The Touchless Conversion

There are a few businesses out there that have managed to achieve the nirvana in a key part of their sales cycle: moving customers from trial to purchase without needing a salesforce to assist with that conversion. The financial models of these companies are extraordinary. Examples of this include SurveyMonkey, ZenDesk, and SquareSpace. 

Examples of the financials

Once you have looked at these financials, you will realized that getting to a touchless conversion is like achieving nirvana. Clearly one of the most expensive parts of the entire sales process is the sales force, and by eliminating or dramatically lowering that cost, these companies have been able to achieve extraordinary levels of profitability.

Observation: Customers like to sell themselves

Where does this break down?

What kinds of products/services are suitable for touchless conversion?

Is there an interim step that you can use in your sales cycle to take advantage of touchless conversion?

Use a simpler sub-set of your product/service, then upsell

Theory: Easier to upsell an existing customer

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  • http://twitter.com/karelvanderpoel Karel van der Poel

    I believe this is the business model of the future and call these companies SAAS 2.0.
    There are several more examples: Freshbooks, 37Signals, Mailchimp. A good directory is: http://www.thesmallbusinessweb.com/

    There are a couple of pre-requisites for these types of business models to work:
    1. Your pricing needs to be at creditcard level, needs to start as low as possible and can not be more then Max 499 USD per month.
    2. You need to have a true multi-tenant architecture and be able to automate instant provisioning of the service. If not your infrastructure and operational cost will be to high.
    3. Your product needs to be easy to understand and self-explainable
    4. You need to be able to generate large volume of leads

    This business model was not yet possible when companies like salesforce, netsuite, succesfactor, workday started. They all had to pioneer SAAS with more or less 'traditional sales models, just a new provisioning model.” In the next 10 years SaaS 2.0 business models will also penetrate large enterprises. They will deliver the same functionality, against 70% lower prices, with no long term contract and since customer acquisition is touchless, their people are focussed on customer retention rather then customer acquisition.

    I have to disclose that CEO and founder of a SaaS 2.0 company called Mirror42 http://www.mirror42.com

  • http://twitter.com/karelvanderpoel Karel van der Poel

    I believe this is the business model of the future and call these companies SAAS 2.0.
    There are several more examples: Freshbooks, 37Signals, Mailchimp. A good directory is: http://www.thesmallbusinessweb.com/

    There are a couple of pre-requisites for these types of business models to work:
    1. Your pricing needs to be at creditcard level, needs to start as low as possible and can not be more then Max 499 USD per month.
    2. You need to have a true multi-tenant architecture and be able to automate instant provisioning of the service. If not your infrastructure and operational cost will be to high.
    3. Your product needs to be easy to understand and self-explainable
    4. You need to be able to generate large volume of leads

    This business model was not yet possible when companies like salesforce, netsuite, succesfactor, workday started. They all had to pioneer SAAS with more or less 'traditional sales models, just a new provisioning model.” In the next 10 years SaaS 2.0 business models will also penetrate large enterprises. They will deliver the same functionality, against 70% lower prices, with no long term contract and since customer acquisition is touchless, their people are focussed on customer retention rather then customer acquisition.

    I have to disclose that CEO and founder of a SaaS 2.0 company called Mirror42 http://www.mirror42.com

  • http://twitter.com/chasedave Dave Chase

    David – I was spoiled by your outstanding SaaS spreadsheet model for ramping sales. It appears above where you said “Examples of the financials” that you were going to similarly link to a model for the Touchless Conversion but alas, I don’t see any links (I’m viewing this in Chrome if that matters). Do you have an example or two? Thanks for your outstanding posts.

  • http://www.forentrepreneurs.com David Skok

    Dave, sorry to say, I haven’t yet posted such a model. It is so much easier to build than the model with a salesperson, so recommend giving it a try yourself.

  • http://twitter.com/chasedave Dave Chase

    No worries. What you’ve already posted is great…I just didn’t want to reinvent the wheel if there was already something created since your XLS is very complete that you already shared. Thanks again for a great blog.

  • http://www.photomerchant.net Elmar Platzer

    David, I run a SaaS business that relies on Touchless Conversion rather then a sales team based conversion model. While I’m clear on how to calculate Customer Acquisition Costs, I’m not entirely certain about what makes up Cost to Serve. Other than infrastructure costs, am I correct in assuming that this also includes customer support costs? Anything else? 

  • http://www.photomerchant.net Elmar Platzer

    Further to my comment from a few minutes ago, I was referring to this formula “LTV = ARPU x Average Lifetime of a Customer – the Cost to Serve them (COGS)” from your post “SaaS Metrics – A Guide to Measuring and Improving What Matters”. Typically, COGS would not include application development costs. I presume this is also the case here?

  • http://www.forentrepreneurs.com David Skok

    You are correct that it includes the customer support costs. The other things that it could include would be your hosting costs, and possibly things like royalties to other software companies, etc. I hope this helps.

  • http://www.cogniview.com/ pdf to xls converter

    HI, 

    Its really very informative article guys about The Touchless Conversion. 

    Thanks for it. 

  • Colin Airdrie

    Your website is so cool. I am impressed by the details that you’ve on this website.

    ______________
    Logistics 

  • http://www.facebook.com/travis.hevelone Travis Hevelone

    Old thread…but wondering if anyone has developed a Touchless Conversion spreadsheet yet??

  • http://www.facebook.com/travis.hevelone Travis Hevelone

    Hey Dave, wondering if you ever found or created a touchless conversion spreadsheet? Any help would be greatly appreciated!

  • Antoine

    As a SaaS founder with limited capital, i’m clearly pursuing this “touchless” conversion scheme as this is the only way i’ll reach traction fast enough.
    However, having read you SaaS survey article, it appears that all fastest growing startup rely whether on Field Sales or Inside Sales.

    Antoine
    https://www.data-field.com

  • http://www.forentrepreneurs.com David Skok

    I should warn you that touchless conversion sales models are what everyone wants to get to, but frankly they are only rarely achieved. They require a very simple value proposition that can be immediately understood, and a free trial that is also very fast to show real value to the customer.
    Even with the touchless model working, it is possible to increase conversion rates by adding in a layer of customer success reps. These folks are doing less selling, and more work around making sure that the trial goes successfully. However once the trial has proven to be successful, they do some selling work to help push the deal through to closure.
    For products that require a more complex sale, such as solution selling, or explanation on how to change work processes to benefit from the product, etc. it is unlikely that you will see a touchless sale.
    In your situation, I would make sure you are doing the work to talk to your customers during the sales process, even if you later hope to evolve to a touchless sale. This is because you need to know things such as:
    – what are they hoping to achieve from the use of your product
    – what problems are causing them to abandon the trial without purchasing – what additional product features would they like to see
    – how can you shorten the time to Wow! (i.e. the moment when they clearly see value in the trial) – etc.

  • Antoine

    Thanks. You’ve exactly spotted our actual trouble : difficulty to deliver a clear and unique value proposition to our customers. I believe we need to focus on one clear and unique selling point instead of trying to reach so many verticals at once.

    We talk with as much customers as possible but answers to
    – what they try to achieve

    – what problem they face

    can differ quite substantially from one to another.

    Given our current pricing point and capital structure, we should probably try to focus/position our product on the shorter sales cycle possible ?

    Is that ok to dig into specific via email ?
    Thanks again,
    Antoine

  • http://www.forentrepreneurs.com David Skok

    Sure.