In the SaaS Sales Funnel, people emerge from the murky ooze of the interwebs, start hanging out on your website, and then at some point start giving you their hard-earned cash and become your customer. How do you build your business in a customer-centric way so you’ve got good, happy, paying customers that keep paying for many months and years? This is a lot more complicated than it sounds — there are a lot of moving parts in a SaaS company, which I described the SaaS Sales Funnel in this blog post awhile back: http://stephdokin.com/the-abcs-of-the-saas-sales-funnel-graphic/

With gratuitis use of Dr. Bob E Hayes’s Customer Loyalty science and gfx (thanks!) …

Three ways companies make money

There are three ways a company can make money: 1) Getting existing customers to buy from you again (measured by Retention Loyalty). 2) Getting new customers (measured by Advocacy Loyalty / Recommendation). 3) Getting existing customers to buy more things from you (measured by Purchasing Loyalty) — in SaaS, this means enticing customers into the next pricing tier.

Retention, Advocacy and Purchasing is Dr. Bob’s RAPID customer loyalty model, and here is how it impacts the SaaS Sales Funnel:

 

What is Customer Satisfaction?

Isn’t customer satisfaction simply if people like your company enough to tell other people about it? Fundamentally, yes, but there’s so much more to it than when your Grandpa taught you Net Promoter Score (NPS). I’ll direct you to Dr. Bob’s website: “Is the Important of Customer Experience Over Inflated?” for a comparison of old school vs. new school CEM methods http://businessoverbroadway.com/is-the-importance-of-customer-experience-over-inflated.

Dr. Bob’s RAPID customer loyalty measurements is especially suited for the 3 ways companies make money in the SaaS Sales Funnel.

SaaS, for those not following along is Software-as-a-Service, donchya know? Monthly recurring payments where the customer has the option to discontinue their service with a months notice if they are unhappy or don’t need your service anymore. Most cloud software companies have tiered payment models that include both monthly payment options and annual discounted licenses.

Use Customer Loyalty Research to help making strategic planning decisions

Increased customer loyalty leads to creating accelerated and sustained revenue growth, and especially so, in SaaS companies and Dr. Bob and I have been optimizing the methodologies for several years. The resulting research processes, survey platform, etc… are what Dr. Bob and I do together for our clients with the team at @TCELab http://www.tcelab.com, with our CRD Survey Product.

Here’s a 13 minute much-to-long video: http://youtu.be/HfS9B5lEN84

It details our TCELab CRD approach, survey, results and process. Think of the CRD as your annual customer survey on steroids … important insights to gain leading up to strategic planning sessions. As a side personal note, the soundtrack on the video is a blues instrumental recorded about 5 years ago by yers truly. But … I digress! http://youtu.be/HfS9B5lEN84

Traditional Google, Mailchimp Analytics etc… are like looking in a rear view mirror and guessing about what’s coming

Measuring conversion rate %’s between the different stages of the sales funnel is a great rearview mirror way to understand what has happened in your business — which tactics have worked and which have not. But, past success does not predict future events. The team then guesses about what the FUTURE holds, like fortune tellers.

Without measurements about customer behaviour … well, in the absence of data, everybody is right. The net result? I have yet to meet a management team who don’t have more stuff to do than they have resources to do them with; “Of the 35 things that are on our plate, we can only afford to do 5 of them well — but we don’t know which 5!”

Knowing vs. Guessing

The critical part of focusing tactics is KNOWING which ones will have the largest impact on your revenue, and which ones will waste your resources. The business transformation required to go from GUESSING to KNOWING can be quite painful for management teams, and requires a commitment from the CEO down throughout the organization. It’s especially painful to those that are using to “shooting from the hip” as it puts discipline into focusing your teams efforts and cash expenditures.

You’ll know you’re spending your time and money in the right place, because you’ve figured to focus on the things that have the biggest impact for your customers that you can improve to make the biggest difference to the customer loyalty.

SaaS Customer Experience Management (CEM)

At the heart of a good CEM program is a way to measure and understand your customer loyalty ’s usage, behavior and attitudes and then apply these learning to operational metrics in order to create business transformation (known as “linkage analysis”). CEM spans your entire business; from product development to go-to-market to service and support, and, in the case of this post, specifically SaaS … here’s how to grow your company:

  1. To reduce CHURN focus on improving Retention Loyalty. With respect to Retention, typically, in a SaaS model, customers get to make a choice on a monthly or annual basis whether or not they will persist with your service. If they choose not to, they cancel their subscription, and the aggregated numbers of customers that leave you is known as “churn.”
  2. To acquire NEW CUSTOMERS focus on getting word-of-mouth through Advocacy Loyalty. At the top of the SaaS sales funnel is where we find new customers. The biggest source of new customers is “word of mouth” a.k.a. advocacy a.k.a. recommendations. The newer school of inbound / social marketing is really all about making sure you make it easy to help customers tell their friends/peers/colleagues – with the end goal about creating and sustaining a buzz. Advocacy starts at the product level, of course. Despite what “savvy” marketers will say to the contrary, you actually can’t sell ice to eskimos … if your product falls short, there’s no amount of marketing SaaS Sales Funnel trickery that will sustain your business. As mentioned earlier, RAPID can help you understand your product quality dimensions, too.
  3. To increase ARPU (Average Revenue Per User) focus on improving Purchasing Loyalty. Customers who are happy with you are great customers. They either continue to pay the subscription amount, or, in the best-case scenario, choose to move up to more premium tiers that offer more value to them in your SaaS model – this increases your ARPU (“Average Revenue Per User”). Understanding Purchasing Loyalty is key to understanding what your customers want in premium tiers.

Marketing + Product Development

As marketers, it is very important that you not stay silo’d in this journey of the SaaS Sales Funnel. The symbiotic relationship between marketing and service cannot be overlooked — they both represent your “product.” So, sometimes it’s not about another marketing campaign or message changes, it’s about product development; or, the “middle-ground” of IT projects that are entwined between sales initiatives and the product offering, such as a licensing server.

Next Steps

  1. Start in the C-Suite. If they aren’t onboard, any customer loyalty CEM program will be marginalized. Passion around customer-centric management isn’t something that can be done as an after thought.
  2. Get measurements for all the stages in the SaaS funnel; then assign team members to be accountable for the metrics.
  3. Survey to get measurements for RAPID customer loyalty metrics. We can help at TCELab, of course.
  4. Incorporate metrics review into your ongoing management meetings.
  5. We don’t live in a perfect world, and sometimes don’t have all the data we need to make the perfect decision. Make the best decisions you can, and ensure you also put in place the appropriate measurements so you make even better decisions.
  6. Focus on the areas of the SaaS sales funnel with the biggest impact on revenue; for example, new SaaS companies obviously need to be more concerned with new customers than with churn.

Summary: In SaaS, we have “Churn,” as well as “New” and “ARPU” that reflect the 3 ways companies make money, as measured by Retention, Advocacy and Purchasing Loyalty. In the world of Saas and agile business cycles, understanding these three dimensions through the RAPID customer loyalty model is vital. With some luck and the wind in our sails, we’ll start driving exponential growth for our businesses.