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B2B Social Business Bill of Rights | Don’t Get it Wrong!

b2b social business peopleWhich is more important in B2B social media, social or media? For way too many B2B marketers, the answer is media. In the B2B marketing community, content marketing has eclipsed blogging, engagement is measured in click-throughs, and gamification is sexier than conversation. Too many B2B professionals see social media as just another marketing communication channel. It is not!

This is the third post in a series designed to help B2B professionals create better social business strategies by thinking in terms of B2B social networking over B2B social media. This post builds on the concepts introduced in the previous installment on professional social networking using B2B social media to explore the opportunities for social business at the company and industry levels. You won’t find tips and tricks for LinkedIn, Twitter or Facebook here, because the foundations of social business transcend the tools. I promise that later posts in the series will get to the tips and tricks, but social business is first and foremost about people, not technology.

social business people

Unlike a B2C brand, revenue at a B2B business is driven by the firm’s underlying professional network, because the social business network of B2B professionals includes their customers. By definition, every B2B business is selling to other businesses, as opposed to a consumer. As such, the professional ties between company and customer are very strong. They go far beyond brand image and brand loyalty to include serious business goals, significant professional relationships and personal career success. Moreover, the professional ties between B2B customers can also be very strong, creating an ecosystem that extends beyond the company to include the entire industry. While having a strong industry network is also important for B2C professionals, that network generally excludes their customers for all but the highest end luxury or durable goods, such as yachts and real estate. Not so in B2B. Successful B2B professionals are connected, and those connections include their customers.

The B2B Social Business Network

A B2B business has only one social business network, company and customer, offline and online. This singular fact should always remain top of mind when crafting a B2B social business strategy. While B2C marketers must struggle for brand engagement and must avoid unnatural intrusion by their brands into the personal social networks of consumers, B2B marketers, sales reps, service agents, executives and potentially all employees in a B2B social business are an integral part of their customers’ industry network and should seek to expand and strengthen that network through B2B social media.

Imagine for a minute that everyone in your industry is on LinkedIn, and everyone is linked to everyone else they know in the industry (this is what LinkedIn imagines ;)). Now imagine a map of that network with all your company’s employees at the center and your company’s customers on the next circle out, then your company’s prospects and partners, and finally your industry’s consultants, analysts, press, competitors, associations and so forth to create the complete social network of your industry’s ecosystem. That is your company’s B2B social business network.

b2b social business network

The B2B social business network extends out from the company to include every professional in the industry ecosystem. Most importantly, a B2B company’s social business network includes its customers, because unlike consumers, B2B professionals are there to do business.

Unfortunately, your company’s social business network is not all on LinkedIn, but it could be. It could be on Twitter. It could be commenting on your forum and your blog. When you clearly imagine your company’s social business network and beyond that to your entire industry’s social business network, the full potential of B2B social media to drive B2B social networking unfolds before you. B2B social media is a tool that automates and accelerates B2B social networking, it is not simply a marketing platform. There is a reason why LinkedIn is profitable largely through paid subscriptions, while Facebook struggles to monetize through ads. Unlike consumers, businesses are willing to pay for the value of B2B social networking. Advertising is just gravy for LinkedIn.

B2B Social Business Bill of Rights| We the People

Social media connects and energizes the B2B social business network, but it is still only a tool. It is not the network. The B2B social business network is composed of real people with real relationships that drive business throughout an industry. In the first post in this series, I proposed that the fundamental purpose of B2B social media is to increase the frequency, velocity, and quality of business referrals, a referral being broadly defined as a trusted relationship and the sharing of some useful information that facilitates a business opportunity. The second post went on to claim that reciprocity is the cornerstone of good professional networking. Just being helpful builds trust and transforms weak ties into strong ties. So let’s put aside the content strategy, engagement, gamification, and other buzzwords for a moment and talk about the right way to use B2B social media: as a technology enabler of B2B networking. Here is the B2B social business bill of rights. Don’t get it wrong!

B2B Social Business Right #1 | Expand the Company Network

The first goal of any B2B social business program should be to get every target prospect, customer, and influencer connected to the relevant sales, service, marketing, executive, and other employees within your company. In short, expand the company network, online and offline. If your industry is not very active in B2B social media, then your social business programs should encourage it. Start a LinkedIn Group and invite others to join. Write a blog and encourage comments. Help your offline social business network link up online. Getting your offline social business network online, linked, liked, followed, and subscribed is the foundation of success for all your B2B social media programs.

B2B Social Business Right #2 | Build Community by Being Helpful

Being helpful builds community within your social business network, because it is reciprocity that enables information to flow and strengthens bonds within your social business network. You may produce killer content for every buyer persona at every stage of the buying process, but when prospects are not ready to buy right now, it is reciprocity that keeps them from opting out of your nurturing queue. You must offer helpful information to keep them coming back for more.

social business network reciprocity

Helpful can mean many things to many people within your social business network: opportunity, education, support, entertainment, unique, simple, and so forth. What is helpful to your customers is different from what is helpful to your prospects, your partners and your industry influencers. Whatever helpful means in your industry, it is essential to energizing your social business network, driving referrals, and enabling viral word-of-mouth, because at the center of every viral social media program is a helpful gem of information.

B2B Social Business Right #3 | Accelerate Information Sharing

If you’ve done a good job of building community within your social business network and you’re offering lots of helpful information, then the next link in the B2B social media chain is to facilitate and accelerate the sharing of that helpful information throughout your social business network. Getting your content shared online is the B2B social media equivalent of word-of-mouth marketing. Word-of-mouth marketing is not only the most effective marketing communication channel; it is also the cheapest.

social business network content

Consistent sharing calls-to-action should be available for all your content. Beyond this, sharing helpful information from other sources builds reciprocity and sets an example for other members of your social business network. For example, content curation may already be a part of your B2B social media strategy, but do you see it as a way to fill in content gaps or a way to build relationships with the authors who create it and a way to encourage them to share your content in return. Lastly, sharing helpful information isn’t just about content. It’s about communication between real people. It’s about opportunity. Your B2B social media strategy should go beyond simple content sharing to driving business referrals throughout your social business network.

B2B Social Business Right #4 | Drive Business Referrals

The be-all, end-all accomplishment of B2B marketing is a customer referral. When your customers consistently tell their colleagues that they should buy from you, it’s time for vacation, because you’ve earned it, and demand for your products will continue without you. Your B2B social media strategy should definitely encourage customer referrals. However, why not take it one step further and promote referrals throughout your social business network? That’s all fine and good Joel, you say, but my company is in the business of making money. How are we going to make money by altruistically driving referrals?

social business customers

Within that circle of your social business network that represents your firm, everyone is aligned behind the same business goals (hopefully). Once you cross the line into areas of your social business network occupied by your customers, prospects, partners and the like, your goals are no longer aligned. The practice of driving referrals through your social business network forces you to align your goals with their goals. Do your case studies help your customers as much as they help you? Do your partnerships with industry experts promote their services as strongly as your own? Do you create opportunities within your social business network, or do you just sell to it? In B2B social media, what goes around online comes around online, and offline. If you want customers, partners and industry influencers supporting your business, then you have to give something in return. Driving referrals builds reciprocity, and reciprocity turns weak ties into strong ones.

B2B Social Business Right #5 | Convert Weak Ties to Strong Ties

B2B marketers would call this right the “influencer marketing” right or “customer reference” right. I frequently use these terms myself. The problem is that these selfish words obscure the means to their own end. They’re all about us. Do we really want to market to the influencer, so the influencer can influence our prospects? Or, do we want to expand our social business network by providing useful information, referrals and business opportunities to our industry influencers in order to build a relationship founded on reciprocity? Every good salesperson knows that asking a customer for a referral is the last thing you do, not the first, because it is the trust and early deposits in the reciprocity bank that make it possible.

social business network brand

Some products and services are so emotionally charged that they engender advocates just by doing what they do. These are usually consumer products, because we as consumers sometimes define ourselves by the products we buy and use. They say something about who we are. B2B customers define themselves by their company and industry relationships. B2B brand loyalties are a function of the B2B social business network as much as the product. B2B social media can help turn prospects into customers and turn customers into champions, but not by running an ad on Facebook. B2B social media turns weak ties into strong ties and customers into advocates by energizing the B2B social business network.

In the articles to come, I’ll provide well grounded social business tactics for specific B2B marketing programs based on the B2B Social Business Bill of Rights presented here, including the following.

  • Social Media for B2B Lead Generation
  • Social Networking for B2B Public Relations
  • Social Networking for B2B Sales Enablement
  • B2B Influencer Marketing with Social Media

Taking the social networking-centric view, these posts will explore specific ways to improve your B2B social business strategies and tactics. Please stay tuned!

Professional Social Networking with B2B Social Media

b2b professional social networkingI believe many B2B professionals struggle in their adoption of social media for professional use, because they see it as a marketing platform as opposed to a professional networking tool. Those who do see it purely as a marketing tool and use it as such, clog up a valuable business resource with spam. I have colleagues that are very active on Facebook for personal use, but can’t seem to get their heads around LinkedIn. CEOs and CMOs don’t have time for Twitter, let alone time to blog. Sales professionals are too busy chasing after prospects, so when they squeeze in the time for B2B social media, they make the mistake of using it for intrusive prospecting instead of professional networking. However, I think if these B2B professionals really understood the purpose and value of B2B social networking, then they would make more time for it and better use of it.

The is the second post in a series designed to help B2B professionals create better social strategies by thinking in terms of B2B social networking over B2B social media. This second installment explores the opportunity of building a stellar B2B professional network through social media and lays the foundation for the following more advanced topics to come.

  • The B2B Company Social Netork
  • Social Media for B2B Demand Generation
  • Social Networking for B2B Public Relations
  • Social Networking for B2B Sales Enablement

It is not another top ten list on how to tweet. So many poor efforts at B2B social networking result from trying to master how to do it without truly understanding what it is. Using social media to build your professional network is a very personal endeavor, and my hope is that this second post in the series will provide a few very personal “aha moments” that help clarify your professional social networking strategy.

Professional Social Networking Aha #1 | Just Be Helpful

Imagine for a moment the consummate professional networker before the Internet age. Perhaps the best networker you’ve ever met. You know the one I am talking about. He or she is probably an entrepreneur, salesperson, executive or maybe just the life of every conference. I still have colleagues like this, offline only networkers. Some have networks so strong they frankly don’t need the Internet. They are also a) rich, b) retired or c) about to retire. If you don’t fall into one of these three categories, then I highly recommend building your professional networking skills online as well as off.

online professional networking

Now can you recall what made that person great at B2B professional networking? Read more »

B2B Social Networking | What’s In a Name?

b2b social networkingI frequently find myself thinking that the dumbest thing we Internet marketers ever did in social networking was to rename it social media.  In the early days of Web 2.0, there was no such thing as social media. Everyone was just working to make software more social, whatever that meant. Then for a while, the terms “social networking” and “social media” were used almost interchangeably.  Today, it’s all social media, the Web 2.0 heir apparent of Web 1.0 new media. Social networking is largely reserved for describing the purest of social networks like Faceook and LinkedIn, or the more technical discussions about social graphs and the like.  Personally, I strongly prefer the term “B2B social networking”; because once you recognize that the smart way to use B2B social media is to drive B2B social networking, your fundamental understanding of the potential opportunity shifts.  Just for fun, I did a quick Google trend analysis on the terms to visualize the issue.

social media - social networking - trend

As it has grown in popularity, the term “social media”
has clouded our thinking about social networking with advertising concepts.

So, what’s the big deal Joel?  After all, it’s just a kind of new media, only social, right? The problem is that the term “social media” clouds our thinking about social networking with advertising concepts.  In particular, when it comes to B2B social networking, the term “B2B social media” misses the mark entirely.  It makes me cringe when I hear statements from B2B marketers and salespeople such as these:

  • “Social media is more relevant to B2C than B2B.”
  • “B2B customers aren’t on Twitter, so we don’t see the relevance of B2B social media.”
  • “I started a blog, but no one followed it and I really didn’t have the time to keep it up.”
  • “LinkedIn is full of unemployed job seekers, not business buyers.”

B2B social networking is not the descendant of new media, like a banner ad, only social. B2B social networking is the new technological enabler of face-to-face meetings, industry events, phone calls, email, sales calls, field marketing and public relations, because it’s the networking, not the media that counts!  Would you ever expect a B2B marketer or salesperson to make statements such as these?

  • “Networking is more relevant to B2C than B2B.”
  • “B2B customers don’t network, so we don’t see the relevance of networking.”
  • “I started building my network, but no one would meet and I really didn’t have time.”
  • “My network is full of unemployed job seekers, not business buyers.”

Cast in this light, these statements are obviously and completely ridiculous. The fundamental purpose of B2B social networking technology is to facilitate B2B networking through automation. In plain English, the purpose of B2B social networking is to increase the frequency, velocity, and quality of business referrals and references.  When applied to sales and marketing, this translates into accelerating the B2B purchase process and driving viral revenue growth within an industry.  At the core of a referral are two things: a positive, trusted relationship and useful information. Now that sounds just a little bit like sharing a blog post or a comment on LinkedIn.  At a minimum, B2B sales and marketing professionals should be using B2B social networking to increase the frequency and velocity of referrals throughout the sales process.  At a maximum, B2B social networking can be combined with search, Website marketing and marketing automation to completely automate the B2B purchase process of the new breed of B2B buyer.

b2b social networking

Business referrals are the mature B2B cousin of B2C word of mouth marketing.  Much of what I propose here in regard to B2B social networking also applies to B2C social networking with the one caveat that B2B social networkers are there to do business, whereas consumers use social networks for personal reasons, so B2C brands must tread carefully on their social turf.  In the case of B2C, the term “social media” may serve as a useful reminder to B2C marketers that consumers on social networks are not there in the service of their brands.  On the contrary, B2B marketers should find B2B social networking more relevant and more straightforward than B2C, provided they view it as networking and not advertising.

I also did an experimental search on Google for the term “B2B social networking” and Google decided what I really meant was “B2B social media.”  It’s really incredible how Google handles synonyms. Thanks for nothing Google!

social media - social networking - search

Even Google treats B2B social networking and B2C social media as synonyms

The is the first post in a series designed to help B2B marketers create better B2B social strategies by thinking in terms of “networking” over “media.”  Future posts will tackle the following increasingly complex B2B social networking challenges.

  • Professional networking with B2B social media
  • Social Networking for B2B Sales Enablement
  • Leveraging Social Media for B2B Demand Generation
  • Social Networking for B2B Public Relations

So, stay tuned for more!

SaaS Metrics FAQs | What is Churn?

saas metrics faqsA little over two years ago, I published a series of well received articles on SaaS metrics that culminated in the SaaS Metrics Guide to SaaS Financial Performance. Since then, I’ve received numerous inquiries regarding the many practical quirks encountered in day-to-day SaaS metrics implementation. In response, I’ve decided to revisit the SaaS metrics topic with this series of SaaS Metrics FAQs where I’ll elaborate on some of these finer SaaS metrics details in a simple Q&A format. This first SaaS Metrics FAQs installment tackles the many problems associated with measuring SaaS churn, so if you have a Q, please feel free to submit it in the comments and I’ll do my best to provide an A.

SaaS Metrics FAQ #1 | What is Churn?

SaaS churn is the percentage rate at which SaaS customers cancel their recurring revenue subscriptions. It is a key SaaS metric of historical SaaS business performance and an important parameter in revenue forecasting. When used in forecasting, SaaS churn can be interpreted as the probability rate at which customers will cancel their subscriptions. In it’s simplest form, SaaS churn can be stated as the number of customers cancelling (ΔC) per time interval (Δt) divided by the number of customers at the beginning of the interval (C).

SaaS Churn = ΔC
Δt x C

In the formula above, the Δ is a common math symbol that means change or interval.

That’s the simple answer. In practice, SaaS churn can be both difficult to define and difficult to measure. For example, it is very common to define SaaS churn rates at the customer level (customer churn), subscription level (product churn), and recurring revenue level (MRR or ARR weighted churn). Moreover, measuring SaaS churn can be complicated by low churn rates, high churn rates, high growth rates, variety of customer types, variety of subscription contract renewal periods, variety of contract MRR values, and changes in the SaaS churn rate itself over time. In it’s most complicated form, SaaS churn is the result of a Poisson process which statisticians would employ survival analysis in place of the simple formulas we generally use to calculate churn rates. So, if you get confused when you attempt to turn theory into practice, don’t worry, you are not alone. In the SaaS Metrics FAQ #3 below, I’ll provide some shortcuts for calculating accurate SaaS churn rates, while keeping the math to a minumum (really!).

SaaS Metrics FAQ #2 | Why is churn such an important SaaS metric?

The reason the SaaS churn rate dominates over virtually all other SaaS metrics is that SaaS churn is in direct opposition to growth; the primary objective of most SaaS businesses. As the limiting factor to growth, the SaaS churn rate has a very negative impact on both SaaS profitability and SaaS company valuation. Moreover, SaaS churn increases with the size of the customer base, so it is essentially negative virality, and as such is incredibly difficult to overcome. Graphically, SaaS churn tends to follow what is called a negative exponential distribution (shown below, it is the opposite of the positive exponential distribution associated with viral growth).

saas churn rate lifetime

SaaS churn tends to follow a distribution where the bulk of customers
fall off within one customer lifetime, but some customers hang around for a very long time.

In plain English, you spend an awful lot of money, time and energy acquiring customers in SaaS. You recover this investment over time, so you want your customers to stick around as long as possible. The longer they stay, the stronger your business. This is why the value of one divided by the SaaS churn rate is often quoted as the average customer lifetime; lower SaaS churn equals longer customer lifetimes equals larger customer lifetime value.

SaaS Metrics FAQ #3 | How do I calculate churn in practice?

Well, it depends. In order to calculate churn accurately, you should make some attempt to achieve the following ideal SaaS churn calculation requirements.

  1. Uniform Customer Population: Calculate churn across a uniform population of customers; uniform meaning they all have the same probability of cancelling during the measurement interval.
  2. Matched Customer Population: Calculate churn by matching the population of customers that actually do cancel (ΔC) to the original population of customers that might possibly cancel (C).
  3. The Right Measurement Interval: Calculate churn using a time measurement interval (Δt) that isn’t so short that you don’t get enough cancellations, or so long that you get too many. Otherwise, simple churn calculation formulas can yield statistically insignificant, biased, and random results.
  4. MRR Uncorrelated to Churn: If MRR gets mixed up with churn, such as big customers cancelling more frequently than small ones, then revenue churn may differ dramatically from customer churn, and in the end, it’s revenue that counts!
  5. Stable Business Process: Most SaaS businesses are constantly tinkering with their business processes to improve them. A SaaS startup may not have achieved a stable business model or recurring revenue stream. Measuring SaaS churn across dramatic business process changes will yield poor results. Ideally, you will measure SaaS churn before and after important changes in your business to understand their impact on churn.

What does this mean in practice? Most people begin to calculate churn by subtracting the number of customers remaining at the end of a month from the number of customers at the beginning of a month and divide by the number of customers at the beginning of the month.

Monthly Churn Rate Calculation = Cbegin – Cend
Cbegin

And, then they multiply the monthly churn rate by twelve to get the annual churn rate.

Annual Churn Rate Calculation = Monthly Churn Rate x 12

(note: Cend is number of customers remaining at the end of the month that were in the original Cbegin. It is not the total number of customers at the end of the month, which might include new customer acquisition. New customer acquisition during the measurement interval should always be excluded from your churn calculation. Thanks to Peter Cohen for pointing out this lack of clarity in the comments below.)

This is OK, provided you don’t have any of the following common churn calculation problems.

  • a small number of customers (measurement interval too short)
  • a very low monthly churn rate (measurement interval too short)
  • a very high monthly churn rate (measurement interval too long)
  • a high monthly growth rate (population not matched)
  • contract renewal periods longer than one month (population not matched)
  • mixed contract renewal periods (population not uniform)
  • distinctly different customer types and behaviors (population not uniform)
  • high early dropout rates leaving behind loyal customers (population not uniform)
  • a wide variety of MRR per contract (population not uniform)
  • upgrades or downgrades (MRR correlated to churn)
  • changing contract renewal periods (MRR correlated to churn)

Just to name a few! The careful observer will note that each of the above situations creates problems by violating the respective ideal churn calculation assumption identified in parenthesis. Here are some SaaS churn calculation tips that will help you avoid many of the SaaS churn calculation pitfalls above without calling in a statistician or overly complicating your churn calculations.

SaaS Churn Calculation Tip #1 | Choose a measurement interval with churn < 1%-10%

When the churn rate is small, so many math things work out better for SaaS churn rate calculation accuracy, as well as in your SaaS business! However, even if your churn rate is large, you can improve the accuracy of your SaaS churn rate calculation by choosing a measurement interval where the total churn within the interval is small. Consider a SaaS business with 25% monthly churn and 100 customers. At the end of months 1, 2, and 3 there will be 75 = 100 * .75, 56 = 75*.75, 42 = 56 * .75 customers respectively. If you use a measurement interval of one quarter, you will likely calculate a churn rate of 19% = (100 – 42)/3 instead of 25%. When churn within the measurement interval is too high, your churn calculation will consistently underestimate the true churn rate.

SaaS Churn Calculation Tip #2 | Use a measurement interval close to the average contract renewal period

Your customers can’t churn unless their contracts are up. If you use annual contracts, only 1 in 12 of your customers can cancel in any given month. On the other hand, for those 1 in 12 that can cancel, you are actually measuring the annual churn rate, because they’ve been around for a full year already. If you customer population is super duper big and uniform and you have zero growth, these two biases will cancel each other out. But, a safer bet is simply to choose a measurement interval that is close to your average contract renewal period. One frequent source of churn calculation frustration comes from reconciling Tip #1 above which entails a shorter churn measurement interval with Tip #2 which usually entails a longer churn measurement interval. The solution to this problem requires a little more complex math and is given in Tip #7 below.

SaaS Churn Calculation Tip #3 | Only look at contracts that are up for renewal

If you can’t seem to find a happy medium between a low churn rate in your measurement interval (Tip #1) and a measurement interval equal to your average contract renewal period (Tip #2), then your best bet is to stop aggregating over the measurement time interval and base your SaaS churn rate calculation only on contracts that are up for renewal. The trick here is that since you are selectively only looking at contracts up for renewal and they may have many different renewal periods, the correct measurement interval to use in your SaaS churn rate calculation is the average contract renewal period of all the contracts in your renewal sample for the month.

SaaS churn rate calculation

When only looking at contracts up for renewal, the correct measurement interval
to use in your SaaS churn rate calculation is the average contract renewal period.

The formula is the same, but the denominator only counts the number of contracts up for renewal in the month and the numerator counts the number of contracts up for renewal in the month that cancel.

Monthly Churn Rate = ΔCcontracts cancelled in month
Δtaverage contract renewal period x Ccontracts up for renewal in month

This is one of the most accurate ways to calculate churn provided you have enough contracts up for renewal each month. It is also the only approach that completely disentangles churn from growth, so it is particularly relevant in high growth situations.

SaaS Churn Calculation Tip #4 | Separate different customers into churn cohorts

Too much aggregation over non-uniform customer populations can distort your SaaS churn rate calculation. Whereas separating different types of customers into churn cohorts and calculating churn separately for each churn cohort can identify important levers you can push to improve your business.

saas churn cohorts

Aggregating over customers with dramatically different churn rates
can hide problems and untapped opportunities for improvement in your SaaS business.

Churn among customers frequently varies by contract MRR, renewal period, tire kickers vs. loyalists, and a host of customer attributes that you are already collecting in your CRM system that are just waiting to be analyzed.

SaaS Churn Calculation Tip #5 | Measure recurring revenue churn

Recurring revenue churn is calculated by substituting monthly recurring revenue or annual recurring revenue (MRR or ARR) into the standard customer churn calculation. It is essentially a recurring revenue weighted version of simple customer churn, i.e., big customers count more than smaller ones.

Monthly MRR Churn Rate Calculation = MRRbegin – MRRend
MRRbegin

The customer churn calculation can hide significant financial problems, such as downgrades or higher churn rates among larger customers. Conversely, it might make things look worse than they really are from a business viability point of view. Routinely measuring and comparing customer churn and MRR churn will help you detect nuances within your customer base that have a direct financial impact on your SaaS business.

SaaS Churn Calculation Tip #6 | Segment MRR churn into upgrades, downgrades and cancels

Perhaps the most useful aspect of MRR churn is the insight it provides into upgrades and downgrades, two important financial metrics that are not measured by the simple customer churn calculation. The calculation is essentially similar to calculating churn cohorts, one need merely identify those subscriptions that increased, decreased or disappeared altogether during the measurement interval and calculate MRR churn (MRR growth in the case of upgrades) separately for each category.

SaaS Churn Calculation Tip #7 | In high churn situations, use accurate conversion formulas

OK, the math will get a little harder here, but keep in mind that your next step is to call in a statistician. ;) It turns out that the annual churn rate is only approximately equal to 12X the monthly churn rate, and this approximation fails for large churn scenarios. The true relationship between the annual churn rate and monthly churn rate is given by the following formula:

Annual Churn Rate = 1 – (1 – Monthly Churn Rate)^12

Or, if you find that monthly churn fluctuates a lot from month to month, then you can calculate annual churn as follows:

Annual Churn Rate = 1 – (1 – m1) x (1 – m2) x … x (1 – m11) x (1 – m12)

Where mi is the monthly churn rate for month i. The reason this is the true formula is that the number of customers hanging around at the end of 12 months is calculated thus.

Cend = Cbegin x (1 – m1) x (1 – m2) x … x (1 – m11) x (1 – m12)

For example, suppose your monthly churn rate measurement comes out to be 10%. Multiplying by 12 would give an annual churn rate of 120%!? Which is clearly not possible, as a churn rate cannot exceed 100%. The correct answer is 72% = 1 – ( 1 – .1 )^12.

The reason you can often simply multiply by 12 to convert the monthly churn rate into the annual churn rate is that is just so happens that for time intervals less than about 10% of the average customer lifetime (or total churn in interval < 10%) the following approximation applies.

(1 – Monthly Churn Rate)^12 ≈ 1 – Monthly Churn Rate x 12

Unfortunately, this approximation can really mess up your numbers in high churn situations. I say 10% because 2 x 10% = 20% whereas the exact formula gives 19% = 1 – ( 1 – 10% )^2, which is more accurate than most businesses care about or the SaaS churn model in the first place. More than 10%, however, and calculations become pretty inaccurate. The inverse of this formula is also useful.

Monthly Churn Rate = 1 – (1 – Annual Churn Rate)^(1/12)

Recall the example from Tip #1 above, where a quarterly measurement interval caused us to miscalculate the monthly churn rate as 19% instead of 25%. In this example, we had 100 customers to start and only 42 left at the end of a quarter. Had we used the correct formula to calculate monthly churn from quarterly in this example we would have done the following.

Monthly Churn Rate = 25% = 1 – ( 42 / 100 )^(1/3)

If you are willing to do the math above, then you can use longer measurement intervals even when churn is high and there is no need to follow Tip #1.

Startup Scaling | Overcoming 5 Key Operational Challenges

startup scalingScaling a startup from zero to $100M is 10% strategy and 90% execution. You’d never know that from reading the Web, because the advice you’ll find online is 90% related to strategy and 10% related to execution. This is the second post in a series that explores the challenges of scaling a startup through rapid growth and presents some tips and tricks I’ve learned over the years to smooth out what is an inherently bumpy ride. The first post in this series entitled Startup Business Growing Pains | Staying Focused examined the challenge of maintaining strategic focus amongst the chaos of scaling a startup. This second post leaves the 10% of strategy behind to explore five key startup scaling challenges commonly encountered in the softer, messier 90% of execution.

Startup Scaling Challenge #1: Passing the Hat

A while back, I published this article entitled Startup Musing | One Hat is Not Enough where I make the case that startup executives need to be prepared to wear more than one functional hat to be successful. As you scale your startup, however, you must carefully oversee the process of passing those hats to new executives and managers that join the team. This looks easy on paper (just draw up the new org chart), but it can prove extremely challenging in practice. While it is easy to pass the hat in form, it may not be easy to pass the hat in substance when the on-boarding of the new hat owner is arduous, i.e., big learning curve, lot’s of important internal relationships, and so forth.

As long as the old hat-owner offers greater knowledge and effectiveness in the relevant functional area, everyone in the organization will gravitate to her for decisions and support, regardless of what the new org chart says. The problem can be further exacerbated if the old hat owner isn’t all that willing to pass the hat in the first place or if the old hat owner is too willing and runs away from the responsibility faster than the new executive can get up to speed. Poor hat passing can result in confusion, frustration, conflict, executive turnover and ultimately poor business performance.

Hat passing is tricky business that requires the buy-in all of all those affected, a solid foundation of respect between the two hat-passers, and a thoughtful approach to managing the transition. Without these fundamentals in place as you are scaling your startup, you may find that you are dropping more hats than you are passing.

Startup Scaling Challenge #2: The Solution of an Unknown Function

A corollary to the challenge of passing the hat is the introduction of a new business function whose role is unknown to those who must work with it. For example, most B2B SaaS startups begin with a CEO and a bunch of engineers, then they add sales and marketing to take the product to market, then technical support and accounting as they gain customers and need to react to their needs, then product management, customer success and QA to develop a more proactive approach to steering the business. Depending on the business model, there may be other functions along the way like business development, partner marketing, channel management, etc. It all sounds very logical and straightforward to the seasoned startup executive. However, it can come as quite a surprise to less experienced staff who have never seen, heard or worked with this new function.

If you’re a junior engineer who has never worked with a product manager before and you’re used to taking instruction directly from the CTO, you will have all kinds of questions and concerns about this new species of coworker. It can even be quite confusing to the new product manager as the product management role at this startup differs from past experience. I’ve scaled multiple sales, marketing, support, and product development organizations and I can say for a fact that they were all the same in some respects, and they were all very different in others. In every case, the specific organizational roles and processes had to be tailored to the unique business strategy and environment of the startup at hand.

When you introduce a new function, don’t assume everyone understands what you are doing and why. Don’t even assume that everyone knows what it is. Some may think they know from past experience, but they still may not know what it is at your startup. Every new function should come with clearly defined roles and responsibilities and these should be broadly and consistently communicated to everyone in the new function and everyone who must work with it to make the transition a success.

Startup Scaling Challenge #3: Moving from People to Process

Passing of hats and the introduction of new business functions are natural consequences of growth and the increasing division of labor required to manage a larger organization. The result is that work that used to be done by individuals and small teams must now be done by cross-functional groups. In my experience, this is one of the most subtle and treacherous startup scaling challenges. Subtle because it sneaks up on you. Treacherous because the problem and it’s potentially damaging results are always underestimated. You design your org chart, hire your new people, get the new team together and quickly discover that they have no clue how to work together effectively.

startup scaling

Take the simple process of creating a single Web page that describes your product. Whereas before a multiple-hat-wearing marketing director might write the content, create the design and even mock up the HTML before sending it over to your only Web engineer for implementation, your scaled up startup now has a product manager internally communicating the value of features and functions, a product marketer producing content for external consumption, a designer creating Web graphics, a Web team manager receiving these requirements, and a team of Web engineers from which to chose to assign the task, all of which are new and don’t fully know the code base yet. Just for fun, let’s say this transformation occurs over a one month period. See the point?

Moving from many individual contributors to cross-functional teams is an essential aspect of scaling a startup. Teams produce more for less when they are working to a well-defined, well-understood process. You can’t just throw a bunch of new people in a room and hope that they will figure it out, no matter how talented they may be. And, you can’t define new processes and make them stick overnight. Define maybe, make them stick no way. This is an essential difference between good startup managers and managers in more stable businesses. It is one skill to oversee the efficient operation of an existing team or process. It is quite another skill to consistently create new teams and processes out of nothing.

Here is my cheat sheet of how to quickly go from people to process…

  • Communicate strategic goals
  • Establish process owners
  • Define roles, responsibilities and workflows
  • Make a schedule
  • Focus on group deliverables over individual tasks
  • Control the hand-offs
  • Educate, educate, educate

What startup scaling rules of thumb have helped you go from people to process?

Startup Scaling Challenge #4: Tribal Knowledge

Underscoring all the startup scaling challenges above is the problem of tribal knowledge: those things that are sitting inside the heads of earlier employees that must be communicated to new employees in order for them to do their jobs. Tribal knowledge is traditionally communicated verbally through stories. Unfortunately, this method of communication is notoriously unreliable leading to misinterpretation, reality distortion, and group memory loss. At some point, effective startup scaling means writing stuff down where everyone can find it and making sure new people are trained on the essential accumulated knowledge of your business.

Personally, I like to take a minimalist approach to documentation. At most startups, folks are too busy to write anything down for future consumption and training, let alone read it. However, it’s essential if you want to avoid the frustration of watching your newest employees waste time reinventing things that you thought your business was good at already. I won’t attempt to define what you should document, as it tends to vary widely based on each startup’s specific strategic goals, stage of evolution, and operational challenges. I’m just going to say that no matter how Silicon Valley cool you are, no matter how agile you want your culture to remain, sooner or later you will reach the limit of tribal communication and you’re going to have to start writing things down to scale your business from startup to firm.

Startup Scaling Challenge #5: To Every Thing There is a Season

You can’t do it all at once, so you must choose very carefully what you will do today. In my opinion, this is by far the most difficult startup scaling challenge of all. As you scale your startup, you will find that you have a cornucopia of organization models, job roles, programs, processes, policies, best practices, templates, and so forth to chose from. The question is always: “Which one, right now?”

The flip side of this principle is that just because you are not doing something now, not following that “standard industry best practice” does not mean you are doing something wrong or that you have a problem. It may just not be the season. It’s a common startup scaling practice to hire experienced executives who have been there, done that at bigger companies to help you scale to the next level. And, it’s a common startup failure scenario when an experienced large company executive with little or no startup experience assumes that her job is to remake your startup in the image of her former company overnight. The proverbial hammer looking for nails. It requires both talent and discipline to scale a startup. Talent to choose the right thing to do next. Discipline to get it done and not get distracted by the thousands of other things whose seasons have not yet come.

The New B2B Buyer | 6 Rules of Engagement eBook!

new b2b buyerB2B buyer behavior has evolved in adaptation to the Internet. A new B2B buyer species has arisen that is more connected, more impatient, more elusive, more impulsive, and more informed than its pre-millennium ancestors. Just as the new B2B buyer has evolved in adaptation to the Internet, B2B sales and marketing professionals must adapt their strategies and tactics to the expectations of the new B2B buyer for online independence and instant gratification. For each new behavioral trait that differentiates the new B2B buyer species from its pre-millennium ancestors, there is a new rule of engagement that complements that behavior to maximize B2B sales and marketing effectiveness.


new b2b buyer ebook

This eBook consolidates and expands on my popular New Breed of B2B Buyer series. It defines 6 behavioral traits of the new B2B buyer and explores how they lead to 6 new rules of sales and marketing engagement. It also introduces the concept of the “fuzzy funnel” and includes tactical highlights such as the evolving roles self-service, search, marketing automation and B2B sales in new B2B buyer engagement. Share and enjoy!

SaaS Branding | 6 Challenges of Killer Cloud Brands

SaaS branding has some unique challenges that aren’t covered in the average MBA program. As a new communication channel, the Internet has altered the rules of branding for almost every category of product. However, cloud brands that owe their very existence to the Internet often find that the message, the medium and the merchandise are a confusing tangle of clicks, words, sounds, images and experiences that is difficult to describe.

I’m not going to re-hash branding 101, there are plenty of resources available for that. I’m also not going to provide a fool proof recipe for creating killer cloud brands. Anyone who says they have that is lying. What I will do is provide some SaaS branding food for thought by exploring 6 key questions you need to ask before committing to your SaaS branding strategy. Because once you commit, it’s not easy to change. All brands, not just cloud brands, are ultimately owned by their buyers, not their sellers. Once you put yourself out there, the evolution and results of your SaaS branding strategy are no longer your own. Your first impression may also be your last, so you should strive to get it right.

Are You in a Category unto Yourself?

saas branding categoryWith respect to cloud brands, everyone wants to own the category. It’s where the big, BIG money is. Moreover, the combination of network effects and switching costs common on the Internet often demand that you attempt to own the category, as everyone else is destined to be an “also ran.” Consider the status of the direct competitors of Salesforce.com, Google, and Facebook.

I like Al and Laura Ries description of the relationship between categories and brands.

“The mind is like a sorting rack at the post office, which has a slot or ‘pigeonhole’ for every name on the letter carrier’s route. Every piece of mail is put into the hole corresponding to the name on the mail. If there’s no hole for a new piece of mail, it’s set aside in a pile called ‘undeliverables.’ So too with brands. The mind has a slot or pigeon hole for every category. If the pigeonhole is named ‘safe cars,’ this is the hole for a brand called Volvo.”

When you are creating a new brand, your challenge is to shove your way to the top of the slot by focusing on your unique and valued qualities over the competition. Building a new category is 3X more difficult, as you must first clarify and create a new pigeonhole where none currently exists, second promote the unique and valued qualities of the fuzzy new category relative to unclear alternatives, and third hold on to the top of the slot by outpacing the competition (which will come eventually if the category is real).

If you find yourself in the enviable position of being a BIG category unto yourself and the nature of that category demands that you own it, then your SaaS branding strategy should focus on crystallizing that confusing tangle into a simple, easily describable position that is unlike any other. No easy task as we all have very big, complex post office racks. Fail and your brand becomes “undeliverable.” If you find yourself in a crowded category where you must fight your way to the top, then focus on your unique differentiation to pull away from the crowd. In either case, realize that positioning alone will not win the battle of the cloud brands; you must also deliver.

Are You Experienced?

saas branding experiencedCloud brands are the most experiential of service brands. What you see and hear isn’t always what you get. You can’t taste them. You can’t smell them. You can’t touch them. You can only do them. Cloud brands must be experienced to be truly understood. In addition, most cloud brands follow a recurring revenue subscription model which precludes any ongoing discrepancy between your message and your service. Your SaaS branding strategy must be tempered by reality, such that your service absolutely delivers on the promises made in the name of your brand.

The experiential nature of cloud brands is one of the myriad reasons behind the free trial imperative of SaaS. If you are tired of explaining and explaining and explaining your cool new category or you can’t quite come up with the perfect words to describe your difference, any car salesperson will tell you that there is no better way to seal the deal with an uncertain buyer than a test drive. With cloud brands, doing is believing.

The cloud brand experience does not begin or end with your product. Prospects begin to experience your brand based on what they hear and see online and off. A recommendation on LinkedIn may lead to a white paper posted to a community site, which leads to a free trial and discussions with your sales and support teams, and finally to a purchase that after time results in an upgrade and another online recommendation, and so forth. Where does your SaaS branding strategy begin and where does it end?

What’s in A Name?

saas branding nameSome folks will tell you that brand names simply don’t matter, particularly for B2B brands. Other’s will tell you that they matter a lot. I say, “it depends.” One reason brand names don’t always matter is their experiential nature, which we know is extreme for cloud brands. You can attach any name, acronym or logo you like to an experience after the fact. You just need a letter to stick in the mail slot. The main argument against the relevance of names in B2B brands is that the buying process is too rational, and good brand names are chosen to reinforce the emotional connection of the buyer to a brand’s essential quality, e.g., an iPad is mine, a Red Bull is full on energy, etc.

These are strong arguments and it’s easy to come up with countless examples of brands where the names are simply arbitrary, not just in B2B but B2C as well, e.g., IBM, Oracle, Xerox, Louis Vuitton, BMW etc. Outside of consumer packaged goods, it’s difficult to make the case that brand names matter at all. How many descriptive, metaphorical and emotional names can you find in the top 100 corporate brands? Not many. Your agency is likely to tell you to play it safe either way. After all, it’s easy enough to come up with a decent name–for a price–so, why take the chance?

Let me tell you when and why I think names do matter for cloud brands. Most examples of successful brands with arbitrary names are exactly that, successful brands. They are not startups. They are not fuzzy, unknown categories. Cloud brands matter most when you are creating the category and you intend to own it. The reason for this is that category names cannot be arbitrary, they are descriptive, and cloud categories can be very hard to describe. If you’re signing up for 3X the work to create that mail slot, then you darn sure want to put your name on the address bar. The best way to do that is to co-opt the category name, e.g., Salesforce.com, Facebook, Box.net, etc. A descriptive, but not quite generic, trademark not only facilitates building a new category by reinforcing clarity of message, but as you capture the market it all but ensures your brand will be synonymous with it.

Can You Play Variations on Your Theme?

saas branding variationIf SaaS branding is all about the experience and names only matter so much, then how do you guide the cloud brand experience? Craft a compelling story and publish it deep and wide. SaaS branding must adhere to the new paradigm of the new breed of B2B buyer. It is no longer sufficient to come up with a name, logo, positioning statement and core message and call it quits. Developing your cloud brand image requires telling your whole story by publishing tailored variations on these primary themes that increase their relevance for prospects and make them easier to find through search and social media.

The Internet is an organic, networked communication channel and your SaaS product sits right in the middle of it, merged with it, evolving with it, part of it. It is not a broadcast medium like television or radio. Prospects decide for themselves what they will see, hear and do. You can offer up experiences, but your prospects choose, which means you must consistently offer up new and varied experiences to cover their diverse range of interests and virtual locations in relation to your offering. One prospect may care about costs and find you on Google, whereas another may care about improving customer service and find you on an industry portal, and a third may not know what she cares about, but hear about you from a recommendation on LinkedIn. Killer cloud brands are everywhere their prospects are with every story they want to hear.

Are You Under The Influence?

saas branding influenceI’m not asking if you’re smoking dope (Although I’ve seen my share of business plans where the management team clearly was!), I’m asking if your cloud brand is “under-influenced.” While your content strategy should cover all your buyer personas, problems, benefits, media, channels, keywords and the like by exploiting the myriad variations on your story, it’s important to keep in mind that not all listeners are created equal. Finding and leveraging influencers in your community accelerates online and offline word-of-mouth and increases the credibility of your cloud brand.

Influencers come in lots of shapes and sizes today from online friends, bloggers and recommenders to traditional mainstays like customers, press, analysts and old-school industry experts that like to sit on panels and publish white papers. Whoever they are, you want them backing your brand and your message. Your SaaS branding strategy should lay out your plan to win over the influencers in your space. My advice here is to go beyond telling them your story and make them part of your story. Don’t go it alone. Friend your brand’s friends, blog with influential bloggers, tell your customer’s stories, help the press dazzle their readers, analyze with the analysts, and organize panels for those old-school experts. In the end, they will own your brand more than you. Great cloud brands facilitate ownership.

Can You Be Trusted?

saas branding trustThe underlying goal of all branding is trust. Trust so thorough that prospects and customers no longer need to think through a purchase, they just buy on trust. There are many elements that impact trust, but honesty, reliability, and risk are right at the top of the list. Cloud brands must live up to very stringent trust standards, because of the ongoing 24/7 relationship inherent in the SaaS model. There is no room for anything less than 100% honesty when your customers can always see for themselves. Any discrepancy between service expectations and service delivery is immediately apparent. And, risk cannot be transferred when a customer can cancel anytime.

Great cloud brands say what they mean, and mean what they say. They don’t promise anything they can’t deliver. One of the great cloud ironies is that beyond the fear, uncertainty and doubt of putting sensitive data and applications on the cloud, cloud brands must by their very nature live up to greater standards of trust than their software equivalents. I can’t count the number of stories I’ve read about shelf-ware and failed enterprise software implementations. In comparison, major outages and security breaches at SaaS providers, while highly publicized, have been few and brief. Cloud brands that fail to engender and deliver on trust go out of business, fast, because they tend to fail for all their customers at once, not just one at a time.

CloudFlare | Crowdsourcing Web Traffic Control

cloudflareLike most small website owners, I have a very limited view of what really goes on under the covers at Chaotic Flow. I know my own source code and I have Google Analytics and basic Web logs, but without a fleet of operations and security IT staff, I really have no clue who is coming to my website beyond the browser types, IP addresses and keywords they use. I routinely have to battle comment spam and I’ve definitely fended off a couple of real attempts to hack my site. It’s amazing when you consider just how small a part of the Internet Chaotic Flow represents, yet the bad guys have sufficient time and processing power to spend it on little old me. Pretty scary.

Since email spam and desktop virus protection are proven, large markets, you’d think that by now someone would have cracked the nut of protecting websites. There are security options out there, particularly if you are a large site and can afford them. Most provide a combination of site scanning for detection with locally installed security software and hardware for prevention, but to my knowledge no one really provides attack detection and prevention for the Web with the kind of SaaS simplicity and effectiveness of email and desktop equivalents. Until CloudFlare.

CloudFlare is a creative and rapidly growing SaaS startup that wants to eliminate website spam the way Postini did for email, only more, a lot more. So much more that the two year old Cloudflare is already rumored to be valued in excess of $1B. I recently sat down with Matthew Prince, CEO of CloudFlare, to talk about what makes CloudFlare unique. He had no shortage of answers.

This is the first article in a new “Cloud Disrupters” interview-based series that will highlight recently launched SaaS companies and products that have the potential to be real game changers. In keeping with the long standing Chaotic Flow theme, the purpose of this series is not news and friendly buzz, but an exploration of the Internet strategies and technologies that make these companies unique and disruptive. And, maybe a little unsolicited advice.

CloudFlare’s Secret Sauce

The simple, game-changing element of CloudFlare is its approach to the website protection problem at the network transaction level, rather than the Web application level. CloudFlare asks nothing more than that you redirect all your Web traffic through CloudFlare, and CloudFlare will make sure only the good guys get through to your website. Technically, it’s completely analogous to Postini, except as opposed to swapping out MX records, you change your DNS settings.

cloudflare network

Cloudflare attacks the website security problem at the network layer,
making sure only the good guys get through to your website.
However, access to all website traffic
opens up myriad business opportunities beyond security.

This approach has the double whammy of being incredibly simple for customers to adopt, while empowering CloudFlare with the maximum amount of community knowledge, business opportunity and network effects to become a truly valuable service and formidable competitive force on the Internet. More on this later.

Community Leverage Lies at the Heart of The CloudFlare Strategy

Growing out of Project Honeypot, an open community-driven experiment to identify and quash website spam, CloudFlare has been community-centric since day one, and the company has reaped the benefits. Prince has a great story about how CloudFlare’s first pre-funding servers were donated by its community. The real competitive advantage of the CloudFlare community is the pooled knowledge of all that web traffic. In Princes own words below.

“Traditionally security is a very siloed market…and if you try to get Yahoo to share security information they won’t for lots and lots of reasons..it’s very isolated….From the beginning the [CloudFlare] idea was how do you create a community that gets stronger as it gets bigger…as data flows through our network, knowledge about that traffic is captured and we can then provide a better and better and better service for everyone.”

Unlike a lot of Internet companies where network effects are fuzzy at best, the network effect at CloudFlare is unusually tangible. CloudFlare’s freemium customers may not pay in cash, but they do pay in knowledge. Knowledge that according to Prince outweighs their costs, alleviating one of the biggest roadblocks to freemium success.

CloudFlare Adoption Costs, Velocity and Scale

I don’t think I’ve ever seen a better demonstration of the inverse relationship between organic growth velocity and adoption costs than CloudFlare. In the ideal CloudFlare world, 100% of Internet traffic will some day flow through its network. “We’re rebuilding the Web,” says Prince. Are you listening Google? While that vision may be a tad bit aggressive, after only 15 months in production, 450 million users pass through CloudFlare’s network every day and their website adoption rate is in the thousands per day (I am not quoting a specific number as it is increasing faster than I can write).

Had CloudFlare taken a less bold approach than the one-click traffic redirection to their “Web proxy cloud,” then its entire business model would fall apart like a house of cards. Too much complexity would produce lower adoption volume, inexorably leading to higher prices and weak network effects. While CloudFlare has zero salespeople and has done only very limited launch marketing like participating in the TechCrunch 50, it’s adoption rate is still through the roof.

C’mon CloudFlare, Show Me the Money

Unlike virtually every other B2B SaaS CEO I’ve met, Matthew Prince is not worried about money. He’s worried about scale. In a fashion more common to B2C startups, the reasoning goes that if CloudFlare reaches it’s natural scale, monetization will not be difficult. Strangely enough, I agree. The reason I agree is that by attacking the website security problem at the network layer, CloudFlare is essentially nominating itself as Web Traffic Control for the Internet. While the original premise might have been to filter the baddies out of incoming traffic, the result is that the CloudFlare cloud has access to ALL traffic, good, bad and otherwise, coming AND going. Generically, CloudFlare is a value-added channel that can augment, cleanse, filter or expedite any website interaction and is only limited in what it can accomplish in the tight window of opportunity between request and response.

In the short time since it’s launch, Cloudflare has gone beyond security to offer itself as a CDN that can speed up your content delivery, a content optimization tool to speed page loads, a website analytics dashboard that goes beyond Google Analystics to give deeper insight into your traffic, and an app marketplace with one-click features that can be easily added to your site. “Security is just a feature. CDN is a feature. Apps are a feature.”, according to Prince, “but they don’t fully describe the product.” Prince recognizes that CloudFlare faces a cloud category branding challenge. For now he’s thinking of what they do as network “operations-as-a-service,” something that only the big guys like Google, Amazon, and Facebook can afford to do for themselves and have whole sections of the org chart dedicated to it. Everyone else can only get that scale through a SaaS community such as CloudFlare.

CloudFlare Competitive Threats

Thus far it may sound like I’m on the CloudFlare payroll, but I’m not. I do think CloudFlare is attempting something very disruptive, interesting and ambitious. Which means I also expect the space will heat up fast. Here are some gotcha’s that I think could trip CloudFlare up along the way if they are not cautious.

  • Do No Harm
    Tampering with Internet packets is risky business. There is at least as much opportunity to screw things up as there is to improve them. Conventional website security products strive to eliminate every significant threat. It will get complicated and with more complexity will come more opportunity to break stuff, especially since CloudFlare is also overlaying all those other value added services. Given it’s super low adoption costs and gigantic target market (pretty much every website), I’d suggest that it’s more important to not break stuff than it is to fix stuff. So what if CloudFlare doesn’t do everything, as long as it does enough to make you push the button to enable it for free, and then upgrade to a couple of paid services, then it’s done enough. Alternatively, accidentally bringing down your site or cutting off your ad revenue in the interest of security will not play well with most Web publishers.
  • Get Sticky Fast
    While CloudFlare has a decent lead on the competition, particularly from the Project Honeypot connection, there are some established players with big pockets that might want part of this action. It only takes a second to adopt CloudFlare. By the same token it will only take a second to switch to a competitor. Services that are difficult to duplicate, but more importantly that increase in value the more they are used like site analytics should get priority on the CloudFlare product roadmap.
  • Make the Intagible Tangible
    After you enable CloudFlare, you’ll find that you are hard pressed to tell if it is making a significant improvement, particularly if you are a small site with limited traffic and analytics as a baseline for comparison. Much of what CloudFlare offers happens behind the scenes and on the security side, you’re counting negatives, i.e., I didn’t get attacked again this week. Making what CloudFlare does tangible to customers is an important marketing challenge. The analytics package is essential to this, but I also think more investment in the CloudFlare community, empowering CloudFlare customers to share their success stories and detailed technical knowledge of CloudFlare optimization and troubleshooting would go a long way here.
  • No FailFlare
    Let’s face it, when Twitter goes down (and it still does occasionally), no one really gets hurt all that much. Maybe a few advertisers and Twitter ecosystem apps. Not like it brings down your website, your business and your cash flow with it. More than anything, CloudFlare has to work. If the startup achieves anything near its ambitions, I give it one, two, maybe three real outages and then it’s all over. CloudFlare is built on the premise of high value at a low cost, but the price you pay is not the true cost, especially if you are paying nothing. It’s the risk. Downtime risk is the hidden adoption cost of CloudFlare and just like the more visible adoption costs, Cloudflare needs to reduce it to zero.

Best of luck to CloudFlare, Matthew and the rest of the team!
JY

SaaS Sales Model and Organization Strategy – the eBook!

One of the most difficult SaaS challenges is choosing and evolving the right SaaS sales model for your business. While the most common SaaS sales model is characterized by a transactional inside sales organization, frequently split into new business focused sales reps and retention focused account managers, this is by no means the only SaaS sales model, and may NOT be the best SaaS sales model for your business. SaaS businesses come in many flavors from consumer-ish freemium services like Box.net and Cloudflare to high-end enterprise solutions like Workday and BazzarVoice. Choosing the right SaaS sales model is often a bet-the-company decision, as second chances are rare in the fast moving world of the Internet. Plus, as your SaaS product offering and customer base grows, you are likely to find yourself supporting several distinct and varied SaaS sales models. How to choose?


saas sales model

Click the image or link to download the complete SaaS Sales Model eBook

A compilation of some of the most popular articles at Chaotic Flow, this new eBook provides a a simple, powerful strategic framework for choosing the right SaaS sales model for your business and gaining wisdom beyond the conventional for matching the right the SaaS sales organization options to your specific operational challenges. Share and enjoy!

B2B Startup Marketing | Blog Your Way to Leads

b2b startup marketing blogB2B startup marketing is tough. It used to be that you could polish off a high level message and a slide deck and let the salesperson handle it from there. Today, online marketing is the primary driver of revenue at the typical B2B startup. The new breed of B2B buyer expects your online content to be engaging, valuable and deep, and is unlikely to engage your salesperson if you don’t deliver. However, B2B content can be excruciatingly difficult to produce. It’s technical, complex, dry and requires deep subject matter expertise to be truly valuable. Plus, it usually must be done on a shoestring budget, yesterday.

The B2B Startup Marketing Blog Imperative

Every B2B startup marketing professional knows that they need a blog, but not everyone recognizes it’s central importance in getting the B2B startup marketing effort off the ground. After all, its just a corporate blog, and who reads corporate blogs right? Wrong! Perhaps it’s the terminology that is getting in the way. Your corporate blog should a) not be corporate and b) not be a blog, as in a Web log of what’s going on at your company. What it should be is a publishing platform for creating engaging, valuable and deep content for the new breed of B2B buyer by following the Top Ten Be’s of the Best B2B Blogs. But, that’s just the beginning. A successful blog should provide enormous leverage to your B2B startup marketing effort and enable you to generate leads faster, cheaper and more effectively.

The Shortest Path to Deep Content

Creativity is a process, not a plan. Turning technical, complex, dry B2B marketing content into something interesting, engaging and compelling doesn’t just happen because you set a date to complete a new video or whitepaper. You need time to think it over. Free your creative juices. Then, hone your ideas into something really cool. In the meantime, you can blog.

b2b startup marketing blog

Your B2B startup marketing blog should be a crucible of creativity. You can try out your ideas piecemeal, one post at a time, until they converge into that fantastic whitepaper, webinar or video series. Regular readers of Chaotic Flow (thank you!) will recognize that this is an integral aspect of how I develop this blog. The Top Ten Do’s and Don’ts of SaaS Success didn’t just spring into my mind all at once: one, two three…ten. They are a result of ideas I played out one post at a time. This is the case for all the whitepapers you see over on the right. Most often, I will outline a series of blog posts with the intent that if they turn out good enough, I can quickly and easily reshape them into a whitepaper.

Get Instant Results Through SEO and Social Media

On the Web, the medium is quite literally the message. As you hone your great ideas one post at a time on your B2B startup marketing blog, you immediately open online channels for demand generation. Instead of waiting three months for results as you write and rewrite that magnum opus whitepaper or produce that expensive viral video, you can be generating leads today through SEO and social media with the half-baked ideas on your B2B startup marketing blog. And leads, today not tomorrow, are uniformly the number one priority of every B2B startup marketing plan. You have to master some technical online marketing tricks to do this, but they are not difficult. Just start every blog post with a keyword in mind, and SEO as you write. Then, make sure to spread your posts through RSS, LinkedIn, Twitter, etc., building back links along the way. That’s about all there is to it. Really.

Integrate Blog Content Into the Buying Experience

Don’t let your blog hang off the side of your website. If you follow the two tips above to leverage your B2B startup marketing blog as a publishing platform, then you should have lot’s of great stuff you want your prospects and customers to read. You can re-purpose your blog content into presentations, brochures, videos, and whitepapers, but you can also use it pretty much as is throughout your website, marketing campaigns and newsletters. In fact, the RSS feed from your B2B startup marketing blog can be used to accomplish this automatically as you publish new content.

Capture Your Prospects

If you treat your B2B startup marketing blog as a corporate blog, your prospects will probably ignore it, so you probably won’t be thinking about lead capture. However, if you follow the Top Ten Be’s of the Best B2B Blogs and you buy into the publishing platform recipe above, then your prospects will be flocking to your B2B startup marketing blog in droves. You should be thinking about lead capture. Be sure to encourage your readers to subscribe to your RSS feed, follow you on Twitter, and wherever else you publish your blog content. That will keep them coming back to read and engage, if not yet to buy. If you have a free trial, make sure your readers know it. And, there is no harm in mixing the occasional product announcement or highlight into your otherwise unbiased, useful, engaging blog posts. You’ve worked hard to make your B2B startup marketing blog useful for your prospects; make sure you capture your leads.

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