Gail Goodman – The Long, Slow SaaS Ramp of Death

This is a summary of Gail Goodman’s Business of Software 2012 presentation.

The Silver Bullet?

The inexperienced assume there is a silver bullet to success.

• Free
• Viral
• Network effect

Have you ever heard someone say that his marketing plan consists of going viral right after launching? It shows a lack of experience. 1 out of 100 will find the magical, silver bullet like viral spread. The rest of us are going to have to work.

Gail claims that she’s pitched more VCs than anyone in the room. There is no silver bullet, but instead it is a long, slow ramp of death. It takes a long time to get to scale. It takes a long time to get to minimum critical mass. Growth is fueled by doing a million things right. Don’t count on a silver bullet to get you to the hockey stick of revenue growth.

Mirages:

• Partners: Don’t worry about partnering until you’ve figured out yourself how to sell your product.
• Product changes: Thinking “One of these product changes is going to make the difference.”

There are no silver bullets. So how did Gail get to where she is now?

The Long, Slow SaaS Ramp of Death

Constant Contact’s sales were $1.5M/month in 2006. They are now at $20M/month, and they expect $250M in revenue this year – $39 at a time. However, it took Constant Contact $21M and 13,000 customers to get to profitability. How did Gail and her team get over the long, slow ramp of death?

The funnel:

1. How will prospects learn about you? How will you reach them?
2. How does prospect and customer engagement lead to customer value and conversion?
3. How will you drive retention and referrals?

How will you reach your prospects?

Content is the biggest challenge for small businesses.

You need both online and offline methods to reach your potential customers. Constant Contact used radio and TV commercials. Slowly test these methods – test, scale, tune. They learned that small businesses didn’t understand email marketing, so they created webinars and seminars to educate them.

Word of mouth continues to be their most important channel. If customers like the product, they tell people.

How does prospect engagement lead to customer value and conversion?

We are in a mixing bowl of technology and people. We live in a world where our attention span is miniscule.

Not only do you have to get them to buy, but you have to get them to stay. Be quick to wow them. Be quick to get your customers measurable results. Make them successful early. The default text in your product should inspire action, not just label stuff.

How will you drive retention and referrals?

Innovate everywhere.  Innovation needs to occur everywhere in your business, not just in the product or technical side of your business. Innovation should be guided by customer feedback.

You don’t own the gas peddle on word of mouth marketing. The best gas pedal on word of mouth referrals is a great customer experience. The more you direct your customers to the early path of success, the better you’ll be.

Metrics

Measure your business from customer view (inward), not from metrics (outward).

Gail says the best blog post she’s ever read on SaaS metrics is SaaS Metrics – A Guide to Measuring and Improving What Matters.

LTV = (ARPU * retention) * gross margin / (-) cost of acquisition

where

• LTV = lifetime value
• ARPU = average monthly revenue per customer

Gail recommends MixPanel or Kissmetrics for measuring business metrics.

[I’d like to thank Bill Horvath, founder of DoX Systems, for sharing his notes with me.]