Stretch vs. Bad-Fit Customers

bad-fit-vs-stretch-customersWhat are the characteristics of a Bad-Fit Customer for your business?

It’s great to know who your Ideal Customer is (my Ideal Customer Profile Framework is constantly updated), but it’s much easier – and I say required – to first identify the types of customers that are a bad fit and the characteristics that make that so.

If we want to build a business that’s free from churn and designed to move customers along an Ascension Path, we must acquire customers that have Success Potential. Period.

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You Have to Know why Your Customers Churn

You Have to Know why Your Customers ChurnWhen customers churn, that’s a problem.

Even if their churn was “unavoidable” it still hurts.

Churn hurts on several levels: from lowering revenue to hurting employee morale.

And churn means something happened to the customer (out of business, acquired, etc.) or – and MUCH more likely – they didn’t achieve their Desired Outcome through their interactions with your company.

In order to avoid churn in the future, we need to learn from the churn that has occurred in the past.

Which means every former customer must have a reason associated with them.

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Pricing Strategy Framework for SaaS Startups

pricing-strategy-framework-for-startupsPricing doesn’t exist in a vacuum and is therefore not something you can tackle on its own.

Pricing is a function of marketing and determines, among other things, your market position. It also indicates – or is ideally derived from – the type of customer you want to do business with.

And of course in SaaS, pricing is tightly coupled to the product itself, which is different from other types of software and non-tech products where the price is decoupled from the product.

Which is why I can’t recall a time where a SaaS company came to me with a “pricing problem” and there wasn’t something else that was going on, too.

In fact, their “pricing problem” often had little to do with the actual “price” – the numbers – and more to do with pretty much everything else (chosen revenue model, customer segmentation, value proposition, marketing strategy, conversion optimization, etc.).

So, when those in an early-stage startup – or those bringing a new product to market within an existing company – ask me for help on pricing, I always say that you won’t get it perfect out of the gate, but you can get it as right as possible.

And then I give them a high-level pricing strategy framework, which I thought I’d document and share with you in this post.

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Qualifying Leads in a SaaS Free Trial

qualifying-leads-in-a-saas-free-trialI got this set of questions on Twitter: “Is there a certain level of activity during the free trial that is likely to predict conversion from free to paid? Also, how do other companies handle Sales vs. Marketing Qualified Leads (SQL vs. MQL) when it comes to Free Trials?”

I thought that was an awesome set of questions because it indicates the person asking is starting to look at their Free Trial as a true sales pipeline; something more people and companies should do.

So I loved the question and I thought my answer was equally awesome (if I do say so myself), so I decided to expand on it a bit and share it with you, too.

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The Fiction that Friction Improves Customer Onboarding

The Fiction that Friction ImprovesA few months back an article was published that talked about how this popular brain training game (I can’t remember what it’s called) made their onboarding process MORE complex – not less – and increased their active users by 10%.

While the article was very clear on when to add friction, most of the discussion around the article that I saw fell into the category of “yes, that’s brilliant! I hate my users and customers anyway, so I’ll add MORE friction to our onboarding and we’ll improve like crazy!”

Crazy is the right word… but the context is wrong.

What they should have said was “I’d be crazy to simply add friction and think for a second that the outcome would be in some way positive.”

Unfortunately, this idea of adding friction has come up a few times recently on a few Clarity calls, so I feel the need to dig into why adding friction all willy nilly is simply one of the stupidest things you could do.

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Customer Psychology and the Unexpected Power of Surveys

Customer Psychology and the Unexpected Power of SurveysSurveys can be dangerous if used wrong, but can be super-powerful if used correctly!

Whether it’s the Net Promoter System to gauge customer satisfaction, doing pre-launch customer development work for your startup, or one of the myriad methods we use to interact with and learn from our customers, prospects, and other people, surveys are by far the easiest to implement and most effective feedback mechanism at scale.

The problem with surveys, aside from all the ways that people generally mess them up (too many questions, leading the witness, not specific enough, poorly targeting / segmenting the audience, etc.), is that the underlying psychology of surveys is rarely taken into consideration.

Now I’ve said before that I’m not a big city psychologist, but I spend a lot of time studying psychology and human behavior as I try to figure out why people do what they do and also how to get them to do what I want them to do.

And some of that studying led me to realize that many of the behaviors we employ around surveys – especially in the Customer Success world with the use of NPS surveys – can have a very negative impact that does the exact opposite of what we’re trying to do.

In this article, I explore how we use surveys and suffer the often unintended consequences.

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How Social Proof Actually Works in Marketing

How Social Proof Actually Works in MarketingI’m not a psychologist, but I play one every day as I try to figure out why people (users, customers, visitors, etc.) do what they do… and how to get them to do more of what I want them to do.

I spend a lot more time reading books about – and otherwise studying – human psychology and the way our brains operate, than I do on specific marketing techniques, growth hacks, or the latest viral sensation.

Those things are fleeting, but the way our brain works is much slower to change.

One of the people I’ve learned the most from when it comes to human behavior is Dr. Robert Cialdini, starting with his game changing book Influence. He and others from his Influence at Work group have released other books that provided real-world examples of how to leverage the principles of Influence – or avoid them – but Influence is still my go-to resource.

Dr. Cialdini has posited that there are six principles of persuasion – Reciprocation, Liking, Consensus, Authority, Consistency, and Scarcity – each of which has the power to elicit certain behaviors (simply due to how our brains work) in those at whom the principle is focused.

In this article I want to explore the Principle of Consensus, otherwise known in marketing as “Social Proof” and in Customer Success as “Advocacy.”

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Customer Success Starts at Sales Done Right

Greg Pietruszynski - CEO - GrowbotsAfter getting a demo of their new product from their Chief Data Officer (Luke Deka) while I was in Poland, I was excited to catch-up with Greg Pietruszynski, CEO of Growbots, when I got back to San Francisco.

We talked about lots of different topics, but the post that my friend Steli Efti from shared a while back – 4 Sales Mistakes That Lead To High SaaS Churn – came up.

Greg said the post was a brilliant summary of tactics that can help you focus on the right customer segments and therefore decrease long-term customer churn.

But then he said something that I thought would make a great post… it’s one thing to know who to sell to; it’s quite another to actually make the sale.

It’s yet a another to make the sale with Customer Success in mind.

Luckily, Greg agreed that this topic would make a great post.

I have a few things to say in the After Word about how churn hurts your Total Addressable Market, but until then, take it away Greg.

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Achieve Network Effect on a Smaller Scale

Piotr Zaniewicz - Right HelloI was talking to my friend Piotr Zaniewicz the other day about the importance of network effects on SaaS businesses.

I mentioned how the common misconception around network effects is that, in order to achieve a real network effect (this is the reason some people say B2B SaaS can’t be “viral”), the level of critical mass necessary for network effects to take place usually requires a lot of time, effort, energy, and resources to develop, on top of that ‘mass’ of users and customers.

But Piotr, the CEO of RightHello, an outbound sales startup based in Poland, and I know different. We started talking about this really awesome way he came up with to generate network effects, but on a small-scale. This is exactly what he did for his company.

I told him – as I do – to write it down and let’s publish it so everyone can learn about it. He obliged and his post is below.

I have a couple of notes and some more resources for you at the end that you’ll want to read, but for now… take it away Piotr.

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3 Secrets of High-Converting SaaS Free Trials

3 Secrets of High-Converting SaaS Free TrialsWhile just about every B2B SaaS company offers a Free Trial – especially those with self-service sales models – in my experience, the percentage of SaaS companies that feel their Free Trial is “successful” is fairly low.

Disappointingly low, actually.

And it absolutely doesn’t have to be that way and in this article I’ll show you how to create high-converting Free Trials!

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How To Get Sales To Help Test your Ideal Customer Profile

How to Get Sales to Help Test your Ideal Customer ProfileI was talking to the CEO of a SaaS startup on Clarity about a dilemma many companies go through.

They’ve decided it’s time to get deliberate about their progress and start testing their Ideal Customer Profile… but there’s a problem.

They already have sales develop reps (SDRs) generating leads and account executives (AEs… aka sales people) closing deals. Both of those groups carry a quota; SDRs on the number of touches and AE the number of closed deals.

So while they know they need to make a change to ensure their long-term success, they know that the SDRs and Sales orgs will want to stick to what works (for them).

Here’s what I told them… hopefully it’ll help you if you run into this situation, too.

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Stick Point: When Your SaaS Customer is Truly a Customer

Stick Point - What it is and Why it Matters in SaaSIn my recent article on accurately calculating your SaaS metrics, I mentioned how some customers shouldn’t be considered customers yet.

I referred to the fact that there’s a “stick point” or that point in time in the early part of the customer lifecycle where – if a customer makes it that long – they’ll likely stay the entire estimated or typical lifetime.

Let’s deep dive on this topic so you really understand what it is and why it matters.

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Free Trials Do Not Devalue Your Enterprise SaaS

free-trials-enterprise-sales-buidling-trustThe CEO of a SaaS company reached out to me on Clarity the other day and he had a very dangerous misconception that could seriously impact their potential as a company.

I hope by talking about it here I can save more SaaS companies from falling into this trap.

They sell to large customers and the dangerous misconception was that offering a Free Trial would devalue their otherwise “enterprise” product.

That couldn’t be further from the truth!

Free Trials DO NOT devalue your offering.

Let’s explore why that is and what you can do if a Free Trial simply isn’t something you can offer right now.

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4 Undercover Ways to Hack Social for More Sales

max-altschuler-sales-hackerHow often do you hear the term “Social Selling” and either can’t figure out what it actually means or just want to call shenanigans on it?

You know you’re not going to close a six-figure deal on Twitter, right? That’s not reality. But that doesn’t mean that Twitter (or any social network) can’t be leveraged to accelerate that same six-figure, high-touch B2B Enterprise deal.

In fact, this was the subject of a conversation I had the other day with my good friend Max Altschuler, founder of Sales Hacker. We talked about all the super-cool ways you can leverage social these days in both the business/market/sales development phase as well as in the sales phase by the Account Exec / sales person.

As we talked it occurred to me that this would be a great topic for an article, and Max agreed.

I have a couple of things to add in the After Word at the end… but for now I’ll give it over to Max to share 4 of his best social hacks to accelerate sales.

Take it away, Max.

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The Success Gap: A HUGE Opportunity You Haven’t Considered

The Success Gap - A HUGE Opportunity You Haven’t ConsideredThere is often a gap between the functional completion of your product and the customer’s Desired Outcome.

I call this the Success Gap.

And this Success Gap that stands between what your product does and your customer’s Desired Outcome is a huge risk for you.

It’s also a huge opportunity if you bridge the gap for your customers.

This Success Gap also has another meaning… it’s the gap between what you think represents the customers’ successful use of your product and what they think equates to success.

As you’ll see, if you mark a customer as being successful just due to certain use patterns within the product – as far too many SaaS companies do – you could have a distorted view of how successful your customers actually are.

That just expands the risk potential within the Success Gap.

Let’s dig into this a bit more, shall we? We shall indeed.

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Your SaaS Metrics Are Wrong if You Include These Customers

customer-user-definitionA user is someone that uses your SaaS product, right? Or is it someone that signed-up? Or someone that’s active? Or someone that logged-in a few times? Hmm.

Okay, so maybe defining a user is hard, but defining a customer is easy, right?

A customer is someone that pays you for your product or service. Even if they’re still within the legal timeframe for a refund? Or a contractual “cooling off” period? Or if they’re within the 90-day “stick point” (if they make it past 90-days they’ll stick around for a long time)? Or…

Wow, so even defining a customer isn’t as straightforward as it might have seemed.

And it gets even messier if you’re in a market with a more transient customer base (i.e. the level of real unavoidable churn is high), if you offer a completely free or freemium product, if you just launched with a lot of early adopter interest (i.e. the “Product Hunt effect”), etc.

To get honest about what’s going on in your company, you need to modify the customer (or user) definition, which is the main input into how you calculate the core metrics of your SaaS business.

Let’s explore this a bit…

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Active Users are a Vanity Metric

vanity-metricsActive customers churn. And when they do we’re shocked and confused.

How can this happen? Your customer was very active, logging-in several times in the last month.

I think it’s fair to say that if Active customers churn, then “active” – as a customer “state” – clearly doesn’t equate to success.

So if it doesn’t mean your customer is successful, what exactly does “active” mean?

Let’s explore this a bit further…

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CAC Strategy is the Key to Scaling your SaaS Company

aaron bird bizibleStarting a SaaS company and scaling a SaaS company are two very different things.

The same is true for “scaling” a SaaS company in the very early days vs. scaling a SaaS company through the growth phase.

And since every company is different and experiences those “phases” at different times in different ways, you have to be careful with blanket statements about what works and what doesn’t.

Everything is situational, which is why when you read a post where the author says Customer Acquisition Costs (CAC) doesn’t matter, you need to understand the big picture.

Perhaps what you missed was when he said they don’t matter in the early days.

Or maybe you missed the part about how that post was talking specifically about heavily-funded startups with 6-figure Annual Contract Values (ACV) and an Enterprise sales model.

The reality is, every person that writes about SaaS metrics is doing so with certain situations in mind and if you aren’t in the situation the author is talking about, then you may wish to consume that writing with a pinch of reality salt.

Not because what the author said isn’t true, but because it might not be true for your current situation… for your current reality.

Which is why when my friend Aaron Bird, CEO and Founder of Bizible (they’ve raised $10.5M since mid-2011), was talking about how a SaaS company’s Customer Acquisition Costs (CAC) Strategy (and Efficiency) is key to scaling I asked him if he’d share that with the world… and he did.

I have a couple of things to add in the Afterword below, but for now I’ll turn it over to Aaron…

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