Tries and conversions
So here we are in the midst of Rugby’s autumn internationals. Over the weekend I am looking for tries (5 from Scotland last week - unbelievable!) and I have spent most of my time during the week talking about conversions. Apologies for the cheesy introduction but not for the topic. In the SaaS world conversion is one of the hottest topics and it gets right to the lifeblood of a SaaS start up.
The free trial model
Let me just go back one step. Free trials have become established as one of the standard options for a SaaS business model. In consumer software there is a mix between freemium models in which you can use the basic service for free forever but have to pay for advanced features and free trials. In enterprise SaaS virtually everyone offers a free trial typically 7, 14 or 30 days. You try the product for a period then have to decide whether to keep it and become a paying customer.
Free trials have proved a great device for filling the sales funnel. There are now a number of channels where it is cheap and easy for a start up to sign up customers for a free trial. Advertising on social media or through search engines has tremendous reach and typically you can find sign ups for two to five dollars. Specialist app stores run by big enterprise vendors like Salesforce and Xero are also a low cost and effective route. Integration with these products is a strong feature for many companies.
Change is hard
But there is a big challenge. Conversion. How do you persuade those users who sign up to become paying customers? A variety of industry sources suggest 3-5% conversion for B2B SaaS is a good solid performance and can lead to profitable operations. 8% is best in class. These numbers suggest conversion is a tough job even for the most successful companies. Why?
There are lots of reasons and I would encourage you to focus on real and very closely understood specifics. There is no substitute for detail in addressing this issue. Many individual issues will relate back to to one very well established business challenge. Change is hard. No matter what the technology or the market dynamics, change always depends on behaviour. Changing behaviour is both difficult and slow. Tomasz Tunguz of Redpoint Ventures (@ttunguz) wrote a great post in March Why Great SaaS Companies Focus on Behaviour Change which captures the essence. Whatever your B2B SaaS proposition, you are asking your customer to make a change to their business and resistance will be tough to overcome.
9 practical ideas
What can you do? Absolute first step is to talk the right language so you recognise the challenge. When someone signs up for a free trial they become a lead NOT a customer. Think in terms of lead generation and conversion and the sales process becomes much clearer. Beyond these here are my top 9 suggestions:
What works for you?
SaaS is in its early stages for software companies and we are all learning. Do the ideas on this list work? What approaches have you used to improve conversion?
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.