LOCALOGY ENGAGE 19: Are You Focused on Engagement?
June 13, 2019 | Contributed by: Neal Polachek
Among the many excellent sessions at LOCALOGY ENGAGE: SaaS/SMB held this past week in the Washington D.C. area was former HubSpot CRO Mark Roberge’s talk on why usage and engagement are the most important metrics for SMB SaaS players to worry about, particularly in the early stages of a product.
Mark, now a lecturer at Harvard University and an investor @Stage2.Capital, spoke about the challenges SMB SaaS companies face in scaling their businesses. Mark’s primary argument is that too many SMB SaaS companies focus on scaling sales before they’ve fully figured out product-market fit and go-to-market fit.
Mark’s views are experience based, having run sales at HubSpot.
His chief contention is that retention is the first challenge for any SaaS company to solve.
As the headline of one of his slides notes, it’s “easier to accelerate growth with world class retention than fix retention while maintaining rapid growth.”
Mark recommends that SaaS companies build a set of metrics that define customer successes that are “observable in weeks or months, not quarters or years.”
These metrics should also be automated. Key metrics might include “repeat purchase, referral, setup, usage, ROI.” Mark said that revenue is often used as a KPI. He contends this is usually a mistake.
Far too often, companies will price a SaaS product high and then drive for adoption or usage. Mark contends that SaaS companies should instead price their products lower to accelerate the sales cycle and then drive for higher and higher spend.
I have witnessed this debate on numerous occasions inside of SaaS companies. In one case, a customer essentially set the price and the company then believed that was the market price. While that lead to early revenue successes, it eventually was unsustainable and hindered customer acquisition and market penetration.
Mark also cautioned that SaaS companies will point to success in one vertical and conclude that sales can then scale across verticals. Instead, companies should assure that product and go to market fits are fully understood in multiple verticals before putting the pedal to the metal.
Given his background in leading sales organizations, Mark had a lot to say about how to compensate salespeople to drive the right behavior. The key to this is to “align sales compensation to lifetime value.”
Another key to effective compensation plans is to hold back half of a reps’ commission until “achievement of a leading indicator of customer success.” The point? Don’t pay reps to drive revenue alone. Make sure they bring in customers that have success with the product and are likely to be retained for the long term.
Mark’s book, “The Sales Acceleration Formula,” covers all of these topics and many more important ones for SaaS companies to consider as they go to market.