywords)
Retargeting software, like Perfect Audience and AdRoll
Exit intent pop-ups, almost always tied to lead generation
While you’re building a product that keeps producing results with minimal interference, give a thought to how you can add public branding for that little bit of ‘virality’.
It’s also important to note that products tied to performance will quickly be removed when that performance isn’t enough. In this case, the product itself may be great, but it is dependent on something else working. For example, landing page software gets abandoned when the Adwords campaigns it was used for aren’t working out.
Products that monitor and provide reports and alerts on a recurring basis without needing additional effort
Few that come to mind are
Mention (social mention tracking, we’ve had it on for at least a couple years… rarely log in but open almost every daily email report)
SEOKeywordRanking (SEO keyword rank tracking; old school interface and not updated in a long time, but am sure its creator Will Reinhardt doesn’t need to work anymore)
While building your product, talk to users about the data they find most useful and want to look at everyday, or see what parts of your reports are accessed most often, then send that data out as daily/weekly emails. It becomes a part of users’ morning routine to check the emails and note/discuss/alert if something’s going right or wrong.
Products that enable data flow between different systems
Think Zapier, PipeMonk, Jitterbit and Informatica. Admittedly, data integration is more of an enterprise problem, but the good thing is that once put in, they’re very difficult to remove. That’s because they’re usually implemented after someone high enough has identified the need to have all the various data silos talking to each other, and that robust decisions can’t be made without a complete picture of the issue at hand.
Case study: Hubspot
Processes are based around the product? Yes, for marketing and sales
There’s someone almost always logged in? Yes, marketing
Managers use the product to report on performance? Yes, primarily marketing qualified leads, then customers and revenue
Product collects and retains valuable data that customers are not comfortable losing? Yes
Has components that produce results without needing on-going effort? Yes, lead-gen landing pages, website personalization, automated rule-based emails
Components that monitor and alert automatically? Yes, primarily alerts to sales owners about lead activity, and other alerts around social media, monthly/quarterly goals, etc.
Components that enable data flow between different systems? A well maintained and documented Salesforce connector, otherwise they have a platform for developers
As you can see, Hubspot is doing pretty well in minimizing churn. It seems to me that would be the case with most large, successful SaaS products. In fact, understanding the reasons why organizations keep paying for products is why large successful software are large and successful, as compared to just large.
I hope you’re able to use this post as a framework to think about what makes products stick, and apply those principles to the products you’re managing or building. Also, do you have anything else I can add to this? For some reason it seems to me the list is incomplete.
Generally speaking, affiliate marketing in B2B SaaS depends on
how you want to incentivize the partner
your average ticket size from one referred sale
how fast your product is selling
the cost of acquiring one customer
how much post-sale training and support is required by the customer
who provides this training and support
the cost of this training and support
Here are some general rules of thumb
If your product is flying off the shelves and is primarily DIY, then you can have a 10 to 15% monthly commission for the lifetime of the customer and you’ll have affiliates queuing up to sell.
If the product is not selling, is not well known, or has a bad reputation, then you’ll have to significantly increase the commission (and therefore, your CAC) to get affiliates interested. If your average deal size is less than $150 you’ll find it extremely difficult to find long-term, committed partners.
If you have annual contract values in the $xx or $xxx thousands, then you’ll rarely have affiliates. Instead, you’ll go for strategic partners who will work with you pre and post sale (like Salesforce or Radian6) and the deal will be more complex than a 15% commission. In such cases, it might go up to 60% where the partner provides lifetime support and training to the customer, while you make a sale and get out of the way.
If you’re on MRR and churn is more than 2% monthly (meaning it’s easy for customers to switch or stop using your product), pay the partner their commission for the lifetime of the customer. If you pay for only a year, then the partner has every incentive to ask the customer to switch to a competitor after one year, or simply stop caring. If you’re paying commission for the lifetime, then the partner has some incentive to keep the customer with you.
Don’t be cheap. In SaaS, a good LTV:CAC is 3:1 so try and pay handsomely for performance. Eg. if a customer stays for more than 6 months then the partner gets 20% monthly (from month 7 onwards), if the customer stays for more than a year then go ahead and pay 25% monthly.
End of the day – partners are not invested in your growth, they’re invested in theirs. So you will have to show them potential returns. Which is why referral and affiliate partnerships work best AFTER you’re a name in the market and are already selling a lot on your own.
A few months ago, we got together a cartoonist and a developer to create a crazy-ass parallax scrolling page. This particular piece of beauty is probably the easiest guide to A/B testing on the web. It is really good and we were mighty excited to share it all over the interwebs. As part of that, we first shared it on HackerNews.
Pretty sweet huh? The post was smartly shared on HN in the morning when most of the US was asleep and it stayed on HN’s front-page for almost the entire day. We got a lot of comments and our traffic saw an immediate (but obviously temporary) spike.
Even better, our active trials (the CTA at the end of the page was to sign up for a free trial of Visual Website Optimizer) shot up like there’s no tomorrow!
So all this felt really nice. We spread this in some other places and got interesting responses. I happily reported to the CEO that we’re reaping significant benefits and the campaign is working well.
The truth unfolds
This is what our active free trials looked like after the campaign (time frame: start of campaign to three months later).
At the end of the day, this was a push that bumped up our ‘free trial’ signups, but couldn’t sustain that number. Kind-of obvious. One can’t expect HN to always be following you. But what was surprising was that not one of those free trials converted to a paid account. That’s right, not one single convert from all the HN traffic.
Absolutely no transactions from those who landed on the page!
The mistake
We ran after vanity metrics like page views and “sign up for free trial” (yeah, in this case that’s a vanity metric). The bigger mistake was that the we got carried away with our work and ran to show it off to those who would appreciate the technical aspects of it. In the process, we neglected the Small Business Owners for whom it was originally meant, and who would actually be influenced by the page. The readers of HN understand A/B testing very well and don’t need a simple story/analogy like Bob. But small business owners worldwide would have really connected with it.
Unfortunately, very few of them actually got to see it.
What we learnt from this
Here’s what we (and you!) can learn from this:
HN is great to introduce new technical concepts (we created a cool parallax page to explain A/B testing and introduce Visual Website Optimizer)
HN might be good if your product solves the problems of technical people
Before creating any marketing campaign/message, think very carefully about the target audience and how you want to reach them
At the end of the day it is all about being relevant
Here’s another nugget of insight that we gleaned from the conversation that happened on HN.
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I remember reading something very interesting about why parents are so concerned about their daughters staying out or partying late, but being lenient with sons of the same age. The point made was that parents don’t get to share in the good parts of a daughter going out with a guy, they only get to see the ugly bits (and that there aren’t too many ugly bits when it concerns a son).
To explain, all the fun parts of a relationship… the flirting, infatuation, romance, sex and sweet little nothings, etc… parents simply don’t experience it. But what happens when things go bad? And by bad, I don’t mean when a relationship sours and there’s heartbreak, I mean when things go really bad. Like the girl is molested or raped or sexually taken advantage of, and all of it caught on a cell-phone camera.
That is when parents and the immediate family bear the brunt of society as much as the girl. Relatives, friends and jaankaars gossip and spread half-truths that usually condemn the girl as loose and without morals. If the media gets wind of it they come running like hyenas hoping for some fresh meat to throw in front of their viewers. Policemen and government agencies that get involved are even worse, making sure the girl and her family go through hell.
As you’ll realize, parents generally don’t see the good parts of their daughter’s relationship. They usually see the bad, so it’s kind of obvious why they aren’t exactly chuffed when they hear the girl acquired herself a new boyfriend. In a risk-reward tradeoff, they’re only seeing risk.
Getting to the point – stopping the rapes
So I thought about it. The reason it is so bad when a girl has been sexually taken advantage of is because society points fingers and says shit about her and her family. This so called “disgrace in the eyes of society” is what makes it so bad. I mean, if no one said anything, that would indicate they probably didn’t care. And if they didn’t care, they’d just move on with their lives. The girl and her parents would file a case against the boy and try to move on with their lives. The policemen would file a complaint and set in motion the due process of law and move on.
But no, nobody moves on. So let’s try turning this process on its head. Next time, whenever a male is even accused of mistreating, eve-teasing or sexually harassing a woman, start talking shit about him. Make up disgusting stories that put his entire character into question. Add masala like it’s free and fling some on his family and parents also. Go to the media and say that he was involved in a prostitution and human smuggling ring. Explain breathlessly how seedy characters regularly visit his house in the late hours of the night.
If you’re in the media, even better! Make stuff up like this
Core of the Issue
Take the fight against rape to those who can nip it in the bud – the man’s family. You know why am I taking such a radical stand? Let me explain. Human behavior is about incentives. So if my son molests a woman and I can make him get away with it by blaming the woman, or laughing it off by saying “ladke toh aise hi hote hain“, or worst case scenario, making him marry the woman… then I will. Not because I’m a bad or a good person, because my incentives are stacked that way.
So you see this photo?
It’s so sweet. “Don’t teach me what to wear. Teach your sons not to rape“. Sounds so nice also. Yeah, a slogan we can all fight for. But it is wrong. The mother who’s been taught that women must bow down to men will teach the same to her sons and daughters. And I kid you not, I’ve seen it up close and personal. Educated women who teach their daughters that women are destined to suffer. Also, when her laadla son is in shit, the mom will do anything to defend and get him out of the situation, which frequently includes going after the girl’s character.
So what do you do? Introduce massive disincentive for the family if the son fucks up.
Seriously, when the father and mother realize that society will hound them to death if their son is caught teasing, molesting, touching or raping a girl, they’ll damn well ensure he doesn’t do it. And moms all over the country will tell their sons very clearly
I don’t give a fuck what she is wearing. You’re not to touch her, or I’ll break those arms of yours.
Oh and if I may suggest this, here’s some optimization to the protest location strategy.
Hey, but what if the man is not guilty?
Then you’ve probably condemned a man to hell, made life miserable for him and his family and probably put them under great financial and emotional strain.
But every battle has its casualties. It just depends on what matters more to you, dear reader, and how much of a price you’re willing to pay. If you really care about stopping the rape of women in our country, then you must attack the root cause of the problem – disincentivize those who do it. This obviously means that some men get treated unfairly in the process and get caught in your ire.
It’s called the Law of Sacrifice and it states
You have to give up something in order to get something
If you feel that the sacrifice is too large, then that’s cool too. You could do the other things that you feel will solve the problem.
Close friend of mine went to a New Year’s party. He was looking for some action but got none. This poem was written by him but he shall remain anonymous because he doesn’t want future employers to see this in case they googled his name. So, ladies and gentlemen, I present to you the unedited version of “The Rime of the Ancient Engineer”.
To a club of honey and milk,
the geek goes to freak;
Accompanied by his ilk,
clad in his finest silk.
Of cheap liquor he reeks,
and to get laid he seeks.
With stealthy glances he peeks,
at the rosy ass-cheeks;
And longs to dip his beak
between the mounds and the peaks.
But his pants betray a leak;
And the pretty girls go “eek!”
While he stands like a hick,
with a raging lonely dick.
Alas! the misses call him sick.
And all that he yearned to lick,
is gone in a tick.
Here’s an interesting phenomenon across Indian b-schools: everyone wants to be doing some kind of “strategy”. You ask a fresh-as-fuck 22 year old engineering grad what his latest live project is, he’ll say “brand strategy”. Or ask the 27 year old with 4 years experience in Infosys/HCL/Accenture/Wipro/Cognizant/you-get-my-gist, and he’ll say “IT Strategy”. This thought process manifests itself in the inter-college competitions that students organize. See http://www.dare2compete.com/events/search-result/0/0/0/0/12/strategy for all the fun strategy events.
Here’s a fun look at why this happens.
What MBAs mean when they say strategy
“Lots of armchair gyaan and suggestions, but not one muscle movement worth of execution.”
Let me clarify. The MBA course is filled with “real life” case studies. Most are from the Harvard Business Review, but a few are culled from other sources too. These case studies can almost always be broken out like this
Business problem
Data (usually incomplete)
Few generalized directions that the business can take
A bunch of MBAs eager to provide their suggestions
In this situation, almost no one knows what the right approach or answer is, so the MBA (or the professor) will take out his most celebrated tool; the case framework. This he will use to analyze the problem from all angles that the framework affords and will finally come up with what he deems to be the solution. Similar mental gymnastics will then be performed by the other MBAs and the professor, followed by a discussion of what the organization did in real life and why it worked/did not work for them.
However, no one ever talks of the execution part of it. Everyone’s busy imagining themselves as the CMO or CEO, yet no one ever tries to think of it from the perspective of the other 20 years of their careers when all they’ll be is Chief of Jackshit.
Why does this happen?
Because to be able to execute better, you need to have some sort of previous experience in that field. In India however, most people don’t join an MBA program because they want to further their career in their field of specialization, no sir, they do it to switch tracks. Why do they want to switch tracks? Because most often their pre-MBA tracks are
Engineering (B. Tech, B.E. followed by some IT company)
B. Com. followed by CA preparations and a job in some bank or financial institution as an Analyst
Fresher, no work experience
Yet, these often trudged pre-MBA tracks are hardly the ones that most people want to stick to. They’re simply those that were available and paid what then seemed like good money. So since you have no previous knowledge in that field, you obviously can’t talk jackshit about execution. However, anyone can talk about “strategy”. It’s so easy because not even the prof can question you (after all, he himself doesn’t know the answer) and there are a hundred ways any strategic decision can pan out, and yours just might be the correct one.
Glorification by Management Consulting
“Strategy” is also coveted because it is what Management Consulting claims to do. And I’m sure you know how well those companies pay.
In fact, I think one of the reasons why Management Consulting is such a hot career path is because you get to meet such important people and influence such important decisions without any actual “get-stuff-done” involved.
Glorification by b-schools
“Strategy” beautifully ties in with the vision sold by b-schools to students and the inflated expectation and sense of entitlement that the students consequently carry with them. B-schools will never say that in most cases, post MBA you’ll have to slog it out for at least two decades. That just isn’t as exciting as convincing young people that they’re going to become “leaders” the day they step out. And as you all know, leaders don’t get stuff done. They just provide overriding strategic direction and play golf. Just for shits and giggles, checkout IIM Shillong’s golf cup website.
Due to all these reasons, I think the word “strategy” has been put up on some kind of false pedestal. More so since it covers up for a lot of bullshit.
A real life example
Back in first year of MBA, I got selected by one of the companies who were offering a live project on campus. The project outline was
Prepare an entry strategy for XYZ consultants to enter – South
Africa and Kenya. This should include:
Local Economy, currency, laws, regulations, etc
Target Customers (including geographical spread and key decision maker)
Possible Indian Firms
Possible MNCs
Possible Local Firms with owners having Indian roots
Others
Target areas in HR Consulting (non-recruitment)
Current consulting eco-system
Locally based HR Consulting firms
MNC firms
Indian HR Consulting firms who are doing business there
Strategy details
What to do in the time period – including how to visits, which companies to approach
· First 3 months
· First 6 months
· First 1 year
· First 1-2 year
Business projections
Dos and Don’ts
Possible local partners
Others
Time fame – 3-4 weeks.
I hope you notice the “entry strategy” right in the beginning. In terms of ego and bragging rights, such a project is pure gold. After all, I got to write “Market Entry Strategy” in my resume. Back then, I remember thinking that just this project would qualify me to get through the CV screening of any consulting firm which came to hire on campus.
But before I get too carried away, let me point out the bullshit to you.
Local economy – the company would hardly be bothered by local economy. They’re a smallish firm that could easily outmaneuver anything happening at the level of the “economy”.
Currency – They’d only be interested in exchange rate and what is the best way to bring cash back to India.
Regulations – It would be silly for an organization to ask MBA students to find out what the laws and regulations for their business in South Africa are. This would be the job of a law firm that specialized and had a lot of experience in this kind of thing.
Key decision makers – No way someone doing secondary research could find out the dynamics of an organization and who it’s key decision makers are. For this, best person would be an experienced Sales professional who understand B2B buying and goes and meets the various stakeholders within that organization.
And so much more that I’ll stop.
Basically, I could go on with pointing out why this is essentially a BS project outline. Oh, and we didn’t submit any of this shit to the company. Our first week, we delivered a “Macroscopic Analysis of South Africa”, all of 5.5 pages long. The contact person reached out to us with what he really wanted: what kind of soft skills training happens in SA, who are the major players and what kind of training programs do they provide? And the fun part is, we didn’t deliver that either, because there is no way you can find out all of this without being in the market yourself.
Eventually, he asked us to find the cost of flying out to SA, camping over there for a few days and moving around trying to setup talks with a few people. If you can’t imagine how that works, it basically means googling “India to South Africa airfare” and surfing all the travel sites for average hotel and taxi rates.
That, my dear reader, along with some hashed up data and analysis pulled from various “Doing business in South Africa” reports was the market entry strategy project that we did.
So what can you do?
If you’re a recruiter
Be very wary of anything “strategy”. Look for simple indicators of employability instead of being swayed by high impact terms that are essentially fluff. Also, realize that persons best suited to understanding things from a strategic perspective are those who have been there and done that. If an ex-Infosys person talks at length on “Brand Strategy”, drill her on the basics of branding. Fundamentals are solidly in place? Good to go. Trips up? Provide her the swift kick she should have gotten much earlier.
If you’re an MBA grad
Stop bullshitting. Get something more substantial on your CV. Seek out projects where you actually get your hands dirty. Stop thinking of ground work as dirty work. Start your career by peeling potatoes.
