Skip to content

2020-06-14 Startup

Software As A Service

A Saas (Software-as-a-service) Marketing, Setup and Information Primer#

Here are a few acrticles I’ve read condensed into a single post about building, enhancing and growing your audience and revenue of a Software-as-a-Service (Saas) product.

Saas Terms#

  • MRR - Monthly Recurring Revenue, a measure of your predictable revenue stream. It normalises growth and churn which can be used to calculate Momentum and CLV (Customer Lifetime Value).

  • Growth Rate -

  • Churn Rate - The percentage of subscribers to a service that discontinue their subscription to that service in a given time period.
  • CLV (Customer Lifetime Value) -
  • CAC (Customer Acquisition Cost) -

  • CRO (Customer Rate/Retention Optimisation) - Measuring your marketing funnel and running tests to improve the number of people that move between each step.

  • AARRR - Acquisition, Activation, Retention, Referral, Revenue. Creating a funnel

  • Engagement - When a customer uses and gains value from a Saas.

  • Friction - Psychological resistance and effort that your visitors experience when trying to complete an action. Friction is a conversion killer.
Acquisition#
  • Visit Site - Landing page
  • Doesn’t Abandon - Views x pages, stays x seconds, x clicks
Activiation#
  • Decent 1st visit - Views x pages, stays x seconds, x clicks
  • Email/Blog Signup - Anything leading to a repeat visit
  • Account Signup - Signs up to account
Retention#
  • Email open
  • Repeat Visitor
Referral#
  • Refer 1+ user who visits the site
  • Refer 1+ user who activates
Revenue#
  • User generates minimum revenue
  • User generates break-even revenue

From 500 Hats Startup metrics for internet marketing

Categorising expenses#

  • Cost of Sales - Sometimes called Cost of Revenue. Record all the costs that go to providing your service such as hosting and customer support staff. Include also meta activities such as recruitment and deployment, task runner (jenkins, CI) as Cost of Sales. This is used to calculate Gross Margin and CLV (Customer Lifetime Value)
  • Sales and Marketing - Consists of costs relating to acquire customers such as Sales staff, google ads advertising, social advertising, email marketing, conference costs or newsletter costs.This is used to calcualte CAC (Customer Acquisition Cost) and CLV.
  • Engineering - Seperating Engineering out of General Admin Expenses can be used to compare against other Saas companies. This is any contract labour, research and development, designers and dev-ops. INcluding employee benefits and bonuses.
  • General and Admin (Overhead) - A catch-all for anything going to running the day-to-day operations of the business. Examples are rent, utilities, telephone and internet. Depreceiation and interest income go to a seperate account: Other Income and Otjher Expense

The source of this information is baremetrics categorizing expenses

50 Saas Adoption tips#

You want your customers to know about your product and find value in it, here are 50 good tips from unbounce (there are too many tips, the first few are pretty good though)

Saas Onboarding and Tips from People who have had success#

Focus on success and learn some good saas onboarding tips from Successful entrepreneurs

The most important ones for me were:

  • Determine the quickest way to value and prioritize those goals for your users
  • Get into your customer’s heads, don’t overwhelm them and make them do things they don’t want to. Onboard the way they want to be onboarded.
  • Anthing that doesn’t make the customer say Aha! should be removed
  • Onboard based on behaviour, if a customer is making great use of the product features then they are more liekly to commit.

Trial and Retention#

40 - 60% of users who sign up for a free rtial will use it once and never come back again

Acquisition vs Activation#
  • You spend R150 on bing ads to get 1 user signup
  • You make R300 for every customer you have
  • Lets say half your users will not activate, they’ll never experience the key action that seperates your product from the other Saas tools out there and won’t become a fully featured user.
  • R300 * 50% = R150 which is the same you spent on bing ads. So you break even

Just like optimising ads, you should optimise your activation process to successfully onboard as many users as possible.

Activation in Steps#

Improving activation rate should be done along with other Conversion Rate Optimisation (CRO) efforts. There are a few steps or goals that a users needs to complete to be “activated”. The goal is to get as little dropoff as possible at each stage.

Focus on the largest dropoff rate.

Kill Friction#
  • Remove unnecessary form fields
  • Reduce visual friction
  • Cut down the number of steps users have to take - favour automatic over manual
  • Clarify onboarding language - clear, concise and action oriented.
  • Improve site performance - Load time, scrolling and page performance matter.
Know your Ideal user flow#

Write down the steps for your ideal user flow. Track the quantitive (quantity) data.

Optimise your Activation Threshold#

It is important to get qualitative (quality of experience) data from customers that actually sign up.

  1. Call people that drop off and get info
  2. Set up a survey tool
  3. Watch users go through the process

Figure out what the major road block is to that activation method. You can then use that info to guide an A/B test and see if that improves.

For example, you might try sending a triggered email to users who’ve created lists and haven’t customized that list for 24 hours or product walkthrough or popup to make process easier.

Other ideas:

  • Have amazing support
  • Automated Welcome email - sending a personalized email from the founder within an hour of a user signing up
  • On-boarding flow - Creating a first-time-user onboarding tutorial or flow can be critical in including your activation rate
  • Lifecycle emails - Expose new features based on behaviour of user in the app
More steps to better activation#
  1. Setup proper analytics
  2. Test multiple steps in the activation funnel - look at the actions of your best customer
  3. Create an activation pipeline
  4. Design an A/B Test
  5. See impact of the test on user activation
  6. Rinse and repeat. Target an activation rate of 60% or more.

From Activate or die - User activation in Saas Part 1 and Activate or die - User activation in Saas Part 2

Never Losing Saas customers#

To reduce Churn you need Engagement, that is customers using and gaining value from your product.

Ask for Engagement#

Measure engagement by trackng product usage data. If a customer regularly uses your product you have nothing to worry about, if it drops you need to figure out why.

  • You can track login regularity
  • The most valuable way of retaining clients is to contact them directly
Be proactive about expired or cancelled credit cards#
Always be Selling#
  • Create great customer service
  • Provide quick deployment and rapid configuration
  • Be Scalable - grow with your customers
Improve the features that really matter#
Give Upgrades, Discounts or Random Rewards#
  • One month Free
  • A percentage discount for a year
Be totally transparent#
  • Notify Users of downtime
  • Give customer advanced notice of pricing or contract charged
  • Explain to customers where their money goes
  • Answer any questions
  • Make it easy for users to cancel the service
Focus on Retention Optimisation as opposed to Conversion Optimisation#

New Users are great, Retained Users are even better.

marginal differences in retention have a huge cumulative impact.

Source of the above note is Neil Patel: Never losing a Saas Customer

Nailing Saas Onboarding#

Once you know the customer success path or milestones, you need to decide on low or high touch onboarding.

Low touch onboarding#

Low touch is automated onboarding, a one-to-many approach, best suited for many low value customers. Some low touch strategies are: An email series based on behaviour, tour videos (preferably small chunks), webinars, social media groups and a knowledge base. Importantly you want to minimise the amount of manual work a customer needs to do with the correct integrations for this method.

High touch onboarding#

Conceirge, one-to-one, onboarding. THis method requires more manpower. This is the type of onboarding generally favored by SaaS offering more complex, expensive software to enterprise-level organizations.

Using high touch onboarding does not mean that you must not use low touch, on the contrary this will benefit the whole process.

You get better feedback with high tounch onboarding.

Some high tounch strategies are being selective about signups (customers must give extensive details), scheduling regular phone calls, sending personalised emails.

The key is retaining the customer by ensuring the customer sees and understands the value and gets full use out of the product

You need to understand What customer success looks like and what customers need to do to get there

Source of the above article is Has your Saas Nailed the onboarding process?

Improving the Saas Free Trial#

Growing your business:

  1. Get more customers
  2. get customers to spend more
  3. get customers to stay longer

As an early state startup #1 is crucial and especially to get qualified leads. Generating leads is wasted if nobody buys at the end of the trial. Building an effective free trial is not easy, you can’t just set and forget

The goal of the free trial is to quickly get the prospect to a point where becoming a paying customer is the most logical next step, which is immediately after the customer achieves or that they could achieve the outcome by using the product

The customer wants automation, time saving, admin saving and insight into their business into making more money.

For Hubstaff the ideal customer flow is:

  1. Set Up their projects
  2. Invite their team
  3. Track time - time tracking is the meat an potatoes, the real value is insight into how employees and contractors are spending their time
  4. View reports - the value step, the Aha! moment. Staying on top of your team, no more spreadsheet or guessing. Just one place of accurate data.
  5. Deepen engagement with integrations

Each of these steps are reinforced by an automated email

What seems to be working#

Asking for feedback when the user becomes stuck

If a user hasn’t taken a necessary step for success, we follow up with an email asking for feedback and offering assistance. Emphasise the benefits here like This is what you are missing out on

Trying to improve trial performance without asking for user feedback is like throwing darts blindfolded.

Welcome from the founder

Hi there, I saw that you signed up for a free trial the other day. We’re glad to have you! My name is XXXXX, and I’m one of the co-founders. At XXXXX we’re super focused on building a better product for our clients and most of the stuff we build comes directly from talks I have with trial users - like you. Can you hit reply and tell me what you’re hoping XXXX will do for your business?

Kind Regards....

Exit Survey

If a user has not upgraded to a paid plan within seven days of their free trial ending, they receive a simple exit survey asking them why they cancelled.

I know we’ve sent you a few emails, but feedback is the best way to help our customers. Can you help me out? Can you hit reply and tell me why you didn’t upgrade/continue?

A complaint about a feature missing that you aren’t going to provide helps with marketing.

  • Important with emails is to come across as helpful and not as annoying.
  • Try and A/B Test Email subject line

You should aim to have high open rates on the end of trial emails

source Hubstaff Improving your Free Trial

Saas Pricing: The Big Freemium Mistake#

Having a generous free tier in your Saas will end up costing you.

Why is doesn’t work#

Think of all the services you would drop if they weren’t free… Free stuff doesn’t carry as much value as stuff you pay for.

Some users don’t value your product enough to pay a price or will switch to an alternative.

Free Users Bring More Free Users#

Gaining users because it is “Free” and not that it is awesome or useful is not something to be proud of. These free users are not influencers and aren’t going to help you grow or get other big clients.

Free Users eat up Support#

Someone willing to pay shouldn’t wait behind people not willing to pay.

People take advantage of Free Accounts#

People will use different email addresses and open new accounts instead of upgrading.

What we Learned#

If someone values a product they will pay for it#

User acquisition is not a money making arms race

Free is not a competitive advantage

The 3 user plan is the highest draw#

Check the baremetrics of Hubstaff

Value your Work#

A startup costs money, like any other business. You put money and value into your products and services, marketing and people.

Source: Hubstaff Our Free Pricing Mistake

How to get the first 10 customers for yout B2B Saas Startup#

If you don’t have buyers you don’t hae a business

Startups (some) are afriad of selling. They spend all their time on product development and no time actually seeking prospects.

Start Selling

Step 1: Create a landing page#

Buy a domain name and a basic web page. A form for contact, a couple of media links and logo.

Step 2: Reach out to your Immediate Network#

Is there anyone in your direct network who will find your product valuable? Friend, Family or Coworkers?

Ask for referrals and introductions.

Step 3: Start a Blog#

You need a presence and credibility.

  • Discover and develop relationships within your market
  • Pitch your solution and receive immediate feedback
  • Establish yourself as a though leader (Oh god, maybe bad advice)
  • Increase online searchability

More Info on Close.io: How to get the first 10 customers for your B2B Saas Startup