SaaS, Social Media, and the Economics of Smart Buyers

There are a few trends in the industry that are worth commenting on in that they relate in a very interesting way.

Economics Shifts towards Renewal/Retention: Software-as-a-Service and subscription-based revenue models in other industries have shifted the economic weight away from the upfront sale and towards the renewal in those businesses

Information Access becomes Free: The information resources available on the Internet have put buyer education in the hands of buyers, allowing them to educate themselves more easily than ever before.

Brand Reputation Control Shifts to the Audience: Social media has taken brand reputation out of the control of marketers and into the control of the audience, both in terms of good reputations and bad reputations

So, what is interesting about this? If we look at this from a purely theoretical standpoint it begins to become clear why it is the right strategy to begin to freely provide education, insight, guidance, and help to the audience at large through social media.

Looked at simply, the social media investment we make in providing guidance, best practices, pitfalls to avoid, etc, is an investment in buyer education. It is not a direct cash investment, in the same way that we historically would have made large cash investments in marketing campaigns. However, as anyone involved in social media knows, it is a significant investment in time and energy. Many times this investment of time and energy comes from key folks within your organization.

Buyer education can be a double-edged sword. More knowledgeable, sophisticated buyers know what they are looking for, they can easily determine what is right for their business, and what capabilities they do and do not need. They are more able to look beyond flashy demos and slick brochures and dig into less sexy things that will really matter; service levels, community depth, ability to map to their precise business process. This can wreak havoc on businesses that focus heavily on selling at all costs, as it allows customers to only purchase what is truly going to fit their business, and avoid surprises after the sale. However, customer satisfaction among educated buyers is generally much higher as they avoided these post-sale surprises and bought solutions that were well fit to their needs.

Customer satisfaction makes more sense the more your business is dependent on retention. If your business model is based on a one-time sell, with a single up-front payment, you are much less tied to customer satisfaction than if your business model is based on a long-term, recurring revenue stream. Software-as-a-Service (SaaS), and many recurring revenue model businesses are well aware of this. Whereas in the historical, on premise, model of software sales, post-sale surprises were the norm, with SaaS, they have a much higher economic cost to the vendor.

Social media acts as a magnifier on this effect as it puts control of brand reputation squarely in control of the audience. Products that do not deliver on their brand promise are quickly discovered and communicated, whether through structured reviews, such as in the travel industry, or one-off efforts, such as the United Breaks Guitars song-writing crusade.

An investment then, in the product itself, becomes the best marketing effort that many organizations can make. With this, I am referring to the whole product experience, including the service elements around the product and after the sale. We’ve seen many examples of this, with Frank Eliason at ComcastCares and Tony Hsieh at Zappos being among the more prominent examples.

Looked at from a high level, there are two very distinct cycles. In today’s businesses, with a reputation is easily shared through social media, and many with revenue models that are recurring, it makes the most economic sense to invest in educating buyers and in the product experience itself. This way, although you may end up with slightly fewer new customers, due to educating some in a direction that does not indicate that they have a need, you will end up with more satisfied customers over all. Contrast this with a historical model, that was dependent on a flashy demo, and great marketing, but not satisfied customers, the investments would be in significant marketing promotions and demo-friendly features.

In today’s market, especially in SaaS and subscription-based businesses, the recipe for success has changed, and it has done so based on the underlying economic drivers as much as anything. It is a change that is for the best as it aligns the interests of software vendors and software purchasers more tightly than they ever have been aligned before.

D&B: Digital Body Language Throughout Customer Lifecycle

A lot of our conversation focuses on new customer marketing, but for many or even most businesses, the successful retention of their existing customers is equally critical. I had a good conversation with Jeff Yee at D&B Canada while writing Digital Body Language, and this was his core focus. By leveraging insights into interest levels, usage profiles, and adoption, he was able to optimize their subscription renewal efforts. Enjoy the case study:

D&B: Digital Body Language Throughout Customer Lifecycle

D&B (Dun & Bradstreet) Canada, given their leadership position in business and credit information, wanted to focus on the end of year renewals for their customer base. With significant existing market share renewal and retention was just as important to them as new customer acquisition.

The initial project they undertook to achieve this goal was focused directly on the
renewal period. A progression of emails, triggered by an upcoming renewal date, was sent to the customer at 90, 60, and 30 days prior to renewal. Over the progression of communications, the tone would become increasingly clear in order to encourage the renewal process.

Watching the results, the D&B team noticed two trends. The first was that the customer response to the emails increased as the renewal date approached. Early communications had open rates of 33%, but as the renewal date approached, these rates would jump to 40% showing a significant uptick in interest.

The second trend noticed was a correlation between the renewal interest and direct usage of the D&B service. Adoption was a critical driver of renewal regardless of product line or industry. To continue to grow their adoption rates, D&B then turned to understanding the digital body language of their customers as expressed in their usage of the service. The service was well instrumented, and provided excellent marketing insight into overall usage and feature specific usage patterns for each user.

Conceptually, the team split the customer’s first 12 months of their lifecycle into 3 phases, adoption, usage, and renewal. With the renewal phase now fully automated, the marketing team is now focused on the other two phases. Leveraging their understanding of the prospect’s actual system usage, combined with their insight into the relationship between usage and renewal, a series of onboarding communications will ensure every new customer is quickly and seamlessly able to derive value from the service, while a series of tips and tricks emails will then work from an understanding of what features are and are not being used to suggest areas in which a customer can see even more value from the service.

By taking their understanding of digital body language beyond marketing and into the customer lifecycle, D&B is focused on ensuring that their customers’ renewal decision is based on a year of maximum success with their service.

Flyers: Renewal Marketing Leads to Deeper Interest Profiling

In the case study on the 76ers, we'd talked about using a multi-channel campaign to build upon the emotional excitement of an NBA franchise. In doing so, however, the opportunity to build a much deeper understanding of exactly what each fan is most passionate about was not overlooked. In this case study, from Digital Body Language, the Flyers leveraged the digital body language insights to better understand which player each fan was most enthusiastic about.

This insight will be leveraged to deepen the emotional tie in future marketing campaigns by focusing communications on what each individual fan is most interested in. I hope you enjoy the read:

Flyers: Renewal Marketing Leads to Deeper Interest Profiling

The Philadelphia Flyers wanted deeper relationships with fans while also driving the highest possible rates of renewal for season-ticket holders. With careful planning, they were able to achieve both of these goals at once.

The team created personal URLs (PURLs) for each season ticket holder (such as http://www.myflyerstickets.com/johnsmith) and invited each customer to his/her personal site to complete the renewal process. On the personal page, personalized content and offers enticed the ticket holder to renew. But just as importantly, the Flyers began to build the basis for a direct online relationship with each fan.

The Flyers’s site contains rich information (including video) on players, stats, schedules, and the draft, and through the direct relationship with each season ticket holder that they have now built, the Flyers better understand each fan. By observing each customer’s unique digital body language as they look at stats, read up on players, and watch highlights, the Flyers can identify things such as favorite players and whether they prefer stats or highlight reel footage.
In upcoming seasons, the Flyers plan to leverage this rich base of knowledge based on the fans’ digital body language to continually strengthen and hone the message. Personalized video and audio messages from each fan’s favorite player and RSS feeds of stats and highlights tailored will deepen the team bond.

The Flyers increased online season-ticket renewals from 1% the previous year to 18%. Renewing online also allowed real-time processing so these numbers were available immediately to senior management opposed to the time lag that occurs with processing renewals manually. Of course, the Flyers were also able to deepen their understanding of their fan base and strengthen those relationships significantly.

76ers: Multi-Channel Campaign To Win Back Season Ticket Holders

Last week's case study was on Bella Pictures use of direct mail as part of their nurturing campaigns. Multi-channel campaigns give us some interesting options as they open up new angles of communication and, when well coordinated, reinforce messages we've seen in other channels.

I greatly enjoyed chatting with Mark Di Maurizio and the team running marketing for the Philadelphia 76ers as they market a product with a great emotional tie - the basketball team. They used a multi-channel campaign to enhance the emotional tie their fans had with the team and drive renewals. Here's the case study from Digital Body Language:

76ers: Multi-Channel Campaign To Win Back Season Ticket Holders


The purchase of seasons tickets for the Philadelphia 76ers is a purchase decision driven by the excitement and emotion that a basketball team brings its fans. It is also a purchase decision that involves a significant financial outlay, however, so the 76ers marketing team needed to ensure that they made the right emotional connections as they communicated with their audience.

A campaign to reconnect with past season ticket holders who had not renewed was initiated. A multi-channel campaign brought the excitement of the basketball experience to the target audience. First, a direct mail piece and a postcard were sent, inviting the recipients to a Select-A-Seat event. A follow-up email campaign shared the creative of the direct mail pieces, and both media types provided a personal URL (PURL) to each recipient that provided highly personalized content and introduced the recipient to their sales representative.

An outbound IVR-based phone campaign recorded by the 76ers president and general manager Ed Stefanski again invited recipients to the Select-A-Seat campaign. At each step, an option to jump straight to purchasing tickets was provided, and for those who showed interest by interacting with the marketing campaign, but either did not attend or did not purchase, the sales team followed up with directly.

The campaign was a great success, with numerous people rejoining the Sixers family as season ticket holders. The resulting revenue generated was more than 35 times the cost of the campaign. By using a variety of media types to bring the emotional experience of basketball into a marketing campaign, the 76ers were able to better connect with their audience.