Archives for December 2010

SaaS Customer Success: Technology Will Fail, but Service Must Never

As a SaaS  company focusing on Customer Success, you are in a unique position to offer proactive support to your customers; anything less is unacceptable!

Alternate title: SaaS Vendors Should Learn What NOT To Do from Citrix

So, I’m not sure if you heard (you probably did if you follow me on Twitter!), but the SaaS Pricing Page workshop scheduled for earlier this month didn’t happen due to technical difficulties. Some people have attempted to point out the irony of a “SaaS workshop” failing due to a problem with “the cloud.” I don’t think that is ironic – technology fails, though trying to keep that to a minimum is obviously the goal, ultimately it is how you handle that failure that matters. In this case the vendor – Citrix – failed, not SaaS, the cloud, etc.

The workshop played out like this. Twenty minutes past the scheduled start of the workshop, and after scrambling around, switching computers, moving from VOIP to the regular telephone, shutting down and restarting the webinar, etc. much to our collective frustration (the 30+ attendees and me), technical issues with the audio portion of Citrix’ GoToWebinar service kept us from progressing. The really bad part was that it was not clear what the problem was while all of this was going on!

The webinar itself seemed to be up-and-running, but there was no sound – and no errors, feedback, or anything indicating something was not working (except the absence of sound). As far as anyone knew (myself included), it was operator error. Yep, to the attendees it just said I was muted. So why couldn’t I just “unmute” myself, right?

Now, let me be clear, I take fully responsibility for this since it was my webinar and I had no backup plan. Well, I sent the slides in PDF form to the attendees ahead of time just in case we lost video – which has happened before – but didn’t take into consideration the failure of audio. I will no longer have a single point of failure for webinars and workshops and I would recommend the same to you.

I guess it was a tiny bit of relief though that it turned out – thanks to an attendee for sending a link to the not-so-obviously-placed status page (what good is it if you can’t get to it or don’t know about it) a little later – that Citrix was having issues with their audio service at the time of the scheduled webinar. So, you know, its all good.. Wait, they were WHAT? OMG WTF?!?! Are you serious!?!?

So lets take a step back and analyze this situation with a clear head…

It would seem that Citrix knew the following:

  1. I had a webinar scheduled for 3:00PM Eastern.
  2. They sent an email reminding me that I had a webinar scheduled for 3:00PM Eastern
  3. I had OPTED IN to using their integrated audio service for the webinar
  4. They were having issues with their Audio Service before and during the scheduled webinar

So, knowing all of that and obviously having the capabilities to email me, why did they let me move forward with the webinar? What compelling reason is there for a user to be able – without warnings along the way – to continue to use a service when it is down? Why would the vendor not tell me? This is simply incompetence – not knowing their proper roll as a cloud vendor. Perhaps this is a legacy mentality shining through.

This is a perfect example of a company that is network-centric but has yet to embrace modern SaaS or cloud methods. Whatever it is, Citrix’ competitors would be wise to understand that you are Software-as-a-Service providers, with an emphasis on SERVICE.

Let me lay it out as clear as possible: as a SERVICE provider, you owe it to your clients to be proactive in support – anything less is inexcusable and will hurt your business! In fact, I wrote a post back in 2009 about Netflix and their proactive customer service titled “SaaS Vendors Should Learn from Netflix”. Its an oldy but a goody and is still – if not more – relevant today.

As a SaaS/Cloud company, you are in a unique position of having visibility into both system status and the user operations within your offering. While we can consider options for integrating status API calls into a native client like GoToWebinar uses, or loading UI frameworks from separate networks while pulling in status messages for web UIs, its simpler than that. Don’t over think this. It doesn’t have to be that complicated, and you can implement something like this RIGHT NOW.

Think about it… Citrix could have sent an email 15 minutes before the scheduled webinar saying “we see you have a webinar scheduled in 15 minutes but we wanted to let you know that as of right now, we’re having problems; here are your options.” Yes, one of those options might have been to cancel and reschedule, but that is proactive. That would have saved the attendees frustration and time, saved me embarrassment and revenue, and possibly saved Citrix at least one customer – maybe more. Remember, this was a workshop with many participants – a lot of folks saw Citrix’ GoToWebinar fail miserably that day.

Needless to say, I immediately cancelled my account with Citrix and they were kind enough to give me a full refund. Sure, the $90 Citrix returned to me did little to cover the lost revenue (since I immediately offered refunds to the workshop attendees) or the potential damage to my reputation, but it gave even further proof of their reactionary, legacy customer “service” model.

Horror stories aside, because of the time of year it is impossible to reschedule the workshop, but I still want you to be able to prepare for a successful 2011. So I’ve put together an amazing package deal for you.

Let’s Improve your SaaS Customer Success

For immediate consultation and advice on SaaS Customer Success, schedule a 60-minute meeting with me via Clarity. If you feel a more involved engagement is required for me to help you, email me with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars.


SaaS Business Model Resource Guide

I put together this list of my BEST SaaS Business Model & Architecture resources just for you. I hope it helps!

If you’re curious how I help SaaS and Web App vendors grow their businesses – and how I can help you grow yours – you can learn more and contact me here.

SaaS Distribution and Promotion Resource Guide

I put together this list of my BEST SaaS Distribution & Promotion posts just for you. I hope it helps!

If you’re curious how I help SaaS and Web App vendors grow their businesses – and how I can help you grow yours – you can learn more and contact me here.

SaaS Pricing Model: Value Metrics Are Key

Your SaaS Pricing Model should be built around what the customer values, which probably means staying away from “commodity” metrics like storage.

I find most articles about “SaaS Pricing Model” to be less-than-helpful because they almost always fail to take into consideration the WIIFT of the customer – the What’s In It For Them.

Most articles usually talk about connecting pricing with the sales model rather than the value perception of the market – a potentially costly mistake. People who try to correlate specific price to distribution methods / sales models with few or no other inputs are making a big mistake.

Your SaaS Pricing Model Starts with the Customer

Price is always tied to the market’s willingness to pay, at all levels, commodity or luxury. Nobody cares what sales model you need to support internally, nobody cares what your costs are, all they care about is what is in it for them. In case you haven’t figure it out yet, this is what you should care about, too.

For SaaS, Web Apps or other information services with mostly front-loaded manufacturing costs, price is tied more than anything to how you market and position your product/service, since that will dictate value perception and willingness to pay.

This is in contrast to physical goods where supply and demand can affect the price or where manufacturing & distribution add significant cost to each order. I’m talking about SaaS here, not truck tires.

The key to pricing is simple: the better you understand your market the easier it will be to create an offering that they perceive to be high value, meaning more revenue and profit for you.

But understanding your market is hard, it takes work, effort, some thought, etc. So you might as well just pull a number out of thin air (or somewhere else), multiply x 3 (as they say, its easier to lower, than raise prices), and hope for the best, right? You’ll need a strong table to hold all that money you’re leaving on it!

The fact is, the price , or price ranges, for tiers / bundles is not often the issue when our clients come to us; well, not the first issue. For many, it is the pricing metrics that are used that is the real issue and once that problem is fixed, it usually renders the first problem irrelevant. Pricing metrics are those little things we base our prices on – and ultimately our entire business – all of us, even us consultant types.

The de facto standard pricing metric in SaaS is per user, per month. As the markets and vendors mature, this is changing and could be anything from packages shipped to number of transactions completed. These are the real keys to value pricing in SaaS and are not talked about as often; either because people don’t really understand this aspect of pricing or because it is too difficult; maybe both.

Unfortunately we see and hear from companies all the time that have built systems or leveraged metering/billing systems that are tied specifically to per user, per month or other legacy metrics. In SaaS, pricing is marketing, but it is also tightly coupled to the underlying technology.

You know that truck tire I mentioned earlier? You can change the price, the price metric, distribution for that truck tire – and legacy software – all day long and the tire (or software) stays the same.

With SaaS, not so much. Be careful that you listen to people that don’t just understand pricing, but the SaaS Business Architecture, too.

SaaS Pricing Model: WIIFT?

So, work with me here. If pricing is marketing, and pricing is where value perception (the market’s idea of WIIFT) and value proposition (what you think the WIIFT is) intersect, then the pricing metric is what ties all of that together. If you were to boil down the value perception to one element, it would be the pricing metrics. And yet few ever speak of these outside of pointing out what the typical metrics are.

Why is this so important? This is really a very large topic, but the idea is simple; if you base your pricing on something people find no value in, your value proposition will not be aligned with their value perception. If people don’t care about the number of users, for example, if you charge per-user you could run into the “shelfware perception.”

The idea behind shelfware comes from the old days when software came on a disk and in a box that you could actually put on your self. The saying comes from the fact that you bought too many copies of a piece of software and rather than using productively, it was “installed” on the shelf in the managers office.

So, if you have a situation where two users – Meg and Brian – are paying for the “lite” version (a bad name and a topic for another day) and want to add Glenn to the system, but to do so requires that they upgrade to the “pro” version which includes up to 10 users, they’ll be paying for 7 users that they don’t need – Shelfware 2.0? So, what’s the problem? Don’t we always want people at the low-end of the next tier up? Aren’t they the most profitable customers? Yes, but we need them to want to be there.

The idea in B2B SaaS that seems to apply almost across the board (your mileage may vary so please do your homework), is that scaling pricing based on the complexity of the companies that are using your product/service is a good idea. This ensures that your price is tied to value perceived at every tier. Which is why I hate this quote by Paul Graham: “You’ve found market price when buyers complain but still pay.” I don’t care who said it, its wrong.

That quote simply flies in the face of “value pricing,” customer-centricity, marketing, etc. and can hurt your Customer Lifetime Value (LTV). Complaining customers aren’t happy and it is hard to upgrade, up-sell, or cross-sell unhappy customers. If they are not happy, as soon as they find a suitable substitute, they will leave. And in the meantime, they’ll game the system, sharing users and logins, or they’ll stop using the system as much.

It is true, you can’t please everyone so some might complain about pricing, which is fine. At some level people will complain that they have to pay anything – this is especially true when you’ve been giving it away for free at first. You have to be able to figure out if the complaining is because of that, or if it is real push-back.

The better you understand your market, the easier that distinction will be to make. The goal should be to get those who do pay to do so happily so that we can get more money from them over their lifetime as a customer. Ideally, you’ve done the work necessary to focus your offering to those that will perceive value removing complainers from the equation.

But there is another aspect of pricing metrics besides keeping Shelfware perceptions at bay; its about aligning with value perceptions to grow LTV. As I’ve said a number of times before, one of the problems with Freemium – for example – is that people promote the free version over the premium versions, ensuring that all customers will go through being a user first; which is why conversions are so low and time to profitable revenue so long.

If they would promote the paid version from day one, give incentives to sign-up for the premium version, etc. they would get the money from their customers faster, meaning that an increased LTV. The same principal holds true in value pricing for SaaS vendors.

The SaaS Pricing Page is a perfect jumping off point for most discussions of pricing with SaaS vendors because it is generally where they start anyway. SaaS & Web App vendors who have opted for price transparency will quite often sit down to develop their pricing strategy by laying out a pricing page first.

Who cares if this is the right way to do it, it is the way its done. So we use the pricing page as the visual manifestation of a SaaS vendor’s pricing strategy and start from there. So when you lay out your pricing tiers or bundles, there is a good chance there will be three versions – small, medium, and large – and that it will be based on number of users. You need to ask yourself if that is the right metric.

Not only could “users” be a metric that has no value to the market, but by basing pricing on that metric, you’ve basically told your customers to start small, then move to medium, and then to large.

Have you provided any incentive – other than number of users – for someone to start with the large bundle out of the gate? What if they only have 3 users (rather than the 25+ in the large bundle) but would find value in some of the features of that bundle? Do they even know they could find value in those features or were you too busy pushing the fact that they the large bundle has 25+ users and 10GB storage?

Look, your pricing today affects the overall LTV – don’t worry about too high or too low – worry about aligning with value as the customer grows/changes. This is what I mean when I say once we figure out the right metrics, what you originally had price-wise is probably irrelevant.

When we figure out the right way to charge based on value-oriented metrics, the price might go up significantly. Or it might not, but the migration to higher-priced tiers early on means a greater LTV, more profit, and a business that is worth more in acquisition or IPO. Yeah, IPO – this stuff doesn’t just apply to startups and small Web App companies – this is a lesson for all SaaS companies of any size.

Let’s Fix Your SaaS Pricing Model

For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me via Clarity. If you feel a more involved engagement is required for me to help you, email me with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars.

– Lincoln