SaaS vendors know getting the sale is just the first step; keeping the customer means keeping them happy and that a happy customer will generate more revenue over time!
A client that I am working with on their Pricing Strategy just sent me the following question (you can send me questions, too):
Lincoln – This isn’t a pricing question, however I think you may have some relevant experience in your agile mind on this one. How many people would it take to support each 1000 users of our SaaS business solution? As you can imagine the numbers will no doubt provide some economies of scale as we move through 100, 1000, 10,000 to 100,000 users – but it will not be an unsupported environment like a social site or free consumer offer. The users will be entering their own key business data… as well as dealing with glitches and submitting suggestions, etc. So the question is, do you have any knowledge of SaaS industry averages in customer support staff? – or have you direct experience on how to make a good estimate?
Here is my answer to him – I thought you might benefit from it, too…
This is a great question and I think you hit on a key point – you will have economies of scale to lower the cost over time. However, since there really is not a “SaaS Market” if you look at averages – and I’m sure someone has this data – it is likely a meaningless or highly misleading statistic. Why? Because support costs are 100% tied to your company and your market. Interestingly, you say this is a non-pricing issue – but after reading this you might think differently.
First, what does “support’ mean? For planning purposes you need to be very clear as to the level of support given, to whom, when, how frequently, and why they would need it, etc. You need to clearly break down all of that for each support area:
(Pre-)Sales Support – You’ll want to automate as much as possible to reach those economies of scale, but what is included pre-sales. Will you differentiate the level of pre-sales support for different market segments? Will some be able to move through the sales funnel on their own in an automated fashion, to a Pricing Page, then into the app, while others will require more hands-on support? Who are those that fit into each of those categories?
On-Boarding Support – Once they are in the Free Trial or when they become a paying customer, what will you need to do for them or help them with? Will they need to seed the system with existing, legacy data? Will you need to help them customize the user experience, integrate with existing systems, etc.? Will some need this while others won’t? Is there a correlation to the types of users that can use the self-service sales process vs. those that need human interaction? How much of this could be revenue generating professional services? What is *expected* to be included with the fee and what is expected to be extra – by the different customer segments?
Initial Customer Support – Once they are on-board, what level of support will be required to get them going? For the automated/self-service folks, will a series of videos/screencasts be sufficient? Will you need a more guided, hand-held process for the other folks? What does that look like? Will there be an on-site consultation / training? Will you do this or will you build an ecosystem of trainers / consultants to handle this? What will those relationships look like?
(Ongoing) Technical Support – What does this mean? First level phone support, use of GetSatisfaction for community support, roadmap ideas, etc. Will you need different support levels for different customer types? Will a certain level be included but a higher level of support be extra? What is the expectation in the market? You can dictate much of this – its all about ensuring you align your value proposition with their value perception.
(Ongoing) Customer Support / Success – Training, Communications, Proactive Sales Support / Anti-Churn Activities, etc. What does this look like? Are there different customer segments that will have more needs in this area? Can you bundle any of this together for larger clients to 1) offset your costs and 2) add revenue (and hopefully profit) directly? What should be included in the base level to keep churn at bay? How can you leverage this to grow Monthly Recurring Revenue (MRR) and therefore Customer Lifetime Value (CLV)? For the purposes of planning, it might make sense to do so, but to be really successful and because we understand that the SaaS Business Architecture is a tightly-coupled machine – no silos here – Tech & Customer support should not be treated as separate!
Okay, so I’m not sure if I answered your question directly, but I hopefully got you thinking about this in the right way… yes, economies of scale do exist and over time you will be able to take advantage of those. Even in areas where its very high-touch, you’ll see that probably 80% of what you do is the same for each customer. Strive to automate that 80% – build it into the app, even if it is your “support” staff that is doing the work. That way, the 20% that is unique to the customer is of higher value and you can charge more for it.
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About Lincoln Murphy