The article below was taken from SaaS Mag Issue 2. To order your free copy, click here.
Tiffani Bova, Salesforce’s Growth and Innovation Evangelist, worked her way up the sales leadership ladder as her career progressed from a technology salesperson to SaaS growth expert. Having found exceptional success with her sales strategies, she began running marketing organizations within the companies she sold products for before moving to customer service.
In the late 90s, Bova was working at Sprint when an opportunity arose at Idealab, an early VC investor during the dotcom boom. Idealab had a portfolio company looking for a sales leader. She remembers thinking, “I didn’t know what this ‘world wide web’ will end up being but I’m going to go check it out. For the next three years, she worked in the web hosting space, and ended up working for Interland (now Web.com), which at the time was four times the size of Rackspace, running sales, customer service and indirect channel marketing.
She was an early pioneer of selling cloud services and became one of the beta clients for both Eloqua and Constant Contact. At the time, no one could have predicted that the world of managed hosting, VPNs, domain names and template-based web design would grow into an $85 billion industry by 2019.
These experiences shaped Bova’s expertise of the industry and gave her a crash course on how to hack it. She would go on to Gateway just as the stores were closing to help them turn around their fortunes through indirect selling. Following Gateway, Bova was left with the question: “What am I going to do next? I’ve got this great circle of experience around selling and marketing service, hardware, software, Cloud, telecommunications, distribution, and systems integration. Where can I go and do something with that very broad experience?”
Gartner presented itself to her. She ended up spending 10 years at the firm advising some of the largest technology companies in the world on how to improve their go-to-market models. Bova comments, “I didn’t realize how way out of my realm I was. I really had to immerse myself in becoming a student of what I was doing and learn how to be an analyst. The first few years I felt I really had to shift from thinking like a practitioner, to thinking like an analyst. By year four, I started to hit my stride. I started pushing the envelope on what I was thinking about. Year six, I started moving up in the analyst ranks. Then, I became a Distinguished Analyst and Research Fellow focused on future sales and the impact digital marketing would have on the way companies marketed and sold products. I was fortunate to be on the team that was making those very bold predictions around marketing, spending more than the CIO and customer experience becoming the new product. All those big catchy things.”
It is no surprise that Bova now travels the world teaching SaaS companies how to scale effectively, helping entrepreneurs and enterprise solutions alike create a product, culture and company that meets the vision founded on day one, at scale.
Could you share a little bit about your experience in the SaaS industry? What do you do at Salesforce and what led you to write “Growth IQ”?
I have been in and around technology for almost 27 years, starting out selling it as an individual quota-carrying sales rep, and moved my way up to sales leadership over time. Then, I expanded my capabilities beyond selling software and hardware to selling services. At the time I was selling cloud services there wasn’t the term SaaS, IaaS or PaaS. We were an “Application Infrastructure Provider” or “Application Software Provider (ASP), Shared Hosting, or Managed Hosting Provider.” In many ways we were learning as we went along. It was challenging and exhilarating all at the same time. We didn’t know what we didn’t know and many of our competitors at the time were in the same boat as us trying to figure out how to scale the business. I left the cloud space in 2004 when I joined Gateway, and then landed at Gartner from 2006-2016. It was during my time at Gartner that I found myself right back in the middle of this massive transition from on-premise to cloud services advising some of the early SaaS companies on comprehensive go-to-market programs.
However, I was feeling a bit disconnected from the technology industry itself and I found myself asking, “What do I want to do next?” Salesforce offered me a position I just couldn’t turn down for a number of reasons. Dreamforce was the only event that I ever went to in my tech career that I felt leaving like I wanted to be a better human being. It was much bigger than tech, much bigger than working for a technology company. It was a place where the culture was so unique, I wanted to be a part of it. It wasn’t about selling SaaS or CRM; it is really about selling change. That weighed heavily on me to where I was in my career and my own personal journey of really focusing on giving back to an industry that’s been so great to me. And also, to take the opportunity to write the book.
You’ve interviewed some incredible minds, including Arianna Huffington and Seth Godin on your podcast, “What’s Next!”. Does anything stand out as the most influential piece of advice you’ve ever received or maybe the most influential story you ever heard?
Yes. I would say there are a couple that bubble right to the forefront of my mind. One in particular came when I was at a crossroads of what I wanted to do next. I had an amazing conversation with Naomi Simpson, a Shark on Shark Tank Australia who I met at an event many years ago on the Gold Coast in Australia. She worked at Apple, a couple of other tech companies, and then became an entrepreneur, ultimately receiving Ernst and Young’s Entrepreneur of the Year in Australia. We were having dinner and some wine talking about the crossroads and she asked “Why don’t you just start your own business and be your own boss and do your own thing?”
That conversation led me to do some deep soul searching on where I thought I could add the most value, keep learning and extend my thinking beyond helping only technology companies. Furthermore, it helped me make this determination: I am not an entrepreneur. It’s not my thing. That second revelation was big for me. I had struggled with that question for some time, so admitting to myself that I really didn’t have the entrepreneur bug, was freeing in so many ways.
Instead, doing what I’m doing now at a brand like Salesforce, makes me super happy. That was one of the more inspiring conversations.
The second was from Seth Godin. When I first started thinking about writing the book, he was the first person I called. Seth and I had met many years ago when “Purple Cow” launched. I had the pleasure of sharing the stage with Seth a number of times, and he was one of the first to see I had a book in me—that I had something to say people and companies would want to hear. He was and continues to be, such an inspiration to me.
Those were great. I mean there’s little anecdotal things along the way. Most definitely trust the process. I hear that in my head all the time. You can’t be impatient on something that just naturally takes time. We all want it to happen like yesterday. Could I learn everything I learned working at Gartner for a decade, in three years?
No. I couldn’t shorten the time. I couldn’t write the book in a shorter period. I mean, I could have, I don’t think it would have been… I don’t know if I would have been as happy with it as I am. Trust the process.
Then, the last one is to just know what you’re trying to go for and make sure that those around you who are supporting that effort really understand the goal so that people don’t get distracted by something that pulls you into another direction. I knew the book I wanted to write. I knew the story I wanted to tell. I knew the feel I wanted in the book. All of those things, not because I magically knew I was right, but because I had been on stage and advising people for now 15 years. That gave me some idea of what stuck. It was just a matter of getting people to either feel and understand the vision or not, right?
What would be your number one piece of advice to both a new startup as well as to a small business feeling extreme growing pains in the SaaS space?
This actually pertains to a research piece I wrote many years ago that loosely followed the Gartner Hype Cycle. I wanted to show whether: regardless of which Hype Cycle, is there some commonality between where a technology is on that Hype Cycle, and how they fall and grow in the market? If you were at the bottom and it’s a technology tech trigger like no one has seen before, new and shiny, it tends to be a more technology-driven sale. In that case a founder is sitting across from another technologist, or a potential customer, trying to land a handful of beta users (or maybe even some alpha customers too).
This is the point where you want to learn from the sale, so you begin iterating. The customer is engaged with you; they’ve got skin in the game and want you to succeed because they’re starting to feel the pain. As you’re moving up that Hype Cycle, then it’s like, “Okay, now we can’t be the founders, and the coders, and the tech support, and the sellers, and the marketers.
We need to start hiring people.” As founders move away from being the people who can sell and market and develop whatever the technology may be, then they must decide: when is the right time to hire the first salesperson? (Hint: you hire your first salesperson before you hire your first marketer.)
For founders, the growing pain is the founder growing pain. Do you reach that level of incompetence, (the “Peter principle”) where you don’t know how to sell or market. Maybe you’re thinking, “I know how to talk about my product but to build a value proposition and create packaging and everything… I’m not a marketer like that.” Founders often have things that they’re really good at and some others that they’re not good at. It goes along with something that Naomi Simpson says all the time:
“Look, I know my strength and I know my non-strength.” (She doesn’t call them weaknesses. She calls them her non-strength.) “As an entrepreneur, I just surround myself with people who are really good at my non-strength.” It doesn’t mean you’re not interested; it’s that maybe it’s not where you shine. As a founder you have to think about where you shine and how you can surround yourself with the right people.
If you’re a sales, marketing or customer service leader at a staffed company where you’re not the founder, for instance, and you’re trying to scale the business, you’re always aiming for just-in-time scale. Meaning, don’t scale ahead of the curve and burn through cash really quickly, right?
The third thing I’d say, and I cover this in the book, is that lots of companies are very focused on CAC—I mean it’s the SaaS world. CAC, ARPU and churn rate are among their top interests, yet, they spend a lot of time on the CAC side of things and none on churn. This means that for every customer you lose, you basically have to acquire two.
To combat this, make sure that you’re enabling customer service to help you avoid losing customers. Are you constantly adding value to the clients that you already have to get them to first want to stay with you, and second buy more from you and spend more money with you on what they currently have, like the Netflix model? While Netflix has raised its prices four times in a couple of years, Hulu just decreased their prices.
Which is the right strategy? You could increase prices. Every time Netflix does that, they continue to grow because they’re pouring that back into the investment of the business. It’s one of the case studies in the book.
People are going, “Oh, more original content, yeah, I’m willing to pay 50 cents more or a buck more, sure. If you’re going to charge me a buck more and I’m not getting any new content, it’s not valuable. I’ll go to Hulu and compete on price.”
I think that companies in the SaaS world tend to look at churn as a negative thing and respond in a very defensive way. It’s better to say, “Let’s attack churn from an offensive position. How will we eliminate it before it happens?” versus trying to run win-back campaigns like giving away three months free.
“I’m great at advertising entrepreneurs and businesses, but I’ve never had that knack of “I’m going to stand up a lemonade stand, do what it takes to make money – clean houses, mow lawns. I know I am going to be an entrepreneur.”
I did want to ask about the offensive versus the defensive difference in strategy. How do those two different approaches look? I think a lot of people hear about churn as the most important KPI, yet they might not really know that there are these two different ways to look at it.
Yes. Churn as a KPI: totally agree. We’re talking about churn as looking at it and going, “Oh my god, the churn rate is going up. We need to drive the churn rate down.” That’s for the defense, right? “Something is wrong, we have to fix it.”
Offensive strategy—I’ll use an example that might date me a little bit. There was a point in time when we were selling web hosting, recurring revenue, 90 days free.
It was $50 a month for a shared web hosting account. My SEO was cheap. I was buying the word ‘web hosting’ for $2.50. No one cared. Google wasn’t in the game.
In the call center, we get these spikes of calls at the end of the month because it would be time to renew, because you could do monthly or annual, right? People would often just do monthly, because it was the year 2000, they didn’t know if their website was going to work so they would pay monthly. If their credit card expired that month, the website would go down so they would call us. “My site is down.” “That’s because your credit card expired.” In our numbers, it showed up as churn, right?
Okay. So, we have these really unusual spikes and churns. What’s going on? People’s credit cards are expiring. We were a startup cloud-based company. We had nothing even remotely close to a comprehensive CRM system; we had Excel spreadsheets. I said, run a report on people whose credit cards are 90 days out from expiring. Then, create a call campaign or email campaign to let them know their credit card was going to expire and we wanted to avoid service disruption. Lo and behold, churn declined. That’s pretty basic.
We did this in lots of ways: people who had a shopping cart attached to their website tended to churn less, so we pulled everybody without a shopping cart on their website and ran a call campaign. Guess what happened: churn went down. Then, I would say, “Hey, if we could transition people from month to month to an annual contract, guess what would happen?” Churn will go down. That’s what I mean by being offensive. Not waiting until churn has gone from 2% to 3% to 4% to 5%, ding, ding, ding, we have a problem.
What does that mean? It’s different for everyone. Does it mean fixing that little credit card problem? Is it seeing what other people do who are the least likely to churn and creating a customer profile from that? Then, how do you find more like that? Or, how do you take the customers you have and make them look more like that, right? The more you know about those that don’t churn and the ones that do churn, you can start to get ahead and use churn as an offensive strategy into the base to just avoid it altogether. That’s why I use that distinction, because I think churn is a word that everyone gets very nervous about.
“As a founder, you have to think about where you shine and how you can surround yourself with the right people.”
Finding those customers who don’t churn and making the new customers look like that: is that what you mean when you talk about the importance of the sales perspective when it comes to fixing churn? What kinds of changes can the sales team bring to their prospecting processes to help improve that internal perspective on a customer and obviously, ultimately churn?
Let’s take this example. You and I are both sales reps and I sold a million dollars this year and went to club. You sold $750,000 and you didn’t go to club. Six months in, my million dollars is now half a million and your $750K is $1.2 million. I got rewarded because I sold the million. You sold three-quarters of a million, and you didn’t get rewarded. In reality, I sold stuff that is more likely to churn. Why is that? From a sales perspective, is it the source of the lead? What’s the difference between my leads and your leads? Maybe my leads all came from source A, like some website or some lead engine or some list we bought, and your leads came from another source. That would allow us to flip my leads from source A to source B and see if my churn rate declines. If my churn rate declines, that’s probably not a fishing hole we should continue to fish out of because those particular customers are high risk and more likely to churn.
The only way to know that is if you were analyzing lifetime value churn rate by rep, by lead source, and by customer acquisition cost. Maybe we have to spend $500,000 to acquire a customer and it takes us six months to pay back that CAC, but those customers stay with us three times longer than when we spend $100,000 to acquire customers.
That kind of intelligence would go down to sales optimization, churn conversation, customer-based penetration, among others. Those bits of intelligence are how you become smarter about that particular customer.
Should SaaS owners be wary of causing churn by price hikes?
That’s really the level of the diminished return. We use this to track market expense. We spent $100,000 a month and we get $200,000 in revenue. The question to ask yourself is, “If I double that spending to $200,000 in marketing, do I get $400,000 in new revenue? Or do I get $220,000?” That would tell you that the double spend does not deliver; there’s a diminishing rate of return.
It’s the same thing on price hike. Take Netflix again. It is a subscription business. They’ve raised their prices four times in the last two years. Every time they’ve raised it, they keep acquiring customers, but their cost of acquisition is going up internationally. They’re developing more original content. What they have to look for is whether there will be a ceiling where customers are not willing to pay. It appears so far that they haven’t hit that yet. At some point, I think they will.
You quoted the marketing strategy at Spotify which goes, “The smarter you are higher up in the funnel, the stronger you will be lower down in driving engagement, retention and ultimately lifetime value.” How exactly can SaaS businesses optimize the top of the funnel or drive engagement down the line? What does that look like?
I think this goes back to, what can you learn about the customer? Which lead source is better? Is this customer more likely to spend more money in this particular industry, or region, or vertical? You can learn so that what comes into the top of the funnel doesn’t cause the sales cycle to collapse because you’re smarter about who they are.
You may get rid of the ones that are totally distracting sales anyway so that they can focus on those that are going to be most important. Ultimately, that’s why it’s so important to know more when you’re at the top of the funnel, because you’re able to then just be much smarter in the middle and in the bottom. It’s all really about accelerating that funnel at the end of the day. I’m actually not a fan of the funnel because I think the funnel gives this visual representation of this wonderfully easy waterfall effect of how simple it is to get someone from awareness to this. It’s just not the way we buy anymore. Ultimately, I think it’s important that people think about the funnel in a way that it’s much more customer-driven than sales process-driven.
Do you have any tidbit of wisdom you would like to share with someone who is starting a business or reading this to help them say, “Yeah, I can do that.”
I’d say that starting a business doesn’t fail because you didn’t have a good idea; it fails because you couldn’t get it in the hands of the customers. They couldn’t buy it, or you didn’t develop the product with a customer in mind. You just said, “This is what I want to build and I’m going to make it happen.” I’d say that anybody that’s starting a company today really has to understand the market need. Is there a market need? Is there a customer need? Is anyone filling that need? Who is? What’s working? What’s not working? How can you make sure that it isn’t just an amazing idea? It has to fix a pain point that customers either know they have or don’t know they have yet.