Venture Capitalist at Theory

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3 minute read / Mar 5, 2014 /

Great SaaS Companies Focus on Behavior Change

Most SaaS companies provide tools to help people accomplish a goal in a better way than they could before. A key part of a SaaS startup’s toolkit, then, is changing end user behavior. A startup that doesn’t change the behavior of a customer will see the customer churn in a few months or at the expiration of their contract. Customers don’t change their behavior for many reasons. Sometimes the friction to adopting a new workflow is too great. Other times, the value proposition isn’t compelling enough for users. Or, the use case is too infrequent for users to remember to change behavior.

But to succeed, SaaS startups must turn motivation into capability. I’ve seen three ways for SaaS companies to accomplish this goal listed in order of effectiveness:

Product: a really great product sells itself. People want to use it because it’s significantly better than whatever preceded it. Product is the strongest and most persistent way of changing behavior. It’s also the most scalable. A great user experience is repeatable with near-zero marginal cost for each user. Dropbox is a great example of how a dramatically better product sells itself and changes user behavior at scale. Looker’s simple tools for data exploration invite entire companies to ask and answer questions of their data.

Sales: sales teams can sell the promise of a product and post-sales/customer success teams then reinforce the promise and train customers to operate a product. Sales-based behavior change is obviously much more expensive than product-based behavior change. As a result, it’s typically reserved for large enterprise customers and products serving those customers. Customer retention hinges on the company’s ability to sell the value proposition to end users and develop a process to scalably chang their behavior through training and support. Workday and Responsys are two good public SaaS examples of this kind of customer behavior change.

Marketing: marketing can sell a dream and appeal to the aspiration of end users to be better at something or be on the cutting edge. Marketing teams can build tremendous interest in a new product category. But marketing can often be challenged in changing behavior, unless the team takes on the responsibility of engaging users after a sale. Post-sales lifecycle marketing makes use of product engagement data to trigger tutorials, encouragement emails and the like to reinforce product use. Yammer’s email notifications of updates on the network are one example of this kind of behavior. In another example, LinkedIn emails users how popular they are to encourage investment in the product.

Figuring out the tactics and techniques to convert initial customer enthusiasm and passion for a project into new behaviors is key to long term customer retention and success in SaaS.

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