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A Framework For Building SaaS Products That Don’t Churn

When you say “reduce SaaS churn”, most people will immediately imagine tactics like drip email campaigns, great onboarding, customer marketing, gamification and automated alerts when users show signs of leaving. But this post is not about tactics. This post recognizes that users are smarter than any of the cute tricks we can come up with, and it attempts to get to the core of why there are some products that business users keep paying for, and others they discard.

A Framework For Building SaaS Products That Don’t Churn

If you’re a founder or product manager, I’ll encourage you to think deeply about this stuff, versus thinking about your next “growth hack”.

Products on which company processes are based

There are products on which organizational functions are dependent and processes are built. These are usually CRMs, Marketing Automation, HR software and Support software. The defining features are

  • they’re used by decision makers for reporting purposes and are often used to track teams’ KPIs and goals
  • they’re used to run day-to-day functions of the team and organization, for example, the process of applying for and approving employee leaves, or changing the stage of a sales opportunity
  • some people are logged in to the system during their entire working day
  • others log in once in a while to complete certain tasks
  • the system collects and retains valuable data that companies are not comfortable losing

Some observations about these products are

  • the sales cycles are usually longer than a month
  • customers will rarely buy these products without first being sure of the processes that are dependent on them
  • they need extensive API support and data integrations, because the data they collect becomes more valuable once combined with other data
  • heavy cross-functional training is required after the sale, and the product takes the blame if a customer org. doesn’t adopt and use it to the best of its capability
  • you need a lot of quality documentation so that you’re not overburdened with support tickets

An important note about products used by decision makers

When I started out at VWO a few years ago, the most important metrics were “free-trial signups” and “paid customers” (about 95% were self-service monthly subscriptions). Back then, Google Analytics (GA) was our most important source of data. We recorded free-trial signups, upgrades to a paid subscription and revenue in GA so it was what we looked at everyday.

In the past couple of years, we’ve started serving more mid-market and enterprise customers. Because of this, a few things have changed:

  • The average deal size has increased from $x00 to $x0000
  • The quality of free-trial signups matters as much as the quantity
  • A large amount of revenue comes from payments made through bank-transfers and other offline methods
  • “New MRR” is now more important than “new customers”

Because of all these changes, Google Analytics isn’t important anymore. Instead, the big decision are made after looking at reports in the CRM and our database, where all lead/deal/customer/revenue data sits. Through this shift I observed how when businesses evolve, the metrics that matter to them change, and this has a domino effect on the SaaS products that fall in and out of favor.

Now here’s another interesting anecdote: VWO has a large number of ecommerce customers. For the majority of these businesses, Google Analytics is the “source of truth”, so we simply had to build an integration with GA. In fact, we once lost a big customer because their VWO test reports didn’t agree with their GA data (completely possible and for good reasons, read this to understand why). The internal VWO champion tried to fight it out and explain the difference to management, but we lost the customer after some time.

So my point is this… it is well worth your while to build capabilities that will be used to make the important decisions, and if that’s not possible, then align your product with the primary reporting tool used by your target market.

Products that give results with minimal effort after initial setup

Some of these are:

  • Lead generation pop-ups, sidebars
  • Landing page software (specially when tied to on-going PPC campaigns or SEO keywords)
  • Retargeting software, like Perfect Audience and AdRoll
  • Exit intent pop-ups, almost always tied to lead generation
  • Personalization and behavioral targeting
  • Email automation like Vero and Intercom

While you’re building a product that keeps producing results with minimal interference, give a thought to how you can add public branding for that little bit of ‘virality’.

It’s also important to note that products tied to performance will quickly be removed when that performance isn’t enough. In this case, the product itself may be great, but it is dependent on something else working. For example, landing page software gets abandoned when the Adwords campaigns it was used for aren’t working out.

Products that monitor and provide reports and alerts on a recurring basis without needing additional effort

Few that come to mind are

  • Mention (social mention tracking, we’ve had it on for at least a couple years… rarely log in but open almost every daily email report)
  • Server Density (server monitoring)
  • SEOKeywordRanking (SEO keyword rank tracking; old school interface and not updated in a long time, but am sure its creator Will Reinhardt doesn’t need to work anymore)

While building your product, talk to users about the data they find most useful and want to look at everyday, or see what parts of your reports are accessed most often, then send that data out as daily/weekly emails. It becomes a part of users’ morning routine to check the emails and note/discuss/alert if something’s going right or wrong.

Products that enable data flow between different systems

Think Zapier, PipeMonk, Jitterbit and Informatica. Admittedly, data integration is more of an enterprise problem, but the good thing is that once put in, they’re very difficult to remove. That’s because they’re usually implemented after someone high enough has identified the need to have all the various data silos talking to each other, and that robust decisions can’t be made without a complete picture of the issue at hand.

Case study: Hubspot
  • Processes are based around the product? Yes, for marketing and sales
  • There’s someone almost always logged in? Yes, marketing
  • Managers use the product to report on performance? Yes, primarily marketing qualified leads, then customers and revenue
  • Product collects and retains valuable data that customers are not comfortable losing? Yes
  • Has components that produce results without needing on-going effort? Yes, lead-gen landing pages, website personalization, automated rule-based emails
  • Components that monitor and alert automatically? Yes, primarily alerts to sales owners about lead activity, and other alerts around social media, monthly/quarterly goals, etc.
  • Components that enable data flow between different systems? A well maintained and documented Salesforce connector, otherwise they have a platform for developers

As you can see, Hubspot is doing pretty well in minimizing churn. It seems to me that would be the case with most large, successful SaaS products. In fact, understanding the reasons why organizations keep paying for products is why large successful software are large and successful, as compared to just large.

I hope you’re able to use this post as a framework to think about what makes products stick, and apply those principles to the products you’re managing or building. Also, do you have anything else I can add to this? For some reason it seems to me the list is incomplete.

Guest Post by Siddharth Deswal, Lead Marketing at VWO.

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Happy Independence Day from iSPIRT #IndiaCanInnovate #PNGrowth

It’s Independence Day today, and the last year has been one of the most exciting years in India’s product ecosystem. Just last week, the news that Sundar Pichai has taken over as the CEO of Google has been another shot in the arm for Indian techies. If ever it was the time for Indian product companies to raise the battle cry to take on the world, it is now.

Screen Shot 2015-08-14 at 6.15.42 pmIn conversations with other people in the ecosystem over the last month, there has been a realisation about the need to create what we call category leaders in the product space.

In India right now, we do not have #1 in any large category. Freshdesk (#2 in category), VWO (#2 in category), FusionCharts (#2 in category), are all virtual market leaders but these are our own unicorns.

And this in turn begs the question – do we take a route of supporting only large leaders, or multiple contenders, at which we already have the above companies killing it?

In this discussion, overwhelming support was for more number of companies; we simply need more entrepreneurs, and MORE IMPORTANTLY more product people.

These new companies we want to see don’t need to become category leaders, but category winners. And this would mean a whole new approach to building a company.

We have reimagine our team/culture, process and product to have a shot at being a category winner.

For team/culture, we need a hiring model that is tied to results from the beginning. Hiring great, not just good, talent in the early days requires hunting people down across the world, and creating a culture that scales.

For process, it starts with eschewing chewing-gum culture and thinking about solving all problems with technology in the way that allows Uber to operate with higher customer satisfaction despite having a fraction of the employees that other companies have.

Metaphorically, it is about having German Product Management, American Marketing and Russian Programmers.

For product, it comes to recreating the category, and sometimes creating a new one. And it’s also definitely about scientific and yet disruptive pricing.

Why all this on a national holiday, you might think? When else, then? Today, when we are watching the Independence Day parade in New Delhi, some of us weight think as to what significance our careers have over, say perhaps an Army jaw an who guards our borders? Isn’t his the more important job for the nation?

It certainly is, but we mustn’t forget that in our own way, our work is also aimed at making a stronger country. When we start building world class products the world uses, we are raising the bar for achievement as well. Our may not be to do and die, but maybe our role, in this quest to build India as a Product Nation, is simply to inspire the next generation.

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Global Lean Sales – Selling your software online to global markets, without field-force #PlaybookRT

Last week I was going through the startup class videos and one particular statement by Sam Altman stuck with me. He said “All successful founders are fanatics”. And YCombinator has seen a whole bunch of them. The way he puts it is very awesome, let me reproduce the statement here:

“The word fanatical comes up again and again when you listen to successful founders talk about how they think about their product. Founders talk about being fanatical in how they care about the quality of the small details. Fanatical in getting the copy that they use to explain the product just right. and fanatical in the way that they think about customer support. In fact, one thing that correlates with success among the YC companies is the founders that hook up Pagerduty to their ticketing system, so that even if the user emails in the middle of the night when the founder’s asleep, they still get a response within an hour.Companies actually do this in the early days. Their founders feel physical pain when the product sucks and they want to wake up and fix it. They don’t ship crap, and if they do, they fix it very very quickly. And it definitely takes some level of fanaticism to build great products.”

Read the full talk here (later)

2014-10-18 15.23.57

This statement came alive for me yesterday when I met Pallav Nadhani, the founder of FusionCharts. As he walked us through how he built his company and sharing his experiences and wonderful insights in building his company, his fanaticism was apparent. I am sure everyone who was there, wanted some of it to rub on to them. Even though it was a “RoundTable”, I think Pallav had more experience than a lot of us and pretty much carried the group. He shared some very cool insights, with real life examples and actionable suggestions.

There were 11 of us, all selling business-to-business (B2B) products in the range of $1000 – $75,000, some online, some offline, most on a subscription model, some early stage, a few past the validation stage. Almost half of the founders depended on high touch sales and half had products that were Do-it-yourself. Here is a summary of the meetup:

Pallav’s Story

Pallav shared his story on how he started the company when he was 16, to get some pocket money. He made a charting widget for himself and then wrote an article about it, which became popular. Then one thing led to another and he now runs a company that publishes 90+ types of charts has 23,000 customers and 70 people. Some of the things that he focused from very early on was:

  1. Reduce all friction for the user who is evaluating the product.
  2. He promised his users that they would get their money back if they could not build the first chart in 15 minutes. That helped him simplify the on-boarding process and make it very easy for his users.
  3. He was a one person company for a long time and handled everything from developing the product, documenting it to doing customer support.

Documentation

Pallav’s father is an author of 15 books on accounting and that gave him a strong foundation to document his product very well. This was particularly important since his target audience was developers who needed good documentation to use the product.

  1. Pallav himself wrote 3000 to 4000 pages of documentation and still reviews every word that is added by his team.
  2. Documenting the product gave him key insights as a user and helped him refine and debug the product.
  3. Every time someone asks a question. His team is forced to answer using a public document. This made sure that the same question did not get asked again and also created a good knowledge base for his product.
  4. He learned from his father on how to structure documentation (with headings, sub-headings etc) so that the reader can quickly find out the relevant sections to read.

There is another interesting anecdote. jQuery was a late entrant to javascript libraries and according to its creator John Resig, it was because it was the first one that was properly documented.

Marketing and First Impressions

Pallav’s hypothesis is that all sales / conversions are driven by “Fear” or “Greed” and products must highlight these in their marketing copy, specially the headling. He even asked all of us the rephrase the core message of our product to appeal to one of these emotions. I had strong reservations on whether this was correct and if this lead too to much focus on top of the sales funnel (new visitors). Either way, the group seemed convinced. While I thought it went went with Pallav’s aggressive and “switched-on” approach, I have my doubts if it works for all kinds of products. Products have the personalities of their founders embedded in them, and I feel its best to stick with the approach that goes best with the philosophy of the product and the creator.

Pallav also referred Kevin Hale’s analogy of building a customer relationship like a marriage and how the first visit of a customer on the website is like dating. For more on this, I would recommend Kevin Hale’s enlightening talks on the matter (later!).

Some other interesting points that were discussed were:

  1. Classify your traffic into different personas. For Fusion Chart, it is the Developer, Product Manager and Designer.
  2. Deeply understand each persona. Appreciate that they are overloaded with information and identify openings in their daily routines where you can reach them.
  3. For security startups, a weekly roundup of major reported breaches worked well when sent at 8.30 in the morning.
  4. Online marketing has evolved from “carpet bombing” to “sniper”. Audience have to be segmented and messages have to be finely targeted.
  5. It is important to reach the users main Inbox and not the promotions box. So keep the mail personal and do not add an unsubscribe link.
  6. Pallav showed how he used WebEngage for conducting surveys on their visitors and how he tested his hypothesis. For example, his survey would ask if a visitor intends to pay for the product on offer or select an open source alternative. Based on the feedback, Pallav said he would change the marketing copy.
  7. He also used VWO for A/B testing and showed us an example on which one of “HTML5 Charting” or “Javascript Charting” resonated more for the user.
  8. Asking feedback from customers who had evaluated a product was also important. A simple email with the subject “5 minutes of your time for 5 questions” gives Pallav great customer insight.
  9. He said he tests all kinds of hypotheses and keeps experimenting on the message. Examples:
    1. Do users like a simple or complex layout
    2. How many fields should a form have
    3. What colour a button should have

The attendees at PlaybookRTContent Marketing

We spent a whole bunch of time discussing and sharing great insights on Content Marketing. Sahil Parikh of BrightPod.com shared his experiences in content marketing. He has built a product for the marketing community and started a blog with the purpose of reaching out to this community. It took him six months of building the blog before he saw some returns. He has hired two content writers and produces 3 to 4 blog posts a week. He shared that aggressive content marketing teams target producing one post a day. He also reached out to Indian authors on popular blogs like ZDNet and TheNextWeb and pitched the Indian product angle that got him attention. Sandeep Todi of Emportant.com shared that he bumped into a content writer for SiteHR, a popular HR portal and is how working with her to build content for his product.

Content marketing seemed like a favorite of strategy of a Lean Sales team but again it boils down to execution. It is very hard to product high quality content and as more and more people start getting good at it, the bar keeps on increasing.

Some content ideas / anecdotes shared were:

  1. Interview / Talk Show Series: Publish interviews with customers and thought leaders in the domain
  2. Use big brands in your blog posts. Examples from Fusion Charts:
    1. How Unilever / Walmart / P&G uses data visualization
  3. Act on industry events:
    1. Security Breaches
    2. Flipkart Billion Day flop
    3. Home Depot breach
  4. “News Jacking” – Connect popular news items to your product.
    1. GangamStyle in numbers
    2. Infographics on FIFA World Cup
    3. 10 infographics on Fitness Apps
  5. Put customer logos on your site, content unless the customer objects. Don’t mention it in your contract or it will trigger a red flag.
  6. Allow your site content to be reproduced.
  7. Curate, collate good content from other site and credit the original author.
  8. Get quotes from industry influencers, the will also ReTweet your content.
  9. Speed is of essence. Create great content quicly (yeah right!).
  10. Publish whitepapers. They are popular with higher management.

Sales Funnel

Pallav walked us through the various parts of the sales funnel.

[From his slides]

  1. Awareness (ads, blog, event, word-of-mouth…)
  2. Initial Visit
    1. Different channels / different ROI
    2. Best channels = low cost, high ROI
  3. Engagement
    1. Trial, case study, whitepaper, anything that could give you email AND other information
  4. Nurturing
    1. Mix of product, marketing and sales
    2. Sales job: get the customer on the call and do aggressive follow up
  5. Closing
    1. Handover from sales to client success.
    2. Repeat business through subscriptions, up-sells or cross-sells.

Pricing

There was a very heated discussion on pricing. Pallav was of the mainstream industry opinion that price is a reflection of value. The higher the price, the better the quality of customers and revenue. There was a discussion on discounts and how in high touch sales, discounts are a bane. Here Pallav shared that adding artificial constraints to negotiate. For example, you can extend the support by 3 months instead of giving a discount, or increase the number of servers etc.

Open Source

There was some resistance and suspicion from the group in discussing this and understandably so because of the nature of the software products business that depends on Intellectual Property Rights. We did touch upon this briefly and why based on our (ERPNext) experience we see open source as a great way to not only reach out a new generation of users but also believe in an alternative way of doing business.

2014-10-18 15.24.15Conclusion

It was great to learn from Pallav, and we thank him for sharing so many suggestions and learnings. Also a big thanks to him for openly sharing specific insights and walking us through an A/B test or testing an hypothesis. This is also a great initiative by Avinash Raghava and iSPIRT, the think-tank/lobby group for Software Products to bring together entrepreneurs so that they can share tips and build networks. It would have been a bit better if there was more unstructured time so that there would be better interaction between the group, to build deeper relationships between the founders. Also a big thank you to FreeCharge.in for hosting the event and providing lunch.

Finally what really matters is execution. For me the biggest takeaway was that the product is a reflection of the creator / founder and it was important that the founders are obsessed with each detail of the product and its quality and also work with the energy that is required to do so much work. For that it is important that they see success early on as Pallav did and the once they are on to something they make sure that they do not lose it.

Specifically, for me it reminded me that its time to go back to fixing the documentation!

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I Just Wanted 50K INR per month, but ended up building company with $9M revenue – Paras Chopra, VWO.com

Paras Chopra from Wingify is great story for startup ecosystem in India and I personally become a fan of him after I watched his Unpluggd Talk on “How To Bootstrap A Tech Startup In India” – His simplicity and honesty gives lot of clarity on how he started his company. All that he wanted to earn is 50,000 INR and had no plan to create company that will generate 9M USD revenue. His perseverance, hard work, and ability to learn from few failures before has out wonderfully for him. Being bootstrapped and growing at 100% rate is just phenomenal success. I am very confident his story inspires many young entrepreneurs.

It was very clear in his words, that bootstrapped startups suffer from media attention which could help them to reach to their target customers, he was envisioning a dedicated publication on Bootstrapping, YourStory started a Bootstrapping Series where they have covered more than half a dozen startups and we are hoping they will do much more soon. The main stream media has been doing some story lately and our goal is to steer that interest and bring awesome ventures to forefront and provide them what they need most.

You can watch full conversation in this video: