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STARTUP KILLER
CAC, LTV & Other Metrics that will make (or break) you




                             CAC
                                                                              ROI by
                                             Viral                             Lead
                                           Coefficient       Time to          Source
                                                             Recover
                       LTV                                    CAC

                                   Churn
                                    Rate             Viral
                                                     Cycle             Conversion
                                                     Time                 Rate
MICRO-ECONOMICS
  PROFITABILITY AT THE CUSTOMER LEVEL




A POWERFUL WAY TO GAIN BUSINESS INSIGHT
An out of balance Business Model

               Entrepreneurs are over-optimistic




    Cost to
   Acquire a
   Customer
    (CAC)

                                        Monetization
                                           (LTV)
Simple Customer Acquisition Funnel

         200 Visitors required for 1 cust


                   Visitors


    5%

                      Trial
                                              Using Google:
                                             At 50c per click
             10%                            Cost: $100 per cust



                  Customer
Add in People costs:- CAC increases dramatically
   Input Variables
   Total Web Visitors                  10,000
   SEM cost per click              $     0.50
   Conversion to Trial %                   5%
   Trial conversion %                     10%
   No of Sales & Marketing Staff             3
   Cost per employee per month     $   16,500
                                                                Marketing and
                                                                Sales people
   Flow                                   Qty.   Conversion %     involved:
   Total Paid Web Vistors              10,000                   CAC rises to
   Trials                                 500             5%       $1,000
   Customers                               50            10%

   SEM Marketing Spend             $    5,000
   Total Headcount Costs           $   49,500


   Cost of Customer Acquisition
   Without headcount costs         $ 100.00
   With headcount costs            $ 1,090.00
Sales Complexity



             No Touch      Light Touch    High Touch                   Field Sales
 Freemium                                                Field Sales
            Self-Service   Inside Sales   Inside Sales                  with SE’s
How I assumed the two would relate
A rough estimate of CAC versus Sales Complexity



                No Touch      Light Touch    High Touch                   Field Sales
 Freemium                                                   Field Sales
               Self-Service   Inside Sales   Inside Sales                  with SE’s



         Rough Estimates of Cost of Customer Acquisition (CAC)
   $0-           $50 –         $1,000 -       $3,000 -      $25,000 –     $75,000 –
   $10           $200           $2,000         $8,000        $75,000      $200,000
The relationship is roughly exponential




                                     Clearly adding
                                     Human Touch
                                      dramatically
                                    increases costs
CAC (logarithmic)



                            10x




                    10x



            10x




                      Sales Complexity
CUSTOMER MICRO-ECONOMICS

    SaaS and
Recurring Revenue
Cash Flow at the Customer Level
   1000


      0


   -1000


   -2000


   -3000


   -4000


   -5000
Cumulative Cash Flow
1000


   0


-1000


-2000
                     Ten months to
-3000                 recover CAC


-4000


-5000
My rules for CAC/LTV balance
      in a SaaS model


     LTV           > 3x          CAC

     Months to
    recover CAC    < 12 months
   Required for Capital Efficiency
SALES & MARKETING
 FUNNEL METRICS
1 st


THE BASICS
OF FUNNEL DESIGN
Expand
Suspects   Closed Deals    Upsell
                          Cross sell
IN A PERFECT WORLD…




       1 Step
IN A PERFECT WORLD…
    MyProduct.com

                            DESCRIPTION
       HOW IT WORKS
                            Our product
                            allows you …

                            Only $9,999.99




                 BUY NOW!
REALITY IS DIFFERENT


    Step 1       Step 2     Step 3




             WE NEED TO BREAK THINGS DOWN
               INTO MULTIPLE SMALLER STEPS
WHAT WE ARE DOING


   ACTION     ACTION     ACTION



   MOVEMENT   MOVEMENT   MOVEMENT
2   MEASURE
      "IF YOU CAN NOT MEASURE IT,
      YOU CAN NOT IMPROVE IT."
                   - LORD KELVIN
WHAT TO MEASURE
FOR EACH STEP / ACTION:


NO OF ACTIONS             % CONVERSION RATE




                  TIME                    TIME
THE KEY METRICS
                    CAMPAIGNS
                     TO DRIVE
                     TRAFFIC



                     VISITORS

      OVERALL
                                  CONVERSION
    CONVERSION %                      %



                      TRIALS


                                  CONVERSION
                                      %



                   CLOSED DEALS
NOT ALL LEAD SOURCES ARE EQUAL
     Google Ad Word Funnel        FaceBook Ad Funnel


           Visitors                    Visitors


5%                           2%
             Trial                      Trial


     10%                      20%



     $5,000 Customer          $8,000 Customer
ROI by LEAD SOURCE
    Cost per lead
        OVERALL
      CONVERSION %




      (BY LEAD SOURCE)




                         Lifetime value of the Customer
THE ART OF
MARKETING
DESIGNING YOUR FUNNEL
WHAT IS A FUNNEL?


    ACTION    ACTION     ACTION



   MOVEMENT   MOVEMENT   MOVEMENT
HOW DO WE DESIGN OUR FUNNEL?
THE

BUYER
THE BUYING CYCLE
                             PURCHASE
             CONSIDERATION



                                        CLOSED
                                         DEAL




 AWARENESS
THE
BUYER       CONSIDERATION

        ADDRESS THEIR QUESTIONS & CONCERNS
         • Will this work for my situation?
         • Is it the best product in the market?
         • Is it a safe choice? (Who else is using it?)
         • Will I get a return on my investment?
         • Is it scalable, secure?
         • Is it easy to implement?
         • Will I get good support?
         • Etc.
TRIGGERS
 • Moving house
     • Movers, phones, cable TV, furniture, insurance, etc.
 • Starting a new software project
     • PaaS (Platform as a Service), Dev Tools, etc.
 • Need to hire a lot of new employees
     • Applicant Tracking System
 • Just lost my data in hard drive crash
     • Backup software/service
 • Read about a new scary computer virus
     • Anti-virus software
Suspects
                                                           Suspects

                                      Suspects
                                                   Suspects
                                                      Suspects
                                                                  Suspects
                                                          Suspects
                               Suspects   Suspects                       Suspects
                                              Suspects Suspects




BUT EVEN IF YOU ARE
MICROSOFT, CISCO, ORACLE, OR
GOOGLE
YOUR FUNNEL WILL HAVE


BLOCKAGE
POINTS
IMPROVE
IN DIAGNOSING MANY FUNNEL BLOCKAGE POINTS,
I HAVE FOUND THAT THERE IS A



CLEAR
PATTERN…
YOU ARE HOPING YOUR


CUSTOMERS WILL DO
SOMETHING
THAT THEY ARE

NOT MOTIVATED TO DO
IN OTHER WORDS…

YOU DESIGNED YOUR FUNNEL
THE WAY YOU HOPED IT WOULD
WORK…

BUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUT

THE CUSTOMER’S POINT OF
VIEW
JBOSS EXAMPLE

PUT A REGISTRATION FORM
ON THEIR WEB SITE BEFORE
A FREE DOWNLOAD

IMPACT

CUT THE DOWNLOAD RATE
BY MORE THAN 10X
GET INSIDE YOUR
CUSTOMER’S HEAD
            FRICTION &
            CONCERNS
            - Hate being sold to
            - Find it offensive to give
              name and email
            - Don’t want to get spam
              sales emails
            - Worried that email
              address will be given to
              other marketers
UNDERSTAND WHAT
MOTIVATES THEM

           FRICTION &
           CONCERNS

           MOTIVATIONS
           -   Want to solve my problem
           -   Recommendation from a friend
           -   Education
           -   Data/ information reports
           -   Entertainment
           -   Free stuff
           -   Meeting other people like me that
               have insights to share
CREATE A SOLUTION THAT
ENTICES THEM AND ADDRESS THEIR CONCERNS

                    FRICTION &
                    CONCERNS
                    ENTICE &
                    ADDRESS CONCERNS

                    -   Customer testimonials address
                        vendor risk
                    -   Free trials address product
                        viability and fit concerns
                    -   Lowest price guarantees
JBOSS EXAMPLE
• Making $27,000 a month selling documentation

• Solution:
   • Give away documentation to get their email address
EXAMPLE: DRIVING TRAFFIC TO YOUR WEB
                 SITE


                          GETTING FOUND
                          Not going to find your site
                          unless:

             friction &   - On top page of Google
             concerns       search results
                          - Recommended by a trusted
                            source
                          - Referred to in social media or
                            blogosphere
David Skok's,  SMASH Summit NYC
David Skok's,  SMASH Summit NYC
LESSONS FROM WEBSITE
GRADER
•   Free tools drive viral spread
•   Low customer work required
•   High value delivered
•   Score leverages competitive urge, and acts as a trigger
•   Builds trust through clear
    demonstration of expertise
using engineering for marketing
USING DATA TO DRIVE WEB
TRAFFIC
SYSOMOS: SOCIAL MEDIA MONITORING




LEVERAGED THEIR DATABASE TO
CREATE BLOG POSTS WITH DATA ON
TOPICS OF CURRENT INTEREST:
• IRAN ELECTION RIOTS
• TWITTER’S GROWTH
• FACEBOOK USAGE
David Skok's,  SMASH Summit NYC
LED TO:
          SYSOMOS ARTICLES IN
          ECONOMIST, NY TIMES




  WEB TRAFFIC TO READ THE FULL REPORT




  LEADS – IMPRESSED BY THE CAPABILITIES
             OF THE SOFTWARE
DROPBOX: SIMPLE FILE SHARING SOFTWARE
–   Get you hooked for free
–   Storage slowly increases to the point where you need to pay
–   But by then they have established trust
    –   And it is hard to move your data that is shared with others
First Contact                          Sell




                   Build       Build
First Contact                          Sell
                Relationship   Trust
OFTEN NECESSARY TO FIND TOPICS
THAT ARE NOT RELATED TO THE SALE




                    Build          Build
                 Relationship      Trust




 First Contact                             Sell
SELLING IS   10X EASIER…
ONCE YOU HAVE ESTABLISHED   TRUST
THE KEYS TO SUCCESS


     THE


  BUYER
               GET INSIDE
              YOUR BUYER’S
                 MIND
CONCLUSION
WHAT I DIDN’T COVER
•   Sadly way too many topics for this time slot
•   Virality – see my blog
•   NPS – Net Promoter Score
•   Etc.
For More information

   Visit my blog at www.forEntrepreneurs.com
APPENDIX
WHY
CHURN IS SO
IMPORTANT
Why Churn is so Important
                 Bookings Versus Churn                                    MRR (Monthly Recurring Revenue)
$150.0                                                                $3,000.0


                                                                                                                         2.5% Churn
                                                                      $2,500.0
$100.0


                                                                      $2,000.0


  $50.0

                                                                      $1,500.0

                                                         Months
    $-
                                                                                                                             5% Churn
                                                                      $1,000.0
           1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58


                                                       2.5% Churn
                                                                       $500.0
 $(50.0)



                                            5% Churn                       $-                                                    Months
                                                                                 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58
$(100.0)
The Impact of Negative Churn
                 Bookings Versus Churn                                    MRR (Monthly Recurring Revenue)
$200.0                                                                $8,000.0

                                                  -2.5% Churn                                                          -2.5% Churn
                                                                      $7,000.0
$150.0


                                                                      $6,000.0
$100.0

                                                                      $5,000.0

  $50.0
                                                                      $4,000.0

                                                           Months
    $-
                                                                      $3,000.0
           1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58                                                       2.5% Churn
                                                         2.5% Churn
 $(50.0)                                                              $2,000.0


                                             5% Churn                 $1,000.0
$(100.0)                                                                                                                    5% Churn

                                                                           $-                                                    Months
                                                                                 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58
$(150.0)
MICRO-ECONOMICS
FOR A SALES PERSON
How Revenue Builds for a SaaS Salesperson
                                                (assuming no ramp up time)

                       With no Churn                                           With Churn of 2.5%
$45,000                                                       $45,000


$40,000                                                       $40,000


$35,000                                                       $35,000


$30,000                                                       $30,000


$25,000                                                       $25,000


$20,000                                                       $20,000


$15,000                                                       $15,000


$10,000                                                       $10,000


 $5,000                                                        $5,000


    $0                                                            $0
          Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec               Jan Feb Mar Apr May Jun       Jul Aug Sep Oct Nov Dec

           Jan Custs    Feb Custs   Mar Custs   Apr Custs                 Jan Custs   Feb Custs   Mar Custs   Apr Custs
           May Custs    Jun Custs   Jul Custs   Aug Custs                 May Custs   Jun Custs   Jul Custs   Aug Custs
           Sep Custs    Oct Custs   Nov Custs   Dec Custs                 Sep Custs   Oct Custs   Nov Custs   Dec Custs
The Cash Flow Gap
          MRR vs Expenses – New Sales Hire                                                       Net profit - New Sales Hire
$30,000                                                                             $25,000
                                                                                                   11 months to
                                                                                    $20,000         breakeven
                                                                    MRR
$25,000
                                                                                    $15,000


$20,000                                      Expenses                               $10,000

                                                                                      $5,000
$15,000         Cash
                                                                                         $-
                Gap




                                                                                                Month 10
                                                                                                Month 11
                                                                                                Month 12
                                                                                                Month 13
                                                                                                Month 14
                                                                                                Month 15
                                                                                                Month 16
                                                                                                Month 17
                                                                                                Month 18
                                                                                                Month 19
                                                                                                Month 20
                                                                                                Month 21
                                                                                                Month 22
                                                                                                Month 23
                                                                                                Month 24
                                                                                                 Month 1
                                                                                                 Month 2
                                                                                                 Month 3
                                                                                                 Month 4
                                                                                                 Month 5
                                                                                                 Month 6
                                                                                                 Month 7
                                                                                                 Month 8
                                                                                                 Month 9
$10,000                                                                              $(5,000)

                                                                                    $(10,000)
 $5,000
                                                                                    $(15,000)

                                                                                    $(20,000)
    $-
          Month Month Month Month Month Month Month Month Month Month Month Month
            1     2     3     4     5     6     7     8     9    10    11    12     $(25,000)

                                                                                       (Slightly later breakeven point, because Gross Profit is less than MRR)
The SaaS Cash Flow Trough
           Cumulative Net Profit - New Sales Hire
    $400,000




    $300,000




    $200,000




    $100,000




          $-




    $(100,000)




    $(200,000)


                 Total amount   23 Months to get   But a great
                   invested:         back the       return on
                     $110k         investment      investment
UNDERSTANDING

 CUSTOMER
ENGAGEMENT
THE OLD WORLD




 HUMAN INTERACTIONS
THE NEW WORLD




MACHINE INTERACTIONS
THE PRODUCT
    HAS BECOME
YOUR SALESPERSON
TRACKING ENGAGEMENT


 What do we know
  about them?      What do their
                   actions tell us?
     Buyer
                    Behaviors
   Attributes
Account Profile
David Skok's,  SMASH Summit NYC
WHY MEASURE ENGAGEMENT?

INSIGHT
Which customers are about to Churn?



ACTION
Use emails and/or customer service reps
to increase usage
WHY MEASURE ENGAGEMENT?

INSIGHT
Which Free Trials are going wrong?



ACTION
Use emails and/or customer success reps
to increase usage
WHY MEASURE ENGAGEMENT?

INSIGHT
Which free trials are going really well?



ACTION
Get Sales to call and ask for the order
Active Lists
Engaged Evaluators Report
WHY MEASURE ENGAGEMENT?

INSIGHT
Which key features in the Free Trial have not been tried?



ACTION
Use emails and/or customer success reps
to focus on those features
PATTERN DISCOVERY
  AND THE NEED FOR DATA SCIENTISTS
Which behaviors are most
correlated with Churn?


       Which lead sources lead to
       the most profitable customers?


                  What Free Trial behaviors indicate
                  a customer that won’t buy?

                            Etc.
THE
BUYER


   WHO IS YOUR BUYER?
   • Who is involved?
   • What are their roles
     (Champion, Influencer, Decision maker, etc.)?
THE
BUYER


       UNDERSTAND THEIR BUYING PROCESS
       • What are their approval processes?
          • e.g. IT approval needed,
            Board approval needed
            Wife’s approval needed
USING METRICS TO MEET TARGETS




           WORK BACKWARDS FROM THE TARGET
Example: JBoss - Sales & Marketing Machine



                                                       Enterprise
Suspects                                Closed Deals
                                                       Rollouts




 Web        Web        Phone   Inside
Leads      Scoring      Call   Sales



            Lead
           Nurturing
Metrics: The End Goal

         4:1         3:1        4:1
        (25%)       (33%)      (25%)

 Raw     Web                            Closed
                     Tele-      Tele-
Leads   activity                        Deals
                   marketing    sales
        scoring
Using the model to work backwards
                  4:1               3:1             4:1


 Raw               Web                                                     Closed
                                   Tele-            Inside-
Leads             activity                                                 Deals
                                 marketing           sales
                  scoring



• To do $4m in the month:
    – If Average Deal Size is $10k
    – Need $4m divided by $10k deals to reach target = 400 deals
    – Means 1,200 deals being worked in Inside sales (400x4)
         • Know that each rep can work 60 deals at a time, means 20 reps
    – Means 3,600 telemarketing contacts (1,200x3)
    – Means 14,400 Raw Leads (3,600x4)

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David Skok's, SMASH Summit NYC

  • 1. STARTUP KILLER CAC, LTV & Other Metrics that will make (or break) you CAC ROI by Viral Lead Coefficient Time to Source Recover LTV CAC Churn Rate Viral Cycle Conversion Time Rate
  • 2. MICRO-ECONOMICS PROFITABILITY AT THE CUSTOMER LEVEL A POWERFUL WAY TO GAIN BUSINESS INSIGHT
  • 3. An out of balance Business Model Entrepreneurs are over-optimistic Cost to Acquire a Customer (CAC) Monetization (LTV)
  • 4. Simple Customer Acquisition Funnel 200 Visitors required for 1 cust Visitors 5% Trial Using Google: At 50c per click 10% Cost: $100 per cust Customer
  • 5. Add in People costs:- CAC increases dramatically Input Variables Total Web Visitors 10,000 SEM cost per click $ 0.50 Conversion to Trial % 5% Trial conversion % 10% No of Sales & Marketing Staff 3 Cost per employee per month $ 16,500 Marketing and Sales people Flow Qty. Conversion % involved: Total Paid Web Vistors 10,000 CAC rises to Trials 500 5% $1,000 Customers 50 10% SEM Marketing Spend $ 5,000 Total Headcount Costs $ 49,500 Cost of Customer Acquisition Without headcount costs $ 100.00 With headcount costs $ 1,090.00
  • 6. Sales Complexity No Touch Light Touch High Touch Field Sales Freemium Field Sales Self-Service Inside Sales Inside Sales with SE’s
  • 7. How I assumed the two would relate
  • 8. A rough estimate of CAC versus Sales Complexity No Touch Light Touch High Touch Field Sales Freemium Field Sales Self-Service Inside Sales Inside Sales with SE’s Rough Estimates of Cost of Customer Acquisition (CAC) $0- $50 – $1,000 - $3,000 - $25,000 – $75,000 – $10 $200 $2,000 $8,000 $75,000 $200,000
  • 9. The relationship is roughly exponential Clearly adding Human Touch dramatically increases costs
  • 10. CAC (logarithmic) 10x 10x 10x Sales Complexity
  • 11. CUSTOMER MICRO-ECONOMICS SaaS and Recurring Revenue
  • 12. Cash Flow at the Customer Level 1000 0 -1000 -2000 -3000 -4000 -5000
  • 13. Cumulative Cash Flow 1000 0 -1000 -2000 Ten months to -3000 recover CAC -4000 -5000
  • 14. My rules for CAC/LTV balance in a SaaS model LTV > 3x CAC Months to recover CAC < 12 months Required for Capital Efficiency
  • 15. SALES & MARKETING FUNNEL METRICS
  • 16. 1 st THE BASICS OF FUNNEL DESIGN
  • 17. Expand Suspects Closed Deals Upsell Cross sell
  • 18. IN A PERFECT WORLD… 1 Step
  • 19. IN A PERFECT WORLD… MyProduct.com DESCRIPTION HOW IT WORKS Our product allows you … Only $9,999.99 BUY NOW!
  • 20. REALITY IS DIFFERENT Step 1 Step 2 Step 3 WE NEED TO BREAK THINGS DOWN INTO MULTIPLE SMALLER STEPS
  • 21. WHAT WE ARE DOING ACTION ACTION ACTION MOVEMENT MOVEMENT MOVEMENT
  • 22. 2 MEASURE "IF YOU CAN NOT MEASURE IT, YOU CAN NOT IMPROVE IT." - LORD KELVIN
  • 23. WHAT TO MEASURE FOR EACH STEP / ACTION: NO OF ACTIONS % CONVERSION RATE TIME TIME
  • 24. THE KEY METRICS CAMPAIGNS TO DRIVE TRAFFIC VISITORS OVERALL CONVERSION CONVERSION % % TRIALS CONVERSION % CLOSED DEALS
  • 25. NOT ALL LEAD SOURCES ARE EQUAL Google Ad Word Funnel FaceBook Ad Funnel Visitors Visitors 5% 2% Trial Trial 10% 20% $5,000 Customer $8,000 Customer
  • 26. ROI by LEAD SOURCE Cost per lead OVERALL CONVERSION % (BY LEAD SOURCE) Lifetime value of the Customer
  • 29. WHAT IS A FUNNEL? ACTION ACTION ACTION MOVEMENT MOVEMENT MOVEMENT
  • 30. HOW DO WE DESIGN OUR FUNNEL?
  • 32. THE BUYING CYCLE PURCHASE CONSIDERATION CLOSED DEAL AWARENESS
  • 33. THE BUYER CONSIDERATION ADDRESS THEIR QUESTIONS & CONCERNS • Will this work for my situation? • Is it the best product in the market? • Is it a safe choice? (Who else is using it?) • Will I get a return on my investment? • Is it scalable, secure? • Is it easy to implement? • Will I get good support? • Etc.
  • 34. TRIGGERS • Moving house • Movers, phones, cable TV, furniture, insurance, etc. • Starting a new software project • PaaS (Platform as a Service), Dev Tools, etc. • Need to hire a lot of new employees • Applicant Tracking System • Just lost my data in hard drive crash • Backup software/service • Read about a new scary computer virus • Anti-virus software
  • 35. Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects BUT EVEN IF YOU ARE MICROSOFT, CISCO, ORACLE, OR GOOGLE YOUR FUNNEL WILL HAVE BLOCKAGE POINTS
  • 37. IN DIAGNOSING MANY FUNNEL BLOCKAGE POINTS, I HAVE FOUND THAT THERE IS A CLEAR PATTERN…
  • 38. YOU ARE HOPING YOUR CUSTOMERS WILL DO SOMETHING THAT THEY ARE NOT MOTIVATED TO DO
  • 39. IN OTHER WORDS… YOU DESIGNED YOUR FUNNEL THE WAY YOU HOPED IT WOULD WORK… BUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUT THE CUSTOMER’S POINT OF VIEW
  • 40. JBOSS EXAMPLE PUT A REGISTRATION FORM ON THEIR WEB SITE BEFORE A FREE DOWNLOAD IMPACT CUT THE DOWNLOAD RATE BY MORE THAN 10X
  • 41. GET INSIDE YOUR CUSTOMER’S HEAD FRICTION & CONCERNS - Hate being sold to - Find it offensive to give name and email - Don’t want to get spam sales emails - Worried that email address will be given to other marketers
  • 42. UNDERSTAND WHAT MOTIVATES THEM FRICTION & CONCERNS MOTIVATIONS - Want to solve my problem - Recommendation from a friend - Education - Data/ information reports - Entertainment - Free stuff - Meeting other people like me that have insights to share
  • 43. CREATE A SOLUTION THAT ENTICES THEM AND ADDRESS THEIR CONCERNS FRICTION & CONCERNS ENTICE & ADDRESS CONCERNS - Customer testimonials address vendor risk - Free trials address product viability and fit concerns - Lowest price guarantees
  • 44. JBOSS EXAMPLE • Making $27,000 a month selling documentation • Solution: • Give away documentation to get their email address
  • 45. EXAMPLE: DRIVING TRAFFIC TO YOUR WEB SITE GETTING FOUND Not going to find your site unless: friction & - On top page of Google concerns search results - Recommended by a trusted source - Referred to in social media or blogosphere
  • 48. LESSONS FROM WEBSITE GRADER • Free tools drive viral spread • Low customer work required • High value delivered • Score leverages competitive urge, and acts as a trigger • Builds trust through clear demonstration of expertise
  • 50. USING DATA TO DRIVE WEB TRAFFIC SYSOMOS: SOCIAL MEDIA MONITORING LEVERAGED THEIR DATABASE TO CREATE BLOG POSTS WITH DATA ON TOPICS OF CURRENT INTEREST: • IRAN ELECTION RIOTS • TWITTER’S GROWTH • FACEBOOK USAGE
  • 52. LED TO: SYSOMOS ARTICLES IN ECONOMIST, NY TIMES WEB TRAFFIC TO READ THE FULL REPORT LEADS – IMPRESSED BY THE CAPABILITIES OF THE SOFTWARE
  • 53. DROPBOX: SIMPLE FILE SHARING SOFTWARE – Get you hooked for free – Storage slowly increases to the point where you need to pay – But by then they have established trust – And it is hard to move your data that is shared with others
  • 54. First Contact Sell Build Build First Contact Sell Relationship Trust
  • 55. OFTEN NECESSARY TO FIND TOPICS THAT ARE NOT RELATED TO THE SALE Build Build Relationship Trust First Contact Sell
  • 56. SELLING IS 10X EASIER… ONCE YOU HAVE ESTABLISHED TRUST
  • 57. THE KEYS TO SUCCESS THE BUYER GET INSIDE YOUR BUYER’S MIND
  • 59. WHAT I DIDN’T COVER • Sadly way too many topics for this time slot • Virality – see my blog • NPS – Net Promoter Score • Etc.
  • 60. For More information  Visit my blog at www.forEntrepreneurs.com
  • 63. Why Churn is so Important Bookings Versus Churn MRR (Monthly Recurring Revenue) $150.0 $3,000.0 2.5% Churn $2,500.0 $100.0 $2,000.0 $50.0 $1,500.0 Months $- 5% Churn $1,000.0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 2.5% Churn $500.0 $(50.0) 5% Churn $- Months 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 $(100.0)
  • 64. The Impact of Negative Churn Bookings Versus Churn MRR (Monthly Recurring Revenue) $200.0 $8,000.0 -2.5% Churn -2.5% Churn $7,000.0 $150.0 $6,000.0 $100.0 $5,000.0 $50.0 $4,000.0 Months $- $3,000.0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 2.5% Churn 2.5% Churn $(50.0) $2,000.0 5% Churn $1,000.0 $(100.0) 5% Churn $- Months 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 $(150.0)
  • 66. How Revenue Builds for a SaaS Salesperson (assuming no ramp up time) With no Churn With Churn of 2.5% $45,000 $45,000 $40,000 $40,000 $35,000 $35,000 $30,000 $30,000 $25,000 $25,000 $20,000 $20,000 $15,000 $15,000 $10,000 $10,000 $5,000 $5,000 $0 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Custs Feb Custs Mar Custs Apr Custs Jan Custs Feb Custs Mar Custs Apr Custs May Custs Jun Custs Jul Custs Aug Custs May Custs Jun Custs Jul Custs Aug Custs Sep Custs Oct Custs Nov Custs Dec Custs Sep Custs Oct Custs Nov Custs Dec Custs
  • 67. The Cash Flow Gap MRR vs Expenses – New Sales Hire Net profit - New Sales Hire $30,000 $25,000 11 months to $20,000 breakeven MRR $25,000 $15,000 $20,000 Expenses $10,000 $5,000 $15,000 Cash $- Gap Month 10 Month 11 Month 12 Month 13 Month 14 Month 15 Month 16 Month 17 Month 18 Month 19 Month 20 Month 21 Month 22 Month 23 Month 24 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 $10,000 $(5,000) $(10,000) $5,000 $(15,000) $(20,000) $- Month Month Month Month Month Month Month Month Month Month Month Month 1 2 3 4 5 6 7 8 9 10 11 12 $(25,000) (Slightly later breakeven point, because Gross Profit is less than MRR)
  • 68. The SaaS Cash Flow Trough Cumulative Net Profit - New Sales Hire $400,000 $300,000 $200,000 $100,000 $- $(100,000) $(200,000) Total amount 23 Months to get But a great invested: back the return on $110k investment investment
  • 70. THE OLD WORLD HUMAN INTERACTIONS
  • 71. THE NEW WORLD MACHINE INTERACTIONS
  • 72. THE PRODUCT HAS BECOME YOUR SALESPERSON
  • 73. TRACKING ENGAGEMENT What do we know about them? What do their actions tell us? Buyer Behaviors Attributes
  • 76. WHY MEASURE ENGAGEMENT? INSIGHT Which customers are about to Churn? ACTION Use emails and/or customer service reps to increase usage
  • 77. WHY MEASURE ENGAGEMENT? INSIGHT Which Free Trials are going wrong? ACTION Use emails and/or customer success reps to increase usage
  • 78. WHY MEASURE ENGAGEMENT? INSIGHT Which free trials are going really well? ACTION Get Sales to call and ask for the order
  • 81. WHY MEASURE ENGAGEMENT? INSIGHT Which key features in the Free Trial have not been tried? ACTION Use emails and/or customer success reps to focus on those features
  • 82. PATTERN DISCOVERY AND THE NEED FOR DATA SCIENTISTS
  • 83. Which behaviors are most correlated with Churn? Which lead sources lead to the most profitable customers? What Free Trial behaviors indicate a customer that won’t buy? Etc.
  • 84. THE BUYER WHO IS YOUR BUYER? • Who is involved? • What are their roles (Champion, Influencer, Decision maker, etc.)?
  • 85. THE BUYER UNDERSTAND THEIR BUYING PROCESS • What are their approval processes? • e.g. IT approval needed, Board approval needed Wife’s approval needed
  • 86. USING METRICS TO MEET TARGETS WORK BACKWARDS FROM THE TARGET
  • 87. Example: JBoss - Sales & Marketing Machine Enterprise Suspects Closed Deals Rollouts Web Web Phone Inside Leads Scoring Call Sales Lead Nurturing
  • 88. Metrics: The End Goal 4:1 3:1 4:1 (25%) (33%) (25%) Raw Web Closed Tele- Tele- Leads activity Deals marketing sales scoring
  • 89. Using the model to work backwards 4:1 3:1 4:1 Raw Web Closed Tele- Inside- Leads activity Deals marketing sales scoring • To do $4m in the month: – If Average Deal Size is $10k – Need $4m divided by $10k deals to reach target = 400 deals – Means 1,200 deals being worked in Inside sales (400x4) • Know that each rep can work 60 deals at a time, means 20 reps – Means 3,600 telemarketing contacts (1,200x3) – Means 14,400 Raw Leads (3,600x4)

Notas do Editor

  1. In a perfect world, we would hope that we could take our suspected market directly to purchase in one step.
  2. That would be like hoping we could simply put up a web site and expect that people would just find it and immediately buy our product.