The AppDirect Framework for Driving SaaS Sales
Building Blocks 3 and 4: Lead Generation and Bundles
If you’re in the business of selling cloud services, one of the most important questions you must answer is this: How do you attract customers to your store and get them to buy?
In this post, the second in our ongoing series on SaaS go-to-market best practices, we’ll look at how to do just that, drive buyers to an online marketplace and compel them to make a purchase. (Click here to read my earlier post on the first two building blocks, building an app portfolio and creating a strong value proposition.)
Building Block 3: Lead Generation
Creating demand for the products in your online marketplace can be a high-stakes proposition. Can you reach the right audience with the right message? Can you do it without blowing your budget? Before answering these essential questions, we need to take a look at the two basic approaches to generating leads, “push” marketing and “pull” marketing.
First, push marketing—this concept is based on a simple premise: if you want to sell something, you have to tell people about it. This is basically what advertising agencies are paid to do; craft messages and get them in front of the right audience, often times through mass media.
However, push strategies run into two problems. The first is audience fragmentation. Today’s buyers can consume information through dozens of outlets, from cable TV to their smartphones, from social media to old-fashioned newspapers. This fragmentation has narrowed targets and increased costs, which means providers can find themselves priced out of the market, unable to reach significant numbers of viable prospects for a reasonable outlay of their advertising budget.
The second problem stems from the first; because customers can consume marketing in a variety of ways, they can also respond in just as many ways. In the past, seeing a commercial would prompt a customer to call the phone number on the screen and talk to a sales person. Today, the buyer can visit the website, put off buying decision, and then, thanks to digital tracking, be retargeted with an offer from a competitor.
As push marketing grows ever more sophisticated, it may achieve its core objective —awareness— but it can also generate leads for competitors almost as effectively as for the company that’s footing the bill for the cost of advertising. That’s no way to build a sustainable advantage.
Given this, it’s not surprising that many companies have begun to try alternative approaches, including “pull” marketing. Today’s buyers are avid online researchers; they search the web, read reviews, and ask friends and colleagues, both online and off, for suggestions. Pull marketing gives you the opportunity to “pull” these buyers to your website or social presence by offering content—such as eBooks, white papers, blog posts, and other content—about the topic they want to know more about.
The Advantages of Pull Marketing
There are pros and cons to each approach, but generally speaking pull marketing is more impactful and cost effective when it comes to attracting prospects in the early buying stage. It can also deliver a higher level of engagement because the prospect shows an interest and takes action without promoting from you.
Here’s a real life example of how pull marketing is more effective and can deliver better results. As part of an early push marketing campaign, Deutsche Telekom advertised its Business Marketplace on billboards in airports across Germany. At the other end of the spectrum, Spark Digital tried a pull campaign offering humorous videos on YouTube that educated business customers about desktop security and backup. (See the examples below.)
The results of these two radically different approaches? Deutsche Telekom’s campaign drove a significant amount of traffic to its marketplace, but much of it ended up being unqualified. Spark, on the other hand, drove less traffic but the prospects who did visit its site were highly qualified and very interested in buying.
For these reasons, it’s usually better to stay away from push marketing if you want your cloud service marketplace to generate sales. As the Deutsche Telekom, example shows, push campaigns will mostly drive unqualified traffic to your marketplace, which will result in big drop-off rates and poor sales since your visitors won’t be targeted with relevant content and solutions. Basically, with a push campaign, you’re trying to jump directly to the “sell” stage while skipping the crucial education and validation steps along the way.
In contrast, the pull marketing approach does a much better job helping you deliver meaningful information to your target prospects. This leads to far lower drop-off rates and real opportunities to establish trusted relationships. Acting as an educator and advisor, instead of just a salesperson, can help you get in touch with prospects at the right time: when the customer is ready to buy.
Pull Marketing Across the Buying Process
For a better understanding of pull marketing, let’s take a look at how it works across every stage of the buying process, from awareness, to consideration, to validation, and finally to purchase. Each stage has a different objective and should deliver content—blog posts, white papers, webinars, videos, etc.—with a different focus to your prospects with the goal to move them to the next stage.
Objective: Earn the interest of businesses with targeted digital content
- Explore industry trends and explain new challenges
Objective: Convince businesses that you can help solve their problem(s)
- Match specific business needs or pain points to relevant solutions that you offer
- Promote customer stories to establish trust
- Provide access to gated content or expert consultation
Objective: Give businesses all the necessary elements to make a purchase decision
- Articulate compelling value proposition
- Present clear terms of service, plans, and pricing
- Share customer reviews and ratings
- Address key concerns and potential objections
- Offer options to try or buy
Objective: Create a frictionless buying experience
- Allow for quick checkout (make it as easy as one, two, three)
- Capture customer details and consent
- Provide adequate payment options
- Reassure the buyer by including messaging that communicates “you’ve made the right choice!”
- Set expectations on next steps, such as activation and onboarding
The chart above shows how it all comes together. Putting up a billboard may seem a lot easier than creating content for each stage of the buying process, but taking the time to target specific prospects with the right messages will end up delivering better results in the end.
Building Block #4 - Bundles
Everyone loves a good deal, which is precisely why offering a bundle is a smart idea. Bundles give buyers the impression that they’re getting good value for their money, and buying related products together can also be more convenient for customers. When it comes to SaaS, there are three popular ways to bundle cloud apps, and each strategy comes with benefits and drawbacks.
Bundling with Core
Looking across AppDirect’s channel partners, the most popular bundling approach is what we call “bundling with core.” Also known as a “hard bundle,” this is when a provider bundles a core service—high-speed internet, for example—with an adjacent cloud application, such as Microsoft Office 365, Symantec, or Mozy. It’s a very quick and affordable way for providers to sell a significant volume of SaaS subscriptions, because every time they sell an eligible core service, they attach a cloud application to it.
This approach can be even more effective because the sales motion is already familiar to the sales team and requires little additional training. Also, sales targets and compensation plans are already built around the core service, so providers don’t need to create specific incentives to drive sales of cloud applications. Moreover, hard bundles can often piggyback on existing marketing campaigns for core products and drive awareness around adjacent cloud solutions. These campaigns can also be a good way for providers to differentiate their offerings from the independent software vendor (ISV).
When providers are able to combine a packaged offer with streamlined activation and customer onboarding process, the bundle becomes an on-ramp to upsell and cross-sell their customers more licenses or related cloud applications. This “land and expand” strategy can be one of the most effective ways to drive SaaS revenue.
On the other side of the coin, one of the downsides of the hard bundle approach is that sales agents may not necessarily sell the SaaS component of the package. Many of them may stick to what they know—selling core services—and won’t stretch to pitch the benefits of the attached SaaS offer. If this happens, any future attempt to communicate with the customer about the cloud application won’t resonate because it will seem to come out of the blue. Subsequently, providers may see poor self-serve activation and usage rates, as low as 3 percent in the case of bundling Microsoft OneDrive with a phone or a mobile plan.
This can present a huge problem for providers, since they will never realize the full benefits of selling SaaS, including increased usage, stickiness, and annual revenue per user (ARPU), as well as reduced customer churn. Furthermore, if providers automate license activations, an even bigger risk is that a huge number of licenses will be active but customers won’t actually be using them. This means providers will end up paying royalties on 100 percent of bundled licenses when only a fraction of them are being really used by their customers.
The bottom line: Bundling with core is only viable if you have the capability to develop a streamlined customer onboarding process with the main objective to drive activation and usage for the attached cloud application. If not, the return on investment is just not worth it, since hard bundles will create a large number of inactive customers who will never maximize the value of the applications they buy, and will eventually end up churning.
Bundling Multiple Cloud Applications
Another bundling strategy is to combine multiple cloud applications together. For example, if you’re an AppDirect partner, you can bundle cloud applications on your marketplace with just a few clicks. This can help you drive higher ARPU and better stickiness with customers, since using more services will help them see more value from their investment, making them less likely to churn. It can also be a great way to differentiate from competitors who might not have the technology to easily combine multiple solutions into a single package with a single recurring subscription fee.
However, the more cloud applications you add to your bundle the more complicated it can be to articulate the full value proposition to the customer. There are simply too many use cases to explain, and sales may not be comfortable pitching the bundle. Customers might also ask to unbundle the package, since they may need to solve for one specific use case (e.g., mobile productivity) and might already be equipped to deal with other use cases (e.g. security or backup).
Bundling cloud apps works best when your sales team has been selling standalone cloud solutions for many years, and is looking to drive increased value to an existing base of knowledgeable customers. Otherwise, bundling multiple cloud applications will only increase the complexity and cost of sale while decreasing the likelihood of closing the deal. Given this, bundling cloud apps probably isn’t the best strategy to try first.
Bundling Apps with Adjacent Services
The last bundling option is to combine cloud applications with adjacent services, for example, packaging Microsoft Office 365 or Google’s G Suite with services such as customer onboarding (initial setup, deployment, migration, and training) and 24/7 premium technical support. This bundling strategy is a great way to augment your offerings because it can give customers an easy, risk-free way to change software products, such as moving from an older version of Office to Office 365.
Additional services can also help you increase software adoption and usage while driving higher ARPU with higher margins (services often come with better margins than the apps themselves). Moreover, offering services can help you meet certain ISV support standards, including Microsoft’s CSP requirements, and they can be an attractive draw for channel partners or resellers that don’t currently have customer onboarding or premium support capabilities.
Bundling adjacent services can present challenges, however, such as increased complexity during implementation. When you need to combine apps from the marketplace with services from your own catalog, it may require additional development to provide a seamless customer experience. Also, this approach might not be well-suited to price-sensitive customers.
Despite these potential issues, bundling adjacent services is a no-brainer for feature-rich cloud applications like Office 365 or G Suite, which often require some live assistance in the deployment phase. For Mozy, Zeendo, CakeMail, and other SaaS apps that feature relatively straightforward set up and do not require heavy lifting for data migrations or integration with legacy systems, offering adjacent services may not make the most sense.
Ultimately, choosing the most relevant bundling approach for your business means having a detailed understanding of your own objectives and capabilities. There is no one size fits all strategy, and experimentation is often key. If you have questions or are looking for advice, we’d love to hear from you.
Christophe Girault is the Global Customer Success Evangelist at AppDirect.