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6/7/11 Skip Besthoff from Castile Ventures, keynoted at a MassTLC SaaS seminar on customer satisfaction and the customer experience in a SaaS environment
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11MLTC Breakfast SeminarSaaS Business Model Series
Improving Customer Satisfaction and the Customer Experience by Leveraging Operations
June 7, 2011
Skip BesthoffCastile Ventures
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
2Agenda
I. Why do we care about Customer Service?
II. What are the linkages between Customer Service and overall SaaS business performance?
III. What are Best Practices to maximize Customer Experience?
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
3
I. Why do we care about Customer Service?
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
4What Is SaaS?
Definition of ‘Software-as-a-Service’ (wikipedia)
Definition of ‘Service’(dictionary.com)
sometimes referred to as "on-demand software," is a software delivery model in which software and its associated data are hosted centrally … and are typically accessed by users using a thin client, normally using a web browser over the Internet.
… the supplying or supplier of utilities or commodities, as water, electricity, or gas, required or demanded by the public
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
5SaaS Is A True Utility
• Thinking about using SaaS as a true utility, what are the impacts of poor customer service?
Lost revenue • Current customers spend less (fewer $ per seat due to
some form of metered billing)• Fewer seats from existing customers (lower organic
growth)• Fewer new customers (lower brand equity / reputation)
Higher support costs• More people / hours
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
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II. What are the linkages between Customer Service and overall SaaS business performance?
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
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SaaS Versus Traditional Software Model
Revenue Model
Term
Investment
Implementation Cost/ Switching Barrier
Cash Flow
TraditionalLarge, up front license
and maintenance
Long (5-10 years +)
Heavy ($ millions)
High
Up front;Disconnected from usage and customer satisfaction
SaaSPer user per month
Meter or transaction-based
Short to Medium (months – 1year)
Light (negligible)
Low
Meter or transaction-based;Highly sensitive to usage and customer satisfaction
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
8Key Metrics In A SaaS Business
Revenue Drivers• MRR: Monthly Recurring Revenue• Churn: Dollars lost on a monthly basis• Organic Growth: Growth ($) per customer on a monthly basis
Costs• Customer Acquisition• COGS• Operating Expenses
Math• Revenue = (MRR * (1-Churn) * Organic Growth) + New
MRR• Costs = Customer Acq + COGS + Operating
Expenses
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
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Impact of Churn On SaaS Business Model
Customer Lifetime Value = Annual Recurring Revenue Churn
Examples: 1) $5,000 = $250,000 2) $5,000 = $50,000 2% 10%
*Note: as posted by David Skok in VentureFizz
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
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III. What are Best Practices to maximize Customer Experience?
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
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Customer Experience vs Customer Support
To do it right, SaaS companies need to think about the true end-to-end customer lifecycle
Pre-Sales- Freemium- Trials- Exploration
Sales
Implementation/Training
Expansion and Upsell
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
12
‘Consumerization’ Drives Expectations
Key Principles
• At minimum responsive; at baseline proactive; at best can anticipate
• High ease of use; UI matters
• Efficient
• Multiple touch points
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
13
Customer Experience Infused Across Entire Organization
• Old Model: ‘Customer Support’ is an afterthought Little to no consideration in product development
Primary focus on post-sales support
• New Model: ‘Customer Experience’ is baked into the product; touches all aspects of the company Senior management accountability
Systems and processes to collect data (buy or build)
KPIs defined: churn, lifetime customer value, $/customer/mo, support costs/customer
Cross-functional visibility and integration
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
14Examples Of Best Practices
• Product Development Applications ‘fully instrumented’ (i.e. tracks all user activity)
Become predictive over time
• Sales Track MRR, not bookings (i.e. reps get paid on usage)
• Account Management Leverage tools such as FAQs, wikis, crowdsourcing
Multichannel: web, chat, phone, social
A Leading Early-Stage IT Venture Firm | Castile Ventures Confidential 2011
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Thank you
Skip BesthoffGeneral Partner
Castile Ventures930 Winter Street, Suite 500
Waltham, MA 0245
781-890-0060
www.castileventures.com
