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Geva Perry is an advisor and board member at cloud computing and SaaS companies. His blog, Thinking Out Cloud (http://ThinkingOutCloud.com), on cloud computing and software-as-a-service strategy and marketing is widely read and he is a frequent speaker on the topic. Geva has been named one of the Top 25 Most Influential People in the Hosting Industry, Top 50 Cloud Computing Bloggers and one of the 12 Top Thinkers in Cloud Computing. Follow him: http://Twitter.com/gevaperry. Geva is a DZone MVB and is not an employee of DZone and has posted 11 posts at DZone. You can read more from them at their website. View Full User Profile

The Importance of Customer Engagement for Cloud Companies

02.03.2012
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In July I wrote about the public beta launch of Totango and how it promised to help increase SaaS sales by better understanding customers, and especially their interaction with online channels, including the SaaS service itself.

Now, Totango has announced that it has analyzed and optimized the sales engagement or interaction with over one million prospects and customers of SaaS businesses. That’s a big number.

When looking at the research published by Totango here are some important takeaways for SaaS sales:

Next best action and next best channel for each customer

If you can, use a zero touch (self service) or low touch (inside sales) model. Using an inside sales rep (phone and email) is exponentially cheaper than using classic enterprise sales (somebody who gets on an airplane and wines & dines customers). And using a self-service sales model is exponentially cheaper than inside sales.  David Skok has published some of the math in his presentation on building a sales and marketing machine (see slides 18, 19, 20). As I know from my own experience with many companies, and as Joel York has pointed out, some B2B sales are too complex for zero touch or low touch selling, but generally modern buyers expect to be in charge and don’t always appreciate a call with a rep. The trick is to figure out which prospects would benefit from a sales call and which would actually be hurt by it. Big data from solutions like Totango can help: A/B testing batches of leads can help you figure out what is the best next action for each specific situation.

Know how your customers are using your service from day one

Not all prospects are created equal. Totango found that the single most important indicator of a prospect’s likelihood to sign up for a paid service is his or her activity level during the free trial period.  So if you know who your most active trial users are you can direct your inside sales team’s attention to these prospects. Free trial users who are still active during day 3 of their trial were 4 times more likely to convert into paying users than the average customer.  Active trial users who were contacted by a sales rep were 70% more likely to buy the paid service than those who weren’t (but of course sales reps are likely to choose the best looking prospects to begin with). Since a sales rep doesn’t have enough hours in the day (and is too expensive as noted above) to contact ALL trial users, it’s important to have each rep start their day by calling those prospects most likely to convert. This will increase sales effectiveness and sales efficiency: Zack Urlocker from Zendesk is quoted on the Totango website as saying that they were able to increase free to paid conversion by more than 30% using this approach.

Focus on customer success

By definition, the all-important customer lifetime value metric in SaaS is determined not by the value of the initial sale, but by the value of ALL sales made by a customer over its lifetime including expansion sales and subscription renewals. The key to success upselling an account is to know what value the customer has received from the solution to date. If you know that a customer has been successful, it’s an easy sale. If you call a customer and find out they have discontinued using the service months ago, it’s an embarrassment. You should really receive an early warning indicator that an account is no longer using the service and proactively address and turn a customer before they cancel the service. Totango’s research found that most cancellations are followed by a period of non-use and that non-use is more prevalent than you might think: a full half of paid SaaS customers log in less than once a month or do not use their paid service at all. Another 19% is using their paid service less than once a week.  

In summary, it seems to me that knowing your customer is rapidly going from a “nice to have” to a “must have”. Those early adopters of customer engagement software will be able to:

  • Dramatically increasing sales by analyzing customer data and deciding on the best next sales action for each customer
  • Exponentially lowering sales costs by routing prospects to the lowest cost sales channel

 

And those who don’t pay attention will very soon be at a very significant competitive disadvantage…

Check out this very cool infographic from Totango:

Published at DZone with permission of Geva Perry, author and DZone MVB.

(Note: Opinions expressed in this article and its replies are the opinions of their respective authors and not those of DZone, Inc.)