saas business models - keys to success
DESCRIPTION
Rich Mironov of Mironov Consulting walks through the keys to developing a successful Software-as-a-Service (SaaS) business model. Whether you are planning to develop a new SaaS offering or making the transition from an on-premises solution, there are many factors to consider.TRANSCRIPT
SaaS Business Models Keys to Success
Logi Analytics Powering embedded analytics inside software applications
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From 2014 State of Embedded Analytics Report
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Deployment model:
52% of software providers say
transitioning to a SaaS model
is an important priority
Speakers
Rich Mironov
• Veteran product manager/executive/strategist
• 6 startups, including as CEO/founder
• “The Art of Product Management”
• Founded Product Camp
Alvin Wong
• Product Marketing Manager, Logi Analytics
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Service Model Thinking
• Many of us grew up as
“on-premise” product managers
– Shipping media = revenue
• SaaS changes business models,
not just hosting locations
– Trial, upsell, segmentation,
success metrics
• Vendors now responsible for
user’s positive experience
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On-Premise Software
• …is like delivering groceries
• User (or IT) is responsible for
• Choosing the right items
• Combining them correctly
• Updates, patches, fixes
• Managing hours and uptime
• Serving/helping users
• Producing tasty results
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SaaS: Software-as-a-Service
• …is like running a restaurant
• Serving complete meals
• Many customers
• Hours and availability
• End users interact directly
• Attracting repeat buyers
• One bad experience is
never forgotten
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SaaS is Default Delivery Model
• Consumer migration from desktop to mobile
• Companies closing IT-run data centers
• 10x less expensive to deliver
• “Software is eating the world”
• Strategic reasons for on-premise software – Embedded in hardware (e.g. routers)
– Data security (military)
– Adjacent systems
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At All Software Layers
• Infrastructure as a Service
– Rackspace (VMware)
• Platform/API as a Service
– Amazon AWS/EC2, SalesForce
AppExchange, Google App Engine,
Heroku…
• Application as a Service
– Twitter, Gmail, SalesForce,
DropBox, Flickr, NetLedger…
• Most new software is (X)aaS
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Many Business (Pricing) Models
• Subscriptions
– Music streaming, surveys, data
storage, CRM, domain registration
• Transactions
– Per click, per download, per stock trade,
per movie ticket, per VM, per tax return
• Freemium
• End user app vs. API
– Systems can access systems directly
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SaaS Pricing Tiers
• Bundles of features/services/benefits
– Simplify choices for mass audience
– 3 or 4 tiers, no “specials”
• Entry tier must be more than viable
– Basic/trial: entice user to purchase
– Freemium: drive usage for vast majority
• One or two major reasons for upsell
• Requires that you really understand
distinct needs of customer segments
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Service Tiers/Bundles
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Basic
Expanded
Advanced
Core feature #1 √ √ √
Core feature #2 √ √ √
Core feature #3 √ √ √
Baseline support √ √ √
Baseline capacity √ √ √
Monthly newsletter √ √ √
Major upgrade feature √ √
Cool feature √ √
Capacity update √ √
Support upgrade √ √
Professional feature √
Tons of capacity √
Concierge service √
CEO welcome letter √
Markets, Not Developers, Define Tiers
• Basic product must impress new (trial) users
– A few cool features, trivially easy to demonstrate value
– Low-end segments with reasonable end-to-end use cases
• Upselling is really segmentation
– What usage scenarios match your upsell customer base?
– What features will next-tier customers willingly pay for?
• Clear/reasonable choices for customers
– Volume plateaus, multi-user delegation, usage reporting,
support levels (24*7), custom training, migration support…
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Avoid Multiple Pricing Schemes
• Adverse selection
– Occasional customers choose “by the drink”
– Volume customers pick “all you can eat”
• Increased customer complexity
– “Too hard to figuring out…
so I won’t buy either plan.”
• Increased operational complexity
• Encourages more “specials”
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Attention Spans Are Shortening
• Mobile apps feed instant gratification
• Web surfers spend under 30 seconds
on a new site
• Twitter/Facebook streams
• Consumer-grade UI/UX has
migrated to B2B (Gmail, Jive, Rally…)
You have less time than ever to show value
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Showing Value (Very) Quickly
Consumer (B2C)
• Websites and mobile apps must be trivially easy to try
• Smallest possible “aha!” experience
• Sign up and use first feature within… 45 seconds?
• User experience is make-or-break, not afterthought
Business (B2B)
• Productivity trial looks like consumer
• Need to entice B2B pioneers
• How to prove value of complex service?
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Incremental Sales Cycle
Initial subscribers sign up more quickly, but…
• Easy, cheap trial is #1 benefit of service model
• Pioneers are really in extended sales cycle
• First taste must be great
Revenue ramp is slower
• …upsell to more users
• …upsell premium features
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Getting Real User Feedback
• Old on-premise model: second-hand feedback – Customer meetings, third party surveys, sales issues,
annual user groups, online forums, industry analysts, product reviews…
– What are their agendas?
• SaaS model: your own data – Marketing automation/analytics
– Clickstreams, error reporting
– Screen-share with UI volunteers
– What features are really being used?
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Continuous Marketing
• “Shared success” service model
– We can’t grow your account until you are happy
• Touch users early, often, honestly
– Transactional: when they do something
– Periodic: monthly hints, support contacts
– Specials, referral bonuses, feedback,
rewards, new features (sparingly)
• Continuous marketing = constant upsell
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Behavioral/Activity-Based
• Experiment, experiment, experiment
• Trigger-based communications
– Successes (user tried a new feature)
– Recovery (dropped transactions, help, tickets)
– Retention (idle user)
• Usage, segmentation, insight
– How do we know which users
are succeeding? Failing?
– Testable hypotheses
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New Kinds Of Service Metrics
You need an Operations team with SaaS skills • Uptime SLA (“Application up 99.95% of the time except…”)
• Response Time (“98% of log-ins take <1.5 seconds…”)
• System Capacity (“Add CPU when usage >60%...”)
• Support Escalations (“P1 first response within 15 minutes…”)
• Reporting (“Billing reports showing all customer transactions…”)
• Software Updates (“Push software weekly at 1AM Sunday with roll-back…”)
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You Own Customer Satisfaction
• As a service provider, any problem is your problem… – User-generated errors
– Poor UX or workflow
– Downtime and data loss
– Networking failures
– Browser/phone differences
– Security holes
• How can you design and engineer for satisfaction?
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Takeaways
• Software has already moved to the cloud
• Focus on consumer-style trial, adoption, pricing
packages and behavioral analysis
• Avoid pricing “specials”
• Marketing (selling) moves from
discrete to continuous
• Much deeper Operations skills
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Contact
Rich Mironov, CEO
Mironov Consulting
233 Franklin Street, Suite 308
San Francisco, CA 94102
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/in/RichMironov
@RichMironov
+1-650-315-7394
www.Mironov.com
2014 State of Embedded Analytics Report
• Executive Insights on
Embedded Analytics
• Why Embed Analytics
• How to Embed Analytics
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http://learn.logianalytics.com/2014-soea
#SOEA
QUESTIONS?
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SaaS Business Models Keys to Success