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Timing is key for Product Market Fit

PC: sochapki.com

I wanted to write a post on how timing is important for a product-market fit – but with the covid19 times, this has become even more important as the leading indicators change superfast.  Usually, such events create massive opportunities for certain products, and if you have that product, you are bound to win.

Marc Anderssen needs to be quoted whenever we talk about Product Market Fit, as I certainly view him the father of this concept, especially for the software products. Marc says that no product idea is bad, but the timing of the product is the most important factor.

In this post, I will just pick on 5 examples to explain why timing is so important and then go into some factors that makes the timing so important.

To explain the significance of timing Paytm is a great example. Paytm was making good traction in the digital payment space. But they were still being only used by the digitally savvy. In came 8 Nov 2016, when the Indian government announced demonetization and slowly tried to promote digital payments. This really made for a great opportunity for Paytm, and it went into an amazing growth trajectory. Of course, since the product and the platform was already scalable, it could really fulfil the huge demand, and it doubled its user base in just a year.

Microsoft office took super advantage of the spike in the PC revolution, they had individual products that were created for different purposes e.g. Excel – spreadsheets, Powerpoint – presentations and Word – documents. The evolution of these individual products were timed very well, constantly innovated but the timing of combining them and offering them together turned out to be a blockbuster.

Priced attractively or bundled with windows, it took the market both consumers as well as business market by a storm. The timing of this was so profound that, the market it had created or the potential it leveraged is still unmatched. While the products were well-engineered and simple to use, I feel the market traction was because of the timing, when the users and businesses were ready to consume and pay for such productivity software.

Who would have imagined that such a simple use case of handling your small accounts or ledger for shops would become such a big hit? I feel the real reason for this is timing. Khatabook came about to solve a real problem that exists with Kirana stores and small businesses in India. But its timing was so good, that this was the time when Jio got launched, and you all know how Jio has penetrated the mobile data usage or how these small business owners could afford a smartphone. Khatabook came out big at the same time and it was perfect use of a smartphone you owned to solve a painful problem of udhaar and khata (loan and books).  

Dr E. F. Codd published the paper, “A Relational Model of Data for Large Shared Data Banks”, in June 1970 in the Association of Computer Machinery (ACM) journal. This was the inspiration to build out a relational database management system (RDBMS) and SQL by Oracle founder Larry Ellison and a couple of his colleagues. While the initial versions was developed in 1977, it became more prevalent later in the mid 80s to 90s. Client-server technologies became very popular in 80s and 90s. This is the time, many needed a more sophisticated database to run on these client-server technologies. Especially companies and businesses looked to leverage technologies and build robust business applications. The timing of Oracle’s database was perfect, and hence the ideal product-market fit.

This is something of a no brainer in the current covid19 situation. Who would have imagined that the whole world gets locked up in a room and most of the business works through zoom. Can’t be a better example to explain the timing effect of such a product that matches the needs of the market. You could say it all luck, but remember the product was designed to scale to a significant level, a reason it could stand the test of times.

Hope the above examples were easy to understand how timing is so important for you to reach product-market fit.

I would like to summarize my post with 5 factors that make timing so important

Market – there is going to be market for every solution at a point in time. But you need to really identify that problem you are solving and whether there is going to be people who are willing to pay for solving that problem. The market always exists, but when does the market mature to become sizeable is all based on timing.

Event – always contributes significantly to certain products. It could be great foresight for some, could be mere luck for others, could be of different types such as current covid19, government actions e.g. GST/Demonetization, competitive action etc.

How long before – In all the examples above, you see that products don’t hit product-market fit instantly, it takes time, perseverance and understanding problem statement deeply. Ideally the products should be built at least a few years before it becomes mainstream, and built to scale. Also, it’s not important to be first in there to become big, often many of the products have done better in catch up and been able to lead

Pivot and survive – while the examples are all success stories, there are many more that have not been able to make there as lack of hitting that timing. If you time your product very late, there are others who have solved the problem, or the problem has gone beyond its useful time. A good example would be that of building a webcam and waiting for the timing to happen on that, while the world has moved on having a webcam in all laptops. In these situations, it’s better to pivot and survive.

Technology and Innovation – finally the kind of technology and innovations that are coming through is fast, and its important to time your usecases based on the innovations that are forthcoming. Sometimes it could be luck, sometimes you saw that coming, sometimes it didn’t make that mark. Remember AI has been in news for the last 25 years, probably it’s just hitting the potential for a product-market fit.

Hope this post helped you understand this critical factor for product market fit – Timing!

Stay Safe.

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Obsessive Focus To Product Market Fit – Tricks of the Trade and 5 Case Studies

As we begin 2019, for many startups the big question is – have they reached Product-Market fit or what should they do to reach Product-Market Fit.

Market it is!

There are 3 important ingredients for making a product – the actual product, the people who build this product and the market for which the product is built. The point of getting the right intersection of the three with success gets you to product market fit.

Marc Andreessen, whom I consider as the Father of Product Market fit, describes Market as the most important of the above 3, and Product Market fit is more likely to be achieved when you have a market – “In a great market – a market with lots of real potential customers – the market pulls product out of the startup”.

So the most important thing in your journey is to identify what market you are addressing. Basically, it means customers – businesses or consumers – who are seeking a solution, a better solution or cheaper solution to a problem.

The market definition has to be very clear and focused – as that would drive the product directions and help you get to the product – market fit.

Here are some questions you can get answered to validate the existence of the market:

Why need? – why do the customers want to solve the particular problem – what’s the real need. Is the problem that you are solving is a painkiller, vitamin or vaccine?

Why buy? – are they ready to pay for it – many solutions are liked by customers, but they could back off if they have to pay for it. So value hypothesis of this would help. Also if you are not expecting the users to pay for it, who will pay for it e.g. ads pay for social media users

Why now? – is this the right time for the product – timing is very important as customers have many solutions and many problems, and they care to address only some problems that have higher priority for them to solve – so timing is an important element to understand if there is a market that exists.

It’s happening vs not happening

How do you know if your product has hit the product market fit? Here are some nice indications

Isn’t Happening It’s Happening
Not getting any customers Customers are buying your product – at least few in B2B and many in B2C
The problem you are solving is not a high priority for your customers Usage is growing
Word of mouth is not happening You have to hire sales and support people
Customer feel your product price is not giving them enough value You are called out by the press, analyst – get good social media mentions
Press reviews are not happening, no tweets or mentions Customers send feedback and complaints – issues

Obsessive focus for Product-Market Fit

For any entrepreneur or product leader, there should be an obsessive focus to get to product market fit. The below is a Create > Prove > Iterate process that can help you to get to product market fit. Also, it’s not going to happen very fast, it needs perseverance and constant focus to move the needle – it’s a long-term journey.

During the process, you may have to do any of the following change to get to the product market fit

  • Rewrite your PRODUCT
  • GO AFTER a Different MARKET
  • REPLACE your PEOPLE or Hire SPECIALIST
  • IMPROVE THE USABILITY
  • CHANGE THE TECH ARCHITECTURE
  • UPDATE YOUR Deployment MODEL
  • Revisit PRICING STRATEGY
  • Fix Quality issues or Customer grievances

5 Takeaway case studies of Successful Product-Market Fit

I wanted to lay out few examples, all Indian, on things that will help you validate your market hypothesis as well as give some references on some generic areas that have worked. I am picking three examples in software tech and two non-software to broaden the horizon of how we should think product-market fit.

Transformation of Existing Product: Royal Enfield – You may notice in the Indian roads a lot more Royal Enfield Bullets plying which was not a case for many years when the 100cc bikes became the hot thing. This is a huge success story when it comes to finding the right Product Market Fit. Royal Enfield was in a do or die situation in the early 2000s – the discussion was around whether to sell off or shut down and its next-gen leader Siddhartha Lal stood up and asked for the last chance to revive. Here are the things they did to reach product-market fit – and the success is big case study now

  • Leisure Segment – The bike had its reputation, a cult following, an instantly recognisable build, and aspirational value. So it was given not to go to the commuter segment
  • Innovate with new tech but still keep the old charm that customers loved. They changed the engine which had 30 % fewer parts, and 30% better power, plus fuel efficient
  • Fix the quality process and problem – formed a field quality rapid action force to bridge the gap between customer expectations and the reality
  • Sales Experience had to be improved – new company-owned showrooms were launched and dealer network was expanded
  • Get the best talent – the company hired top talent – a new CEO who had enormous experience in transformation and revival, with auto experience

So as you can see over the years, there were very visible actions taken and we know how Royal Enfield is such a huge success. You can read the full case study here

Clear Definition of Market and Problem Statement: Career360 – When I was doing some innovation projects to leverage big data a few years back on EduCareer, I bumped into this startup that I thought had a very clear differentiation of their market and huge potential in India which has a huge number of young students – seeking to know what, where, why and how they should study something in order for them to reach their dreams.

The problem that they laid out to solve, is a huge one – as every student and parents of the student have this as their top priority – which validates the market need.

The objective as laid out by their founder Peri Maheshwar really makes the problem statement very clear – “

– To ensure that every student makes an informed career choice.

– To force institutions to greater transparency with their data and achievements

– To create an Information eco system suited for the 98% Indians than the 2% most meritorious one’s.

For us, a career is a life. A student isn’t any other customer. He is a life. He needs to be protected.”

As the market is clear and exists, once the focused founder is on a mission to build a product for this market (Student), they were naturally able to get there. Offcourse their journey has been with a lot of hard work, innovations – it’s been great to observe from what they have started out with to how they have really transformed their product and tools to address the market. With a high school going daughter, we have been personally benefitted by them, so are the millions of students/parents in India. The best part of their offering is that they are multi-platform – Careers360’s has been reaching out to students through multiple platforms viz. print, web, mobile and TV. So it’s a case of great omnichannel experience for the student through traditional and tech channels.

Career360 is a clear example of how Marc A says “In a great market – a market with lots of real potential customers – the market pulls the product out of the startup”.

Leverage similar idea to validate market: SeekSherpa – I met this startup in one of the Google Launchpad events, and I straightaway was blown away with the idea. I have been personally tracking the travel industry very closely and how tech is helping this further. In that Airbnb, story is amazing, as it really was a huge vaccine product to address a market that existed for the “tired of hotels”travellers. SeekSherpa was a great offshoot of Airbnb type idea – in the same industry but for a different product offering. SeekSherpa connect “real” local tour guides and Sherpa’s for the “tired of regular guides” travellers.

So with the market validation, obviously the offering/product has to be compelling – and I saw their Lazor focus on great UX being a killer differentiator initially, and the ability to connect the local guides to travellers as a way to get to product-market fit. Its been a fantastic journey by Dhruv and Sukhmani who founders of this great startup, they have also addressed different channels that appeals to connect the traveller with the sherpa.  And once again, the most important thing here is that the market existed, very well validated with a similar idea which makes it easy to explain, and it’s a problem better addressed by tech.

 

Expanding product capabilities to reach market: Schoolpad – I met with this startup through iSpirit, and what really caught my attention was the way the founder Abhiraj Malhotra explained to me how he transformed his product features to make it a viable option for Schools to buy it. Schoolpad started off with a USP of improving the Parent – Teacher collaboration. Soon they realized that while this is a great capability, it cannot on its own sell. So they expanded the product to include the core School management features. So essentially it became a solid School ERP with the differentiator of the collaboration feature which was the original capability. This has helped them reach a great market – as Schools are now willing to embrace this solution.

A great story of innovating and expanding the product to get to the market – and therefore reach product-market fit.

Price point to reach market: Xiaomi Mi – Apple products are aspirational, but many cannot afford it or they don’t see the value. So customers are always looking for alternatives that are cheaper and provides near equal features. This is where a company like Xiaomi comes in, where they really penetrated into the mobile market with a great product at a very affordable price, as that then opens up a huge market.

In order to do that, they had to initially sell through only online channels – Mi sold only through Flipkart initially. Also, they couldn’t spend a lot on marketing, so they leveraged the flash sale idea to promote their products. Over the years, as others started copying their model, they have now gone into the physical store – to sell through new channels. They also make a lot of the parts locally to get a cost advantage. Finally, now they are looking to penetrate rural markets as their phones are affordable.

To read more on their story, look for their original china story and then the India story.

So again here, the market is the winner – the market here is affordable smartphones, which was not addressed by Apple.

Products do not have to be original, you can always build products to address market based on Price.

In summary, getting to a product market fit is a journey, it may take time, but most important is to identify and get the market definition right, and channel your resources to build the product to address that market.

Happy New Year 2019!

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It takes time to build something successful!

Since SaaSx second edition, I have never missed a single edition of SaaSx. The 5th edition – SaaSx was recently held on the 7th of July, and the learnings and experiences were much different from the previous three that I had attended.

One primary topic this year was bootstrapping, and none other than Sridhar Vembu, the CEO and Founder of Zoho, was presenting. The session was extremely relevant and impactful, more so for us because we too are a bootstrapped organisation. Every two months of our 4.5 year-long bootstrapped journey, we have questioned ourselves on whether we have even got it right! If we should go ahead and raise funds. Sridhar’s session genuinely helped us know and understand our answers.

However, as I delved deeper, I realised that the bigger picture that Sridhar was making us aware of was the entrepreneurial journey of self-discovery. His session was an earnest attempt to promote deep thinking and self-reflection amongst all of us. He questioned basic assumptions and systematically dismantled the traditional notions around entrepreneurship. Using Zoho as an example, he showed how thinking from first principles helped them become successful as a global SaaS leader.


What is it that drives an entrepreneur? Is it the pursuit of materialistic goals or the passion to achieve a bigger purpose? The first step is to have this clarity in mind, as this can be critical in defining the direction your business would take. Through these questions, Sridhar showed that business decisions are not just driven by external factors but by internal as well.

For example, why should you chase high growth numbers? As per him, the first step to bootstrapping is survival. The top 5 goals for any startup should be Survive, Survive, Survive, Survive, Survive. Survival is enough. Keep your costs low and make sure all your bills are paid on time.  Cut your burn rate to the lowest. Zoho created 3 lines of business. The current SaaS software is their 3rd. They created these lines during their journey of survival and making ends meet.


Why go after a hot segment (with immense competition) instead of a niche one?  If it’s hot, avoid it i.e. if a market segment is hot or expected to be hot, it will be heavily funded. It will most likely be difficult to compete as a bootstrapped organisation and is henceforth avoidable. Zoho released Zoho docs in 2007, but soon as he realized that Google and Microsoft had entered the space, he reoriented the vision of Zoho to stay focused on business productivity applications. Zoho docs continues to add value to Zoho One, but the prime focus is on Applications from HR, Finance, Support, Sales & Marketing and Project Management.  Bootstrapping works best if you find a niche, but not so small that it hardly exists. You will hardly have cut throat competition in the niche market and will be able to compete even without heavy funding.

Most SaaS companies raise funds for customer acquisition. Even as a bootstrapped company customer acquisition is important. As you don’t have the money, you will need to optimise your marketing spend. Try and find a cheaper channel first and use these as your primary channel of acquisition. Once you have revenue from the these channels, you can start investing in the more expensive one. By this time you will also have data on your life time value and will be able to take better decisions.

Similarly, why base yourself out of a tier 1 city instead of tier 2 cities (with talent abound)? You don’t need to be in a Bangalore, Pune, or a Mumbai to build a successful product. According to Sridhar, if he wanted to start again, he would go to a smaller city like Raipur. Being in an expensive location will ends up burning your ‘meager monies’ faster. This doesn’t mean that being in the top IT cities of India is bad for your business, but if your team is located in one of the smaller cities, do not worry. You can still make it your competitive advantage.

Self-discipline is of utmost importance for a bootstrapped company. In fact, to bootstrap successfully, you need to ensure self-discipline in spends, team management, customer follow-ups, etc. While bootstrapping can demand frugality and self-discipline, the supply of money from your VC has the potential to destroy the most staunchly disciplined entrepreneurs as well. Watch out!

And last but not the least – It takes time to build something successful. It took Zoho 20 years to make it look like an overnight success.

This blog is authored by Ankit Dudhwewala, Founder – CallHippo, AppItSimple Infotek, Software Suggest. Thanks to Anukriti Chaudhari and Ritika Singh from iSPIRT to craft the article.

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Product Teardown explained in 10 minutes (well almost!)

Last Saturday we had an awesome teardown roundtable in Chennai moderated by Suresh (KiSSFLOW) and Bharath (FreshDesk) 🙇🏻.. This was my first direct experience with the teardown. Six companies participated (PickYourTrail, FoodEngine, SysCloud, CustomerLabs, Tagalys, and ManageArtworks). While the entire session of 4+ hours was extremely intense, I want to quickly share with you in 10 minutes (almost) of what happens in a Product Teardown.

Teardowns are coming to your city. Please apply here (Limited Seats).

Product Teardown Framework

The iSPIRT product teardown (esp. for SaaS websites) is primarily structured around 5 key principles outlined below.

Idea 💡

What is the problem you are trying to solve? Who is your target user? It is critical to have a clear picture of your target user persona, their problem and how your solution solves their pain point. Essentially establish your problem-solution fit and articulate it for the customer journey from Discovery → Conversion.

Discovery 🔍

How do customers find your product? Is it through google search? Is there a channel they frequent? Have you identified your TAM (total addressable market), SAM (serviceable addressable market) and SOM (serviceable obtainable market)? Use this model to help identify strategies to have your SOM discover your product.

Website 🕸

Your website is the first & most important way to establish trust & relationship with your customer. This is true even if you don’t use inside sales. What is your first message or hook for your target user persona? Are they able to connect your product with their problem and the path through which they discovered your product? Are they able to understand how your product solves their problem, and why they should use it? Once they identify with your message and establish trust & credibility the rest becomes easier.

Sign up 💰

If the customer has understood your solution and found it fit for their needs, the last purchase decision is the cost. As Suresh said

If the cost connects, signup happens!.

WoW! reaction 🌅

Post signup, is there a WoW first experience? Whether it is a try & buy experience or a first purchase onboarding, it is important for customers to experience some instant gratification for the grueling journey they just went through. Believe me, making a purchase decision can be taxing. If you can make this journey pleasant and the final destination fantastic, you have a winning product 🏆.

Do go through the video above and hear Suresh’s simple explanation. And if you like what you hear remember you can apply here for a teardown in your city.

Coming soon – 2017 SaaS Survey

While I still have your attention, we are excited to announce that we would be launching the third edition (2017) of the India SaaS Survey in a week from now. This survey is an annual exercise conducted jointly by SignalHill and iSPIRT to gather valuable data for drawing insights which help various stakeholders in the ecosystem understand this space better.

Please click on the following link to access last year’s survey results

Please stay tuned to this space. We will be providing a link to this year’s survey very soon in an upcoming blog post.

PS

The amount of time & effort Bharath & Suresh provided to review and analyze each product before the actual teardown is simply inspiring. 🙇🏻. to their commitment to the community.

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Virtual Teardown Experience

Recently, I got the opportunity to participate in a virtual product teardown session. After attending SaaSx4 teardown, and participating in PNCamp hyderabad tearddown, I was curious to see how it would work in an virtual format. In a teardown, you get critical (sometimes more critical than you expect!) feedback on your product, if you don’t mind being torn down in the process. I wasn’t sure how it would work when this is not done in person and you can’t see each other.  

Post the session, I am happy to report that the effectiveness of the teardown didn’t get diluted too much because of the virtual format. This means that the teardown can be scaled and many such sessions can be run every month. Good news for all startups.

Enough about the process! In this post, I want to share 3 simple lessons someone would have taken from our virtual teardown of 2 companies. They stuck with me also because these were quite similar to what I saw in the PNCamp product teardown session as well.

Lesson 1: Spend time clarifying the messaging on your website

In most cases, I found the messaging to be confusing. When I would question the founder to understand what should be there, they were not very clear themselves. It is important for founders to be extremely clear about the message they want to convey to their potential clients. One way of getting clarity in your own head is to work on your website content copy and if you can nail it down, you will have improved clarity in your head as well.

Lesson 2: Build the differentiation into the product

It wasn’t very clear what the differentiation was in many cases. Even when it was clear, the differentiated messaging didn’t come out from the product. For example, if your product’s differentiated offering is that it is for teams, then the product, in every step of the way to onboarding, should bake the notion of team – setting up team, communication within team, teams working with other teams, manager of the team, etc. Otherwise the differentiation doesn’t sink in. 

Lesson 3: Think like your customer

Most often, I saw founders thinking from their own perspective when describing the product, or building the product. This is cardinal sin. Your customer doesn’t care what you think, they care about what they think and what they get. For example, one of the products competed head-on with another product in WordPress plug-in; competing product had 1M installs, this product had 10 installs. Of course customer wouldn’t choose this product, ever. It is more prudent to think like the customer and position the product differently rather than passionately try to go head-on against this category leader.

These are simple and straightforward ones and it is not that founders don’t know them. Problem is that they get so busy solving their day-to-day problems, sometimes they don’t zoom out and think about these basics. Attending teardowns can sometimes serve as reminders for some of these points. If you are an early stage startup, consider attending one of the teardowns.

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PNCamp#3 — Product Teardown UrbanPiper

Before writing something down about our experience at the recently held Product Nation Camp (PNCamp) product teardown session, I think it would be better to give a short perspective on the overall event from the viewpoint of a fairly reclusive startup in the B2B Saas space.

UrbanPiper has been around for some time; however, for a pretty long period, we haven’t taken part in any SaaS focused events. Well we did, but all of them were in Bangalore. The ones that we attended too, were mostly about networking with hundreds of people milling about and ready to deliver an elevator pitch if you so much as said “hello” to them. Nothing inherently wrong about such a gathering, but if networking isn’t your one-all-be-all purpose, these events stop making sense once you’ve attended one or two of them.
The PNCamp was suggested to us by one of our advisors. Not sure what to expect, the only reason we agreed to go was because we hadn’t attended any event for a decent length of time.

The event turned out to be a delightful experience — spread across a full day (Saturday), it was a small (80-100 people) gathering of focused individuals from a curated list of startups, with an evolved sense of SaaS business and products reflecting a matured outlook towards problem-solving. There was a team (including the founder) from the matured startup – Zenoti, which anchored most of the sessions and did all that they could to share their learning with the rest of us fledgling startups. The day’s events were well regulated to avoid any feeling of drag creeping in, and at all times, it felt like everyone was invested with a great deal of interest and purpose to contribute to each other’s box of learning.

The product teardown was the first session scheduled after a short inaugural talk by the PN team and the guest of honour – Mr. Jay Pullur (Founder of Pramati Technologies).

As it usually is with all things unprepared for, UrbanPiper was invited as the first startup to step up for the teardown. Not having any previous experience of a product teardown, I had no idea what good or bad was in store, and that in a strange way helped me calm down and focus upon telling the audience a good narrative about the UrbanPiper story.

THE TEARDOWN PROCESS

The teardown allows the speaker, a representative of the startup core team, to speak about their startup for 5-10 minutes. As part of the initial presentation, some basic questions are asked by any member of the audience. These questions are usually of the nature to understand a bit better about the proposition of the startup.

Once the presentation is through and the first wave of questions answered, the team from Zenoti takes over. They systematically explored aspects of the technology platform – the finished product, product interfaces, on-boarding process – but it all starts with the “deconstruction” of the website.

For us, the UrbanPiper website (https://urbanpiper.com) had been an effort to put up a decent web presence. Where “decent” merely meant that it was better as a façade than what our competitors had, and it somewhat managed to convey the platform’s proposition.

The following is what we felt manages to tick most of the checkboxes when it came to a Saas-based startup’s website:

UrbanPiper

The next 15 minutes was a logical and well-executed act of unravelling the pointlessness of doing things half-baked and half-thought. While the focus was directed towards our website, but it didn’t take much effort to see signs of the same problems when it comes to setting a product vision, selling, pricing, negotiating, fund raising, marketing, etc.

The primary theme of the teardown can be summarized as:

  1. What have you built and how do you intend to sell it
  2. Does your website echo the thought-process expressed in #1
  3. The website teardown focuses on:
    1. The messaging around the primary proposition of your product/platform
    2. The explanation of how your target audience can use your platform
    3. The long-tail value of using your product/platform
    4. How has your platform made a difference for the merchants/clients who have been using it for quite some time

TAKEAWAYS

As ominous as a “teardown” sounds, the first thing to know is that it’s a very friendly event. Instead of feeling defensive about getting “exposed”, it is best to view the teardown as a get together of well-informed friends who point out the gaps in your plan to save you the blushes in the future. Think of the last time when a friend of yours pointed out that your fly is open – that probably best sums up the purpose of the teardown.

Another important aspect is the quality of feedback–you have some of the best minds, who have most certainly been-there-done-that, offering you their undivided attention so as to offer you advice which is best suited for you.

For us, the key takeaways boiled down to:

  • Narrow down the area UrbanPiper wants to focus on. Instead of positioning the platform for every merchant, it would make it much easier to scale if we simply focused on being the best in one domain, and then decide to pursue another one.
  • Overhaul the website to focus on simple messaging instead of using buzzwords, which would most likely make no sense to even the people you’d like to sell to.
  • Break down the journey a merchant would have from not using our platform to the benefits of signing up and thereafter.
  • Last, but certainly not the least, build out the product and the website with a focus on selling globally. This involves a change in setting out a more global plan, but the start needs to be with the website–which should reflect in no uncertain terms the intent to cater to a global audience.

CURRENT SITUATION

It’s been a week since the PNCamp, but we have already finished work on the first iteration of making some much needed changes to our website. This iteration is by no means a finished product, but it certainly embraces some of the direction that we should be taking with our platform’s positioning.

It gives me a lot of pleasure to unveil the new look of our website–

While this is just our first iteration, there are some key elements that we wanted to address:

  • Focus the messaging around the domain that works for us.
  • Take the visitor through various parts of the platform in a gradual and relevant manner – the features should unravel themselves as an easy to understand narrative.
  • Use styling which gives the site a crisp look and feel, such as to measure up to the expectations of a global platform.
  • Add a blog (https://urbanpiper.com/blog) section to write about the platform and make a visitor find out more. Not to mention, reap the benefits of better SEO.
  • Prominently showcase a video which ideally has a current merchant talking about the platform.

Urbanpiper2

THE WAY FORWARD

We have just begun an interesting journey of making UrbanPiper relevant for the next phase of growth. During the PNCamp, Sudheer (founder of Zenoti) had suggested that I read a book – Crossing the chasm (Geoffrey Moore). I’ve just read the first chapter of the book, and already it feels like there’s going to be lots to learn from it.

Whatever be in store, it will surely help us rediscover ourselves at an important juncture of growth for UrbanPiper.

If I were to pause for a moment and reflect upon the events and the actions we’ve taken, it’s not like there was a grand revelation or something. Working in startups, we all carry a bunch of latent thoughts. However, in the everyday hectic operations of running a startup, we often lose “perspective”. If we’re lucky, then we have some good friends from other startups with whom we hang out regularly, and exchange notes, which in-turn helps us gain some of the lost “perspective”. But then, having friends from startups which have tread a path similar to yours, call for rather long odds.

Events are usually good to meet an eclectic group of individuals from the startup world, but then, most of them are primarily about networking, and soon lose value for all the effort that needs to be put in for attending them. And then, we just become lazy, letting our latent thoughts remain buried, while we continue to endure every aspect of a tunnel-vision syndrome.

For what it’s worth, the Product Nation Camp, was certainly a refreshing take on the idea of a startup conference – or rather, unconference. You’ve got a room full of smart people, doing smart things, and wanting to help you see things differently – to help you gain some of your lost perspective.

Guest Post by Anirban Majumdar @ urbanpiper.com

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Why #SaaSx4 Product Teardown is for all SaaS startups

Whether you’re an early stage, late stage or VC funded startup (pun intended). There is one thing all of us struggle with always and that is ‘Growth’. So, how to keep this repeatable in constantly changing market dynamics?

Acommunity is a great place to learn, unlearn and grow at the pace you never imagined. For SaaS startups in India(bravery award goes to you), SaaSx is a community built by thought leaders for other builders to nail this process in and out. #SaaSx4 was a tech event that provided SaaS founders the opportunity to network and share product insights with other SaaS founders.

How we got into #SaaSx4 Product Teardown..

Widely is an early stage SaaS startup, we’re right now hustling, learning and trying to respond to the amazing traction we’re receiving. While all this was happening, we got a call from Prasanna K to attend SaaSx, that was the first time we heard about Product Teardown and horror stories around it. Imagine your product being grilled down to levels in front of the whole community.

It did seem scary, but we said YES!

Because very often when something scares you, it’s the very thing worth doing.

So, what were our asks?

Initially they were simple, to validate our thought process, marketing channels, and product roadmap, but subsequent calls and discussions with Avlesh Singh, CEO, WebEngage, Bharath Balasubramanian, Director of Design, Freshdesk, and Shekhar Kirani, Accel Partners, made us realize it is an opportunity to deep dive and their critical remarks made us rethink over pricing to customer onboarding.

#SaaSx4 Event Day: The D-Day

This was my first SaaSx & by the end of the day, I was left amused and happy to become part of the SaaSx community. It is by SaaS founders for SaaS founders, hence, the learning becomes easier & straight cut out for us.

UnConference, Product teardown & Fireside chats, also in between meeting Investors (trust me that was not the driving force for anyone joining in there), the energy was to learn and grasp as much as possible. When you hear guys like Girish, Sudhir, & Avlesh talking about their mistakes, you feel confident within.

There comes the Scary Product Teardown

So, how it began?

I was called on the stage, Bharath, Avlesh and Shekhar ready with their inputs. The hall was full of awesome SaaS founders, including those of India’s best SaaS companies, interacting constantly over the good and bad parts of products(Imagine receiving suggestions from the experienced).

Widely Product Introduction
  • Introduction: I went up and gave some context to the audience

Widely helps online businesses to acquire new mobile users, increase conversions and grow user retention with nothing but their existing website by upgrading it into a progressive web app in minutes. Introducing native mobile app features into a website, the plug and play setup with the analytics based dashboard to trigger and customize a Progressive Web App (Mobile Web App).

  • Product teardown segments & Widely’s State

Product teardown was segmented into three sections primarily, Finding Customers, Keeping Customers & What is my market.

  1. Widely’s primary traction channels are SEM and SEO,
  2. Also, our customer segment is a marketer or a product manager.
  3. For us to convert a website visitor into a customer is a simple 2 step process, a signup and then 15 minutes plug & play integration into their website.
Widely Setup Flow

These details were used in teardown, and so teardown was designed in a way to be helpful for others struggling in the similar space.

  • The Teardown began

As an early stage startup with a goal to reach the global audience, we’ve identified search and ads as great ways to go ahead. So, exactly this was the first step, Widely’s SEM at one side works great, SEO is where our keywords don’t match. That was eye opening to me as sometimes while building and selling the product we tend to forget most basic things.

Then came product landing, with few ifs and buts, here we saw our moments of wows & learning, in the form of better representation.

Product Landing Page

Bharath pointed out key areas we need to improve upon during Sign up too, although this is something we’re constantly working upon and rigorously followed making website our best marketing person, but exactly the point, improvements to become sticky for the set of next 100 customers should be the focus.

The Wow Moment

The final step to Setup!

So, out of all signups we get every day there are many who don’t integrate (A huge loss to our marketing efforts), there could be many reasons, we’re constantly using visualizations and website conversion optimization tools to see where our funnel breaks and fix those parts immediately. For us to come at something which we saw next would have taken some next 100 signups we believe,

Current State of Setup Flow using Widely
The whole process

The next step of teardown focused on our claim of no coding required, though that is not required but looking at the setup it feels a coder is required, and for us targeting product managers this doesn’t look related at all.

Suggestions by Bharath for the setup screen

Sign Up After Landing
Easy UX

The designs in themselves speak louder than words and hence, something we loved instantly, apart from great design and user experience inputs. We got great insights from,

Girish — Website landing page heading should initially focus on technicalities, then functionalities and later on the larger message when the brand is big enough.

Ex: Coca-Cola — open happiness.

Ex: We say ‘Upgrade into a Progressive Web App’, this is good for us initially as an early stage startup, segmented only for the crowd who knows.

Shekhar — Asking telephone numbers from our initial customers is a great way to increase conversions rapidly, our signup should have that one field.

The last but not the least, Product Positioning and Market

All the above insights make no sense when we don’t know our market. I did talk about the positioning of early stage startups and how we did it for widely.

As there is this increasing need of brands to be accessible by all mobile users, we get queries from enterprises, brands, services/agencies related to our solution, we’ve been on and off on where to focus and what we should leave. This also made us change our pricing many times.

The last part of teardown was a relief when the founders sitting there, Shekhar & Avlesh made us believe you don’t need to stay at one, until you get where the best market is. All this made sense, as then we could generate higher revenue by understanding our value add to the users.

At the same time, we received Girish’s point of view on growing freemium way and onboard as many users as we can,

So here is the beauty of SaaSx, you get everything, now it is going to be a tough fight within the team to choose a way.

Key takeaways..

An enthralling experience in Widely’s product journey, SaaSx, and product teardown happened to be extremely helpful. In my opinion, teardown is a great way to eliminate blockers and move faster against competition and changing market.

I’d like to end by a note I sent out to Avlesh, Shekhar, Bharat & Avinash.

Thank you note SaaSx

Definitely I’m in awe and I’d like to mention Product Teardown of Omnify & Product Teardown of 99Tests, these were our fellow product teardown startups, they have explained the process extensively to explore further. Hope it helps more SaaS startups growing and hustling.

Anshuli Gupta, Co-Founder @WidelyHQ, My twitter handle @anshulix

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Team 99tests At #SaaSx4 Product Teardown

#SaaSx4 is a leading tech event that provides Saas founders the opportunity to network and share product insights. Product Teardown session was one of the key highlights of this year’s event held in Chennai on 17th March, 2017. The goal was to help SaaS entrepreneurs gain actionable product insights. Entries were invited from innovative SaaS products from all over the country.

When we, at 99tests got the first email invite for the Product Teardown from iSPIRT, our first thought was that, this was about UX and we might not be a good fit for the event. We then had a conversation with Prasanna who explained to us that product tear down is about Business Discovery of our Product and retention of customers. Basically, a session that will enable to understand your product from a customer’s perspective. This piqued our interest in the #SaaSx4


A panel of established SaaS founders and mentors that included Avlesh Singh, CEO, WebEngage, Bharath Balasubramanian, Director of Design, Freshdesk, and Shekhar Kirani, Accel Partners, were assigned the task of selecting the final products for the event. The first screening call with the panel was very interesting. It was a 30 minute call where we got the chance to showcase what 99tests does, and how it works. We answered questions about revenue, SaaS model, our core value proposition, and how we delivered our services.

With only three slots left, the pressure was on us as we waited for the results. After a few days, we finally got the message that 99tests was selected in the SaaSx4 Product Teardown. We were pretty excited and looking forward to all feedback on our product from eminent members of the Indian startup ecosystem. We admit that we were also a little nervous that our mistakes would be out in the open!

Key Takeaways From The Event

Software products chosen for the product tear down session were critically analysed by a team of expert SaaS mentors and SaaS founders. The aim was to understand the customer onboarding process, retention and discovery of business opportunities for the products. These insights helps entrepreneurs in answering key market questions like:

  • Who is my customer?
  • Who could have been my customer?
  • What characteristics of my customer makes them like my product?
  • If I am successful, who will come after me?

Our Experience At The Product Teardown

In the next call that we had a call with Bharath, Director of design, Freshdesk, we explained how 99tests actually works. The key questions were around customer on-boarding, understanding how much of our service was self-serve and how much was fully managed.

On D-day, we were a little nervous, wondering what aspect of our product would be showcased to a room full of SaaS founders. The first teardown by the first team did give us a hint into what would come next.

What We Learnt About Our Product

The first part of the teardown was about seeing how the search keywords map to our target personas. It was good to see one of the teardown companies having website that perfectly matched the keywords that they were targeting. In our case, we learnt that on our page, the content did not contain enough matching keywords that a customer would type in. This makes it difficult for them to find us.

The next feedback was on our homepage. We found that it was using too much of testing concepts. Moreover the Home page did not clearly highlight the functional message of Automation Testing by Crowd, our USP.

The last set of feedback was on customer on boarding. Here, we learned that our product asked too many questions that assumed that our customers would know a lot about testing. This is causing a lower sign up to the demo page. It was also great to learn that we needed focus in terms of countries, based on how customers would perceive our product. The most useful feedback that we got, is that product owners were not clear on how much time they needed to spend with 99tests on a daily and weekly basis. although they could get started in only 30 minutes.

Overall, we got the feedback, that we do have a fantastic product, but the messaging was not yet sophisticated enough for an international audience and could be improved. 99tests is very thankful to iSpirit, Bharath from Freshdesk, Avlesh from WebEngage and Shekar from Accel for the opportunity to be a part of the Product Teardown at SaaSx4. The feedback and insights we gained from the SaaSx4 Product Teardown was very helpful in identifying areas that needed improvement and also in gaining new ideas to make our products great.

Guest Post by Praveen Singh, 99tests.com

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What we learned from the Product Teardown of Omnify at #SaaSx4

A week or so before #SaaSx4, I woke up with an early morning call from Prasanna (SaaSx Volunteer) to tell me that they have nominated Omnify for the Product Teardown. Honestly, I jumped out of bed and my first reaction was like Ohh sh*t.. Not the Teardown!!

But then he said that they will select three companies out of the few nominated. So I agreed for a Hangout call hoping that we will not be selected.

So, Why did we do it?

I think, as a startup it’s good to go through “Make & Break” cycles which helps building a stronger product. Incidentally, that week we were sort of doing an internal teardown of our product and our conversion funnel. After the first hangout call with Avlesh, Shekhar and Bharath, I realised that it is indeed a great opportunity to get external feedback as we will be making a lot of effort this year on Product Design and Marketing.

Also, best part about the SaaSx community is the positive environment where no one is judging others and it’s all about learning from each others mistakes. Guys like Girish, Avlesh and Sudhir openly talk about the mistakes and learnings so others can benefit.

So, in the same SaaSx spirit we decided to participate in the Teardown for the benefit of us and anyone who can learn from our mistakes.

About Omnify (to give some context)

Omnify helps small businesses to Sell and Schedule their services online through One, Simple Platform. We have built comprehensive scheduling for Group Classes, Appointments, Events, Camps, etc. which can be easily sold as Packages and Subscriptions through Omnify.

Goal of the Teardown

I had multiple calls with Avlesh, Shekhar and Bharath before the teardown. The purpose of the calls were to have better understanding about Omnify and see how they can help.

After some discussion, we decided to find gaps in our conversion funnel; right from discovery, signup, onboarding to setup.

Discovery

Our major channel for getting customers is Search. Hence this part was focussed on our SEO. Interestingly, we got a thumbs up for this part as we have already put some work into our SEO. There is so much more to do and scaling our Top of the funnel is currently our Top Priority as pointed out by both Shekhar & Avlesh.

The best part about Search is that it shows “Intent” which has a direct impact on your conversion. For SaaS startups (especially at early stages and targeting global market) this should be the most important channel for customer acquisition. Hence, my advice for anyone who has not yet worked on their SEO is to atleast get the basic On-Page optimisation, Major Keywords and URL structuring right. It is a time consuming project but it will be worth your time and effort.

Here is an old, but a simple post on this by Moz.

In case you have no clue where to start, just hire an SEO expert from UpWork for a $100 project to do an SEO Audit of your website.

Action Plan: We are now spending a lot of time on Keyword optimization, Improving on page optimization and figuring out ways to churn good quality content at scale. Will share our learnings with some data once we can.

Website

Next target for the Teardown was our Website (https://www.getomnify.com/)

Bharath did a great job pointing out few key issues in our website that may be affecting our conversion and also did a comparative analysis with our competitor’s website who has probably spent millions of $$ to optimise it for the target audience.

Although we had spent quite a lot of effort on our website as it the most important part of our company and our doorway to customers across the world.

Although, there is a lot of room for improvement but here are a few things that we already worked on.

Trust

  1. Good Design breeds trust.
  2. Simple things like SSL certificate (https) improves trust in your website.
  3. Transparency — About us page with photos and social profiles of the team.

Mobile Responsive

A big chunk of the website visitors are probably coming through mobile, so it’s super important that the website looks and works great on any mobile device.

Speed

Today, everyone has very little patience. So if it takes more than a few seconds to load a page we might lose potential customers. Simple things like image compression, lazy loading, etc can be very effective to improve speed drastically.

Visual Content

People scroll through the pages in seconds, it’s super important to have enough visual content like images and videos to grab their attention.

Key Takeaways:

  1. Our messaging on the landing page should be more targeted and simple to understand.
  2. Improve Trust on our website through customer review, case studies, etc.
  3. Learn from our competitors on targeting.
  4. Content language should be optimised for the biggest market (US in our case).
  5. We should have country specific landing pages for at least our major markets.

Action Plan: We are doing a sprint soon to optimize our landing pages with more targeted content and adding customer reviews + case studies.

We are also going to try Zarget (https://zarget.com) to experiment and improve our website conversions. Thanks for the dinner Arvind! 🍺

Customer Onboarding

This is where we already knew our funnel is broken and although we have already been working on it, we got good critical feedback and suggestions from Bharath.

Signup

Interestingly, this is one of the most ignored pages for most startups (including us).

Even small things here can increase drop-off or conversion.

In our case, I think we got away with small ux issues as Omnify is a business product and the value of a Free trial outweighs the effort of the signup. But, needless to say we are making it simpler.

Onboarding & Setup

To give more context, our current onboarding process is a wizard that appears on Home page of the Dashboard for new users and stays there until completed. One major issue with this is that once you navigate away from Home there is very little hand-holding.

This is how it works currently:

  1. Setup Business: Basic information and contact details.
  2. Setup Services: Comprehensive and a little time consuming.
  3. Website: Auto-created but valuable only after a few services are setup.
  4. Attach Payment Gateway: Connect Stripe or Paypal.
  5. Add/Import Clients

Design Suggestions

Bharath suggested a simple 2 step onboarding process for Omnify.

Key Takeaways:

  1. Our Onboarding needs more customer hand holding.
  2. Setup needs to be simpler or create Website with Sample Services for Instant Gratification.
  3. Auto-fill wherever we can.

Action Plan:

We believe in fast iteration and are already redesigning our onboarding and setup. I will share a detailed post on our Onboarding redesign later but for now, here is a Sneak peak on what we are upto (Still iterating):

Market and Positioning

Last part of the Teardown was about understanding the target market and our positioning.

There were 3 points that were discussed.

Understanding our Target Customer

Omnify can be used by anyone who provide services and scheduling is an important part of their business. Most prominent segments are fitness, wellness, sports, kids activities and recreation.

Horizontal or Vertical SaaS

This was one of the hot topics at SaaSx and I am hoping for more content on this from the community.

In case of Omnify, we started as a vertical SaaS product but went through a customer discovery process thanks to Inbound Marketing and pivoted to Horizontal SaaS.

Since we didn’t have control over who was signing up, we thought we might as well turn it into an experiment to understand demand and gaps in the market. After working with hundreds of customers across different categories and 50+ countries, we learnt that we are solving a core problem for a wide set of customers who behave very similarly.

Hence, our view of the market changed to horizontal.

Target Geography

While it’s extremely important to choose the right geography if outbound is the core channel for customer acquisition, businesses like ours who run on Inbound Marketing have an advantage of understanding different geographys at due to lower cost. Saying that, we are currently picking up few key geographies with better volume and conversion rates to put our efforts on.

Key Take-away:

Leveraging existing market segments is easier than creating new segments.

Last words..

Overall, product teardown was a great experience and we would recommend other startups to do both, internal and external teardown of your products regularly. It’s a great tool to find gaps in the product so we can iterate fast and grow faster.

Big shout to Avinash, Avlesh, Bharath, and Shekhar for putting so much effort into the Product Teardown.. taking calls at 8am on a Sunday, spending time going through our product demos, etc. Thanks guys, it was super helpful.

Also, it is truly a pleasure being part of such an amazing community of Entrepreneurs and I would like to thank everyone who worked hard for making SaaSx possible. Already looking forward to the next one.

Keep Hustling..

Manik Mehta

Founder & CEO, Omnify Inc.

Say hi @manik_me

P.S. It was the first SaaSx for my Co-founder, Kabandi and she can’t stop talking about it 🙂

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“Vertical SaaS” Deep Dive #PlaybookRT in Bangalore

If I were a Cobbler it would be my pride..

The best of all Cobblers to be..
If I were a Tinker, no Tinker beside
Should mend an old kettle like me..


The above poem defines vertical SaaS to a T!

When I got an invite from iSPIRT that there was going to be a roundtable on Vertical SaaS, I jumped from my chair with joy!

First of all I discovered only recently via iSPIRT that there’s a buzzing ecosystem of SaaS startups in India! Not SaaS enabled Marketplaces, but SaaS products that are built worldclass and sell to the world.

So when I discovered that within that little ecosystem, we can go further narrow into sharing knowledge specific to vertical SaaS, I could have given iSPIRT a bear hug!

So last Saturday, in the cosy n energetic office of Hotelogix, few of us vertical SaaS folks gathered around Sudheer Koneru – cofounder of Zenoti.

As with the iSPIRT roundtables this one was also a treasure-trove of experiences shared, founder dilemmas discussed, the unavoidable pain points bantered about.

WhatsApp Image 2017-03-05 at 12.36.07 PM

The 2 main takeaways from Sudheer’s session were

1) Narrow Focus

So when you are starting a business you want everyone to buy your product right? Especially if your product is an Online Software that needs least feet-on-street selling.
 
Now you have chosen a vertical as your karmabhoomi, at least in that vertical, you want everyone, right? In case of Sudheer who builds a kickass product that makes wellness service/spa owners’ life easy, one would expect him to want every Spa, Massage Parlor and Beauty Parlor to use his product. There are at least 5 Beauty Parlors in any 1KM radius of any metro/tier-1 city!
 
The answer is a resounding No. Sudheer chose to focus further narrow on that – upon Customers whose pain point is the most acute. Those are the multiple outlet chains. Now that Zenoti has an established market, it is exploring expanding the customer segment.
 
Apart from the customer segment Zenoti also sets an example in going narrow on geography. Sudheer started Zenoti from Seattle, worked on winning the Seattle market and then looking elsewhere.
 
Reminded me very much how we limited ADDA to Whitefield in Bangalore before spreading wide to rest of India.

2) Empathy

Sudheer highlighted how employees in a StartUp may miss out on the Empathy factor in our dealings with the Customer.
 
To the Cofounder of a Vertical SaaS product Empathy would come naturally. If you are a cobbler all you care about are the feet of customers. When your customer mentions a stitch was sticking out in the shoe, you grimace, you know how annoying it must be to the Customer. Not only you know how it feels you makes sure your Customer knows that you feel her pain. And then of course you fix it
 
But, how do you pass on that Empathy to your employees!
 
Interesting inputs flowed in from all present.
 
Overall, this roundtable set us few steps forward  on the path of overall Wellness and Growth!
 
Of course the final credits goes to Natwar who moderated the session like the pro he is!
 
Guest Post by San Banerjee, ApartmentAdda
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You may have a viable product but do you have a viable business?

(Also posted on LinkedIn here).

I’m a big fan of the “Lean startup” movement. Steve Blank, Ash Maurya and others have done amazing work around innovative, startup companies. Two of my most recommended books in this area are The 4 Steps to Epiphany and Running Lean. I strongly recommend every founder read these. Shockingly, most haven’t!

I’ve come across a new breed of founders who are well versed in the lean startup methodology. They understand the importance of customer discovery, a minimum viable product and the power of testing. These are all necessary to build new products.

I submit that they are not sufficient to create a company.

Here’s why.

A feature isn’t a product; a product isn’t a business; a business isn’t a company; a company isn’t an organisation.

Sanjay Anandaram.

Here are four additional questions you need to look into before you startup.

1) Are you talking to the right, representative prospects to validate your idea?

I’m a big believer of getting out in the field and talking to customers. Dozens even 100’s of them. It is an order of magnitude better than sitting in your office and pontificating. However, talking to 200 people does not make your idea into a viable business opportunity.

Are these 200 people truly representative of the prospective customer pool ?

Or, is there a selection bias? Perhaps, these are only tech-savvy customers in urban areas or the upwardly mobile. You need to estimate how big is that addressable market over the couple of years.

Secondly, how critical of a pain point is it for these users?

Is it an ongoing pain or a one an infrequent, perhaps even a one time, problem ? In general technology has made people be more open to saying “yes” more often to new ideas. This is the classic Aspirin vs. Multi-Vitamin question that VCs often talk about. While new ideas area interesting, it often takes years to change customer behaviour unless it a dire problem for a large number of prospective customers.

Don’t try to “invent” demand. Find basic human needs and solve them better, cheaper and faster.

Evan Williams, Co-founder of Twitter.

Market creation is hard for a variety of reasons; one of the primary reasons is that the cost of distribution is continually getting more expensive.

Lastly, would customers pay — ideally with money or at least with their time(e.g. Snapchat, Instagram, Google)?

2) Can you get effective distribution of your product or service ?

Human beings and businesses alike are being bombarded with a breathtaking innovations at a rapid pace. However, the amount of time, energy and money they have is limited.

How will you reach a large number of customers whether they be consumers or businesses? Are there existing channels that you can tap into ? Would they be cost effective?

Every innovator believes that their product will have strong word of mouth, virality and/or some kind of network effects? Well, most don’t. For most ideas, esp. in B2C, I would be very dubious if you don’t have strong, organic user acquisition channels to grow.

3) Are the unit economics viable?

So you have a problem worth solving, a solution that’s differentiated and a shot at distribution. Now comes the question about “Unit economics”. The simplest place to start is with your gross and net margin. How much money would you make per transaction (or unit of engagement)? This is not GMV or Transaction Value but the money that your business makes.

The first step for this is to calculate your Contribution Margin, or the money you make per transaction less your variable costs. For most businesses, variable costs are marketing, payment gateway charges, delivery/logistics charges, etc. This does not account for fixed charges for your employees, server costs, etc.

Is your margin or take rate (%) enough to cover your variable costs per unit?

If you are relying on scale to get your contribution margin positive, you are barking up the wrong tree! You may never get there.

4) Is there a large enough profit pool to tap into?

If you’ve gotten this far, you clearly have a problem, distribution channel and business that’s worthwhile.

Is there a large enough market size and profit pool in the area that you are in?

I don’t know about these new valuation metrics, but remember that the only way to value a business that will always be true is: present value of discounted future cash flows

Prof. Bill Sahlman, HBS, Circa 1999

If you don’t have a large enough profit pool, you may build a company with great unit economics on a large enough market but have little discounted future cash flow (e.g. IRCTC — Indian Railways). See Rajan Anandan’s prescient comments on the Indian B2C e-commerce marketplaces.

Now comes the source of capital to build your business. If you are aiming for something big and ready to scale fast, then I would recommend using venture capital (if you can affirmatively answer all 4 of these questions, give us a shout at Prime Venture Partners). However, VC money may not be appropriate or relevant for your business or your approach. Here’s one representative list of questions to ask yourself before raising VC money.

All of this won’t be empirically figured out on Day 0 of a startup. Of course, you will learn along the journey. However, you won’t be able to change the contours of the market or the availability of profit pools once you are 6–12 months into your startup.

It behooves you to spend a few weeks or even months to think through these questions before you commit yourself to a new company!

Guest Post by Amit Somani. He is a Managing Partner at Prime Venture Partners, an early stage VC firm based out of Bangalore, India. Prime invests in category creating, early stage companies founded by rock star teams. Prior, Amit has held leadership positions at Makemytrip, Google and IBM. He is also deeply engaged with the early stage startup ecosystem in India and actively volunteers with iSpirt, TiE and NASSCOM. He tweets occassionally @amitsomani and is trying to become an active, late blooming blogger.

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Place of Effective Management (POEM) of a business

Finance minister had announced during budget 2016 that place of effective management (POEM) will determine if a company is resident in India or not. Accordingly, this was notified in Finance ACT 2016 as under.

Finance Bill

The details of what will determine the place of business rules was not decided in the Finance Act 2016. The POEM provisions was supposed to become effective from April 2017. The detailed guidelines of what rules and conditions will determine the POEM has been issued by CBDT on 24 January 2017.

Ever since the announcement in 2016 there were many apprehensions on POEM, especially in SaaS companies.

In order to clear this apprehension a PolicyHacks session of iSPIRT was conducted.

The video discussion on POEM attended by Girish Rowjee, Founder CEO of Greytrip; Mrigank, Mrigank Tripathi,  Founder CEO of Qustn Technologies; Sanjay Khan Nagra, of Khaitan and Co.; Avinash Raghava and Sudhir Singh, iSPIRT  is given below.

What does the above POEM ruling incorporate in finance bill imply?

In simple terms the place of effective management in above act means a place where key management or commercial decisions that are necessary for the conduct of the business of an entity are made, in substance. This implies Indian resident status on a company will apply even when the entity is incorporated outside India, if the place of effective management is proven to be in India.

The guidelines issued on 24th January 2017 by CBDT will be used to determine if a business of non-Indian entity or a subsidiary of Indian entity will fall under the place of business rules or not. The Guide lines can be accessed here.

POEM is an internationally recognised test for determination of residence of a company incorporated in a foreign jurisdiction.

Why this regulation has been brought in?

POEM require Indian firms with overseas subsidiaries or foreign companies in India to pay local taxes based on where the business is effectively controlled.

The main intention of this regulation is to capture the income in shell companies incorporated outside India that are held by resident Indians with a basic intention of retaining the income outside India.

The regulation is not intended to discourage valid Indian businesses to setup an entity outside India or operate in global markets.

Does it impact Software sector?

It is very common for the India Software companies to open an office in foreign geography, many times as a subsidiary of Indian company and sometimes a new entity with mixed local and Indian management. Hence, the POEM has been worrying entrepreneurs in this sector. For SaaS segment, it is very normal to have a foreign entity, either for reasons of funding or market penetration.

As mentioned above, for a valid global business the POEM will not be a hurdle. Businesses, having global operation but not retaining income in foreign companies (i.e repatriating profits to Indian company) through authorised route and after complying with other regulations, POEM will not be a a worrying factor.

There may be a very few Software Companies, who may need to be concerned, to pass the test of POEM. Any determination of the POEM will depend upon the facts and circumstances of a given case. The POEM concept is one of substance over form. If POEM is established to be in India for businesses operating outside India, they will be taxed in India.

It is not possible to generalize the impact of POEM on Software sector or illustrate few used cases. Whether a business operating outside India will get classified as POEM can only be ascertained after detailed examination.

Exemption for turnover less than 50 Crore

There is good news for startups as per the Press release accessible here, it has been decided that the POEM guidelines shall not apply to companies having turnover or gross receipts of Rs. 50 crore or less in a financial year.

This was not clear before video discussion and doubts were expressed during discussion, as this rule has not been described in the guideline circular of CBDT but has been mentioned in the press release of same date from CBDT.

Hence, we can expect that the rule of less than 50 crore income shall be embedded in income tax rules to be notified later.

Other salient features

  1. The provision would be effective from 1st April 2017 and will apply to Assessment Year 2017-18 and subsequent assessment years.
  2. The Assessing Officer (AO) shall, before initiating any proceedings for holding a company incorporated outside India, on the basis of its POEM, as being resident in India, seek prior approval of the Principal Commissioner or the Commissioner, as the case may be.
  3. Further, in case the AO proposes to hold a company incorporated outside India, on the basis of its POEM, as being resident in India then any such finding shall be given by the AO after seeking prior approval of the collegium of three members consisting of the Principal Commissioners or the Commissioners, as the case may be, to be constituted by the Principal Chief Commissioner of the region concerned, in this regard. The collegium so constituted shall provide an opportunity of being heard to the company before issuing any directions in the matter.

The point 2 and 3 mentioned above will ascertain that there is no arbitrary discretion exercised by Assessing officers on ground.

The Guidelines issued can be accessed here, also provides examples that explains when an active business outside India will be treated as Indian business based on POEM. These examples do not explain each and every case.

Also the exemption of 50 Crore is neither given in Finance Act or in the Guidelines but mentioned in press release.

CBDT may therefore issue further circulars to clarify these positions.

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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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The Product Manager’s RuleBook

The Product Manager’s RuleBook

This post is not about “tools” which will make you (integral)dx more productive. This post is about telling you rules of the Jungle called Product Management.

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So you are the Product Manager, Right ?

You just graduated out of B-School (or even worse completed your bachelors degree) and you have been given the product manager tag in the company you decided to work in. Welcome to the Jungle. Unless you have a really f**ed up CEO or a clueless CTO, you are in for a hell of a ride. There are a dozen of definitions of a Product Manager but, here is the one that sticks –

You are the mini ‘CEO’

Welcome to the Jungle. People don’t follow rules here. Especially when it comes to product. Here are 49 rules that I have curated, over the course of 7 years, across Product, Operations and Sales.

Rules

As a Product Manager, you will be exposed to attention, and a lot of it. Mostly unwanted and discomforting. Don’t be surprised if your peers are jealous of your role. You will get pulled into every meeting. You will looked upto/at for every release. For every feature. For almost every client meeting/call. But that is least of your worries. Unless you have been a PM before, your biggest challenge would be not having a benchmark. You have no way to draw the line. Follow these rules and you will stumble less- I am personally still trying to master the art.

  1. Get sold to the product. Believe in the product yourself. If you don’t, try again. If you still can’t make your self believe it, drop it and find something else.
  2. You will get sucked up in your work schedule. Be ready for it.
  3. Don’t get sucked up every time. At times, drop the bomb on Sales and Marketing. Reality check can never hurt
  4. Learn the art of saying no. At least in your head. Practice it over a period of time with/on your CEO, CTO, Sales and Marketing (in that order)
  5. Develop a healthy relationship with your developers, QA and designers.
  6. Avoid making value judgements. What are value judgements ? The statement that you say aloud in your head without ANY authority or reliable data to back it. You always know when you are speaking from the gut. (You know who else spoke from the gut ? George W Bush)
  7. Trust your developers. Back them up. Stand for them. Pat their back and give them credit.
  8. Bet on your Sales and Marketing. Support them. Be their favourite cheer leader. Always
  9. Keep some buffer from Day 0 itself on your delivery schedule. You are surrounded by uncertainties. Every client wanted “it” yesterday and no dev will have it ready by tomorrow.
  10. Split roles between you and your CTO. Decide, who will plan and who will drive the execution. Don’t fuck this one up. Don’t take planning, because you most likely don’t understand your dev’s code.
  11. Between your CEO, CMO and you, figure out who will OBSESS about “organic growth” (SEO). You don’t have bandwidth, don’t ever opt-in for this one.
  12. Coin and propagate your own product terminology/nomenclature, before sales “oversimplifies” it or dev “rocket-sciences” it. This is a critical to build and manage perception.
  13. Write emails with keywords that you can search. Chat with keywords that you can recall and search again. You will spend significant time in forwarding old emails to dev, sales, marketing, CEO. Skip the CTO. Your CTO barely opens your email.
  14. Park your personal choices of colors, fonts and design at home. Product is being built for customer’s delight, not yours (or your investors)
  15. Like a rhetoric, keep telling point #14 to your CEO.
  16. Get a Tee that says “Good is not fast and fast is not cheap.” Boring, cliche but still right.
  17. Pulling an all nighter for product release is cool and fun, but not if you are releasing thrice a week.
  18. Remember that you don’t understand quality assurance or testing. Like everything else, QA is a skill. Unless you have learnt it, avoid claiming it.
  19. If you are building a B2B product, you definitely need a QA. If you are building a B2C product, hell as sure you need more than 1 QA.
  20. Be friends with QA and Designer. Make them feel special. You won’t exist without them.
  21. Assumption is the mother of all fuck-ups. Under communication is an assumption. Hence, under communication is a fuck up. Over communicate and play safe.
  22. Build your own narrative as an objective and data driven person. Understand and question the objective before jumping into anything (including that market research slide for the investor deck)
  23. Document everything that is made and not made. At least try.
  24. Begin you conversations with developers and designers with context. They will feel involved, aware and productive. Context helps. Always.
  25. In the same breathe, demand context from Sales, Marketing and CEO. You will be able to address their requirement faster.
  26. You will always be able to sell better than your entire sales team combined. But again, don’t do it.
  27. Keep your Company Logo Product Logo, favicon, Product Description (1 liner, 5 lines and 1 pager) always ready. Anyone can ask for this. Anytime.
  28. Plan ahead for a week. Do so on a Saturday/Friday Evening. Do it on a Sunday night if you have to but NEVER on a Monday morning.
  29. CEO’s often talk sense. Listen to them.
  30. Not everything that your CEO said was actionable. Don’t act on everything that your CEO says. They most likely didn’t expect action themselves.
  31. Build your own opinion about the industry, domain, and the product. Attend conferences/events focused on your industry.
  32. CTO’s can/will have walls. Be inquisitive ( read pushy)
  33. You need to be aligned with your CEO, Sales, Marketing and CTO. Don’t forget your actual job (Mini CEO/Get-Shit-Done)
  34. There is nothing better than pen paper when it comes to maintaining lists. There is nothing better than pen paper when it comes to wire-framing.
  35. Don’t boil the ocean with every release planning. Every dog has his(/her) day. You will have yours on the day of bug bashing.
  36. Avoid falling sick. Exercise daily. Meditate daily. And buy a Macbook air
  37. Nothing will go wrong if you are late by two minutes late in sending that presentation/ releasing your product update. Be right and late rather than being sorry and on time. If your Sales team can’t hold for a client for 2 mins, imagine..Again, plan better next time and avoid being sorry.
  38. Next time, a Sales guy says that “it was you and your product” that costed him/her a sale. Gulp down your ego. Hear them out. They are ranting. The next day, give it back to them. Patiently.
  39. Your role needs you to seek feedback. Proactively. Ideally once a month, from all your peers. Similarly, your feedback for your peers is critical.
  40. Sales folks are hired for selling. They most likely, can’t make presentations. Live with this fact. Make a template for them. Engage your sales team by changing the template’s colours every 10th week.
  41. There is never a bad time for having chai/coffee. Though Obama doesn’t drink coffee. But again, you are not Obama.
  42. Content writing is NOT your forte. Nevertheless, write the copy for your website or someone else will write something that you never made/promised/planned. Rant about it, if you ever hire a content writer
  43. Create your own reports, dashboards and product performance benchmarks. Do this before the developers starts developing.
  44. Start your day with numbers of the previous day.
  45. Learn to let go, of things you like. Your favourite features, CEO’s favorite feature, colors, fonts, processes and evening dates.
  46. In hindsight, you will always be right. Move on.
  47. You job needs you to be a swinging pendulum. Hah. Self-Pity mode is awesome. But, don’t let it stretch for more than few hours
  48. Last but not the least, remember to laugh about that how, once upon a time, everyone including your head of sales, marketing lead, CEO, CTO and dev ops were clueless about the house of cards that “you” got “built”
  49. In the end, make your own list. And pass it on.

Author – Vivek Khandelwal

Founder of Datability Solutions, a technology startup building iZooto, a web push notification platform for user engagement and retention. 

 

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Freemium Model for SaaS – The Good, The Bad, and The In-between

In 1999, Vistaprint, a four-year-old French startup, launched its internet-based printing services in the highly competitive US market.

Going against the popular advice to target the bigger companies (who would spend more money on printing), the Vistaprint team went for the micro businesses (who were then considered as a terrible market, as they were close to impossible to reach).

To tackle that, the Vistaprint team came up with a direct marketing strategy, which turned out to be a runaway success, becoming their core acquisition flywheel in no time.

And, it’s simpler than you think.

Basically, this was their offer: Customers could get 250 full-color business cards (that were being sold for about $85 online and about $200 to $300 offline, in those days) printed for free, and pay just a nominal charge of $5.67 for shipping and processing.

They could place this order as many times as they wanted, and Vistaprint would fulfil it for them, under a few conditions:

● The free cards will be printed only using one of a set of 40 designs

● It will take three weeks to deliver them

The customers who wanted a different card design, or wanted to get their cards delivered faster, would have to pay a premium price.

This strategy, that worked wonders for the printing company (which had about 17 million people individually buy from them by 2009), lies behind the freemium model in the present-day lexicon.

(Note: If you’re new to the freemium concept, head over to this post that outlines what the freemium model is and how it works, and then get back here. We’ll wait for you.)

However, all is not perfect in the freemium fields.

Even though a plethora of SaaS success stories including SurveyMonkey, FreshBooks, and Prezi have managed to make the model dance to their tunes, we can quote an equal number of accounts where businesses have fallen prey to its deceptive allure – Baremetrics, Ning, and Bidsketch, to name a few.

So what’s the deal with this elusive model? What does it take to win over it?

When does the freemium model go wrong?

VistaPrint already had a full-fledged card publishing and manufacturing technology in place, when they started providing business cards for free. Thanks to the economies of scale, the more cards they printed, the lower their manufacturing cost.

As you’d probably know by now, the basic premise that the freemium business model operates on is this:

Several hundred thousands of users sign up for the freemium plan, and then a good cohort of them will convert into paying customers.

“The easiest way to get 1 million people paying is to get 1 billion people using.” – Phil Libin, CEO of Evernote

So for the freemium model to work out, one specific product attribute must already be in place – low marginal distribution and production cost. Only if you can keep the cost as low as possible, an additional free user will cost you nothing more than a database entry.

SourceMicrosoft, in one of their whitepapers, showing how the cost plummets with quantity

Although this is an inherent characteristic of SaaS products (as shown above), if you’re not careful enough, your freemium pricing can still go completely awry.

The number road to failure is pretty straightforward: Keep investing in more and more infrastructure to handle new users, without generating additional revenue (or having a backup plan) to offset the growing cost.

A majority of websites that sell downloadable content fall under this category. These businesses don’t charge their freemium customers and rely solely on ads for revenue. So when they can’t make enough money from the ads, every new freemium user will exert a bit more strain on their existing infrastructure, to ease which, they will have no other option but to augment their resources.

About 11 weeks after having launched their free plan, things were looking positive for the Baremetrics team – over a 1000 free accounts had been created, of which the eligible paying customers sported a conversion rate of about 11.5%.

And over a period of two years, their free users outnumbered their paid customers, and they found themselves grappling with increasing server and performance issues. The result? More dissatisfied customers began leaving them, because of the “down time, delayed data and inaccurate metrics”.

Source“Our free plan was causing our business to slowly implode.” – Josh Pigford, Founder, Baremetrics

Countless such services have gone under because they weren’t able to bear the weight of the overwhelming scale of operations, both financial and infrastructural.1

But, that isn’t the only reason that leads SaaS businesses to succumb to the dark side of the freemium model and shut shop (or pivot, if they’re smart).

Had the Baremetrics team restricted the data import/export for the free users, they could’ve saved up on the server usage, and have in turn strengthened the reason to upgrade.

Here’s our next SaaS example, Bidsketch’s free to paid conversion rate over the weeks:

SourceFrom “Great!” to “Grmph.” to “Grrrr!”

What’s happened here is a textbook example of how the different kinds of adopters operate as per the “Diffusion of innovations” theory.

The real game begins after you move past the Early Majority adopters

Once the Early Majority customers have moved up the pricing ladder, the conversion rate starts tapering down, as the Late Majority and Laggards are more averse to change. The trick is to keep innovating and adding more value to your premium plan, thereby nudging them down the conversion funnel.

Summarizing this section, the main reasons that contributed to the failure of the freemium model in these businesses are:

● Not having a business model that’s cut out for freemium, where every new user puts more pressure on the existing resources. Adding to that – under such circumstances – not having been equipped with a solid strategy to accommodate the growing load.

● Not striking the right balance between your freemium and premium offerings – if the freemium plan isn’t attractive enough, then you won’t attract new users, and if the freemium plan is too heavy, then the new users won’t move to the premium plan.

● Not communicating well to the free users, a straightforward and solid benefit of upgrading to a paid plan.

● Not constantly hitting on the innovation pedal and making your premium product more and more lucrative, to convince the users in the Late Majority and Laggards categories to upgrade.

When does the freemium model pay off?

1. A DIY product/service, where the cost of servicing a new customer is close to nil. These are the businesses that are designed for the freemium model by default.

SaaS examples: Massive Open Online Courses (MOOCs), Webflow.

This business model accommodates the main ingredients that were missing in the previous section – economies of scale, and low marginal cost.

While MOOCs incur an initial significant fixed cost on course development, contrary to a regular classroom, they don’t have a restriction on the number of students. So a $500,000 fixed cost will be brought down to about $5 per student, if 100,000 students enroll for the course.

Also, the marginal cost of serving an additional student can also be brought down to $1 per student, as there’s no personalization of the service, the product doesn’t have a steep learning curve, and a community-based support will suffice.

The premium plans usually consist of certificates from reputed universities, and according to Daphne Koller, Coursera’s co-founder, they’re able to monetize around 20% of the total registrations.

Moreover, a majority of the students drop out mid-way, thus lowering their streaming cost (their biggest marginal cost). Only around 10-20% students make it to the final exam, and they are the ones who will most likely be interested in paying for certificates.

Now these aspects aside, the other deciding factor for the success of your freemium plan is your value metric.

Check out Webflow’s pricing for instance.

An attractive freemium plan + an even more appealing paid offering = a very satisfied cash register + an even more satisfied customer

These guys have nailed it in coming up with a super compelling reason to upgrade – they have used the collaboration feature (they call it the Team Dashboard) – one of the fundamental activities of website building – as the value metric.

This ingenious move set them up for success, and it wasn’t as easy as you think it was.

Only when you have a crystal clear idea about your customers’ Jobs to be Done (JTBD), will you be able to pinpoint the exact feature that will deliver the ultimate value for the price that you’re charging them.

So if they get a freelancer web developer on board, Webflow can either have them in the freemium plan, or they can make a decent sum of money in the Professional plan, and the moment the freelancer grows into a company of at least 2 members, they directly take them to the Team plan and charge them $78 per month.

The product is designed in such a way that it keeps track of the IP addresses; you can’t log in with the same ID more than once, and you won’t be allowed to view the same folder. For a user who is thoroughly impressed with the product, and is looking to collaborate, these enforcements act as a natural motivator to upgrade to the higher tier.

Which highlights the next factor: it all comes down to how irrefutable your offering is to the customer, and how effectively it gets their job done.

2. Businesses which deliberately try to assimilate and absorb the cost of operations, support, and service, to have a freemium model up and running.

Now why would anyone do that, you ask? Well, for one or more of the following reasons:

● When you’re having your freemium plan as a differentiator in the market.

About 75 startups were already operating in the American market when VistaPrint set foot on it. Millions of dollars were being raised by e-printing companies, and the competition was cut-throat. And they counted on their strategy to target a different market and to offer a freemium deal to give them a spotlight.

SaaS example: SALESManago.

This Polish marketing automation startup knows what it’s up against – giants like HubSpot, Pardot, and Eloqua. And that’s precisely why they double downed on nailing their pricing strategy, to stand out from the crowd of Goliaths.

Notice how the 0’s stand out in the collage of screenshots with numbers strewn all over them? There you go.

And they seem to have done a great job at it. This February, they have raised about $6 million, following a 200% growth over the previous year,  2015.

Let’s examine their pricing plans for a moment – clearly segmented free plans, each with their own specific set of benefits, and the introduction of a premium plan only when the customer’s business grows large enough to integrate and automate the marketing activities. Just like Webflow, it is evident that the SALESManago team has a thorough knowledge of their customers’ JTBDs and pain points that they’re solving.

The result? The customers get an offer that they can’t refuse.

● When you’re employing your freemium plan as a free branding tool.

Wait. The VistaPrint team didn’t have just two conditions attached to their freemium offering. There was one more. Apologies for missing it in the introduction.

Yet another tactic of theirs is that all their free cards will have “Business Cards are FREE at VistaPrint.com!” printed in small fonts at the backside bottom. Those customers who wanted to get the line removed, will have to pay.

SourceViral branding at zero cost – Check.

SaaS examples: Zendesk and Typeform

At the time when they had just launched, Twitter was Zendesk’s highest referrer. Zendesk had a freemium tier back then, where they’d brand the Help Center’s URL. So everyone who was on Twitter and had to get in touch with the support team had to do so via twitter.zendesk.com. Easy, free, referral program to earn new customers!

Typeform does that at present. With the “Powered by Typeform” signature on the bottom right corner of the free forms.

SourceWant to replace Typeform’s brand with yours? Become a PRO!

If just by including a line at the bottom or by adding your brand name to the URL, you’re able to generate ample volume of new users through your existing customers, why would you mind giving it away for free? The cost that you incur because of the freemium plan can then be brought down under your marketing costs.

● When you’re having your freemium product to market your paid product

VistaPrint’s objective was clear. They wanted to sell anything and everything that will help their customers to brand their own businesses – brochures, presentation folders, stationery, apparel etc, and printing business cards was the starting point to get there. Give away business cards for free, and use them to market/sell your other paid products.

Even though this particular category doesn’t fit the textbook definition of the freemium model, the underlying intent is very much aligned to that of the model. And the SaaS world has a name for this: Side Projects.

SaaS examples: Crew and Intercom

When the Crew team was running low on money and were desperate to turn the tables, they created Unsplash, a website that curates and gives away hi-resolution stock photographs for free. The results? Unsplash was (and still is) the number one referral source to Crew, that brought in around 5 million unique visitors.

Mikael Cho, Crew’s founder, quotes Jay Baer to back his faith in side projects (they have since developed a truckload of free side projects – 13 to be precise).

“Due to enormous shifts in technology and consumer behavior, customers want a new approach that cuts through the clutter: marketing that is truly, inherently useful.” – Jay Baer, Youtility

Intercom does that too. Their free product? A customer intelligence platform.

In short, businesses that belong to these three categories, spend those extra dollars to sustain their freemium product, because they know that the free users are paying through one medium or the other –

● They will either use the product and allow it to become a part of their workflow, thus pay for it with their mindshare, or

● They will pay for it by marketing the product

How to find out if the freemium model is right for you?

There’s one school of thought that argues that freemium is dead and gone, and businesses must shift to the next big thing to stay afloat. Then there’s another side that vouches for the abundance mindset, where websites like Craigslist let people post ads for free, and still manage to earn $400 million. Both make sense, and both are equally right.

Vistaprint entered the US market just after the infamous dot-com crash, as a result of which they weren’t able to raise much money compared to the other bubble companies. And its founder believes that that situation, in fact, saved them; because they weren’t able to pool in investments, they had to operate leaner, come up with better strategies, and work harder to make a profit. And that set them apart from the rest of the venture-backed companies.

This is also the reason why they were able to go big with free products and over-the-top distribution strategies, which backfired for most of those latter companies; Vistaprint was clear about its customers and what they wanted, and in turn, the right fodder that will fuel its growth.

Ultimately, it all comes down to how well you understand the value that you’re bringing forth to the market, and how well it aligns with the freemium model.

Dan Martell sums it up in four crisp points, and says that you’ll have to get 3 of them right, to evaluate if the freemium model will work for you:

  1. The number of potential users in your market: The more, the better – remember, only around 5% of the free users will eventually end up paying you
  2. The specific market advantage required to win: What do you want the freemium model to win for your business? Is it a competitive advantage? Is it free distribution? Is it getting more referrals? And how realistic is this goal?
  3. The max complexity of your product and how it works: How simple and straightforward is your product? Does your offering set itself apart from the din around? Is it lucrative enough for your customers to ascend the pricing tiers?
  4. The specific cost each additional user can have: Is the marginal cost of serving an additional customer negligible? Can you ramp up your operations without shooting up your cost? Do you have the capacity to handle the exponential escalation in scale?

MailChimp launched their freemium plan after about 8 years of building a “powerful, affordable, profitable, self-serve product,” and after gathering and analyzing “tons of pricing data”, to justify the 10:1 ratio of free to paid users of the freemium model.

“The question to ask yourself is whether or not your “one” is big enough to pay your bills yet. For eight years, our company never thought about freemium. We didn’t even know the concept existed. For eight loooong years, we were focused on nothing but growing profits… … In other words, we’ve been laser-focused on the “1” side of that 10:1 ratio. We’d never consider freemium until our “1” was big enough. Enough to pay for 70+ employees, their health benefits, stash some cash for the future, etc.” Ben Chestnut, Co-founder of MailChimp

Guest post by Sadhana Balaji, ChargeBee. The blog was originally published here