What can you learn from someone who built and grew a SaaS product during 7 years?
Especially from someone who didn’t become an overnight success, but kept on going all this time while making a living from a profitable product?
We hear all the time about the Snapchat and Instagram of this world. But at the same time, hundreds of thousands of good businesses are being built outside of the TechCrunch bubble. Their founders are working hard on making their business succeed, and yet we never hear about them, even though they are successes by most personal standards.
They’re not billionaires, but they make a living from doing something they believe in. Isn’t that what we all work for, in the end?
This week, I organized the first Paris SaaS Meetup.
The meetup goals are to get French and European SaaS players exchange about best practices, share lessons learned and learn about marketing, growth, metrics, and everything related to creating and growing a SaaS product.
For the first edition, we had Chaib Martinez from Zyyne and Close More Deals share with us the lessons learned from creating and growing 2 SaaS products in 7 years. While not a big success story, it was a refreshing talk about what it actually entails to work on a product for such a long time.
In this blog post, I will recount what was being shared by Chaib and add my own commentary.
Mistakes made while building and selling 2 SaaS products for 7 years
As Chaib shared, the most fundamental mistakes they made at Zyyne derive from two things:
- Not knowing enough about the AARRR framework
- Not being strict enough about measuring what worked and what didn’t work.
What’s the AARRR framework?
AARRR stands for Acquisition – Activation – Retention – Revenue – Referral. It describes a framework for understanding the customer lifecycle in a SaaS product.
- Acquisition describes the “top of the funnel”: how people arrive on your website (Search? Social? Cold calling?) and sign up for your product
- Activation refers to the first meaningful experience of your product (what happens right after they sign up)
- Retention is for engagement or stickiness: when people come back to your product to use it again and again.
- Revenue is for the time when they decide to pay you
- Referral happens when your existing users/customers talk to other people about your product, hence driving further acquisition.
Chaib explained that the AARRR framework was helpful in splitting the big, unsolvable question:
“How do I grow my SaaS product?”
into several smaller questions, each relating to a specific moment of the customer lifecycle:
- How can I acquire more users? (Acquisition)
- How can I get a user to get value from my product as soon as he signs up? (Activation)
- How can I get an activated user to engage with my product on a regular basis? (Retention)
- How can I get a regular user to pay for the service? (Revenue)
- How can I get a customer to spread the word about the service to other people? (Referral)
The big advantage of dividing the problem in 5 distinct areas is that you can prioritize better. Instead of saying “I want more users!” you can identify that you have a problem with Activation, and the question becomes “how can I get a user to get value from my product as soon as he signs up?”.
It’s easier to work on a specific AARRR goal (e.g increase Activation) than trying to “get more customers” (growth goal).
How do you identify that you have a problem with Activation for example? Most often things are not clear-cut and you have problems in every stage (you have “leaky buckets” and your users drop off too much at every stage). However, you still should prioritize your goals. For that, you could try answering the following questions, in order of priority:
- Do you have a product that your users use? Do you have a “reasonable” amount of users who get value from the product and use it regularly? If not, your first problem is retention, and you should work on that.
- Do users who get value from your product pay you? If not, work on Revenue.
- Do your new signups know what to do or do you get a big drop-off in usage right after sign-up? In that case, work on Activation.
- Do you get enough traffic and do you convert the incoming traffic in leads? If not, work on Acquisition.
- If all else is good but you’re not getting referrals, work on Referral.
I came up with that priority list and some people might disagree, for example some people would say Referral are the thing to focus early on. You could get into some pretty lengthy debates about that.
Zyyne lessons learned ordered by AARRR stage
Getting back to Zyyne talk, here are the mistakes they identified:
- not tracking their acquisition sources: not knowing where your users (and most importantly, your paid customers) come from means it’s pretty difficult to double-down on effective marketing. Where do you spend your time and money? If you don’t know the results of your investments, you’re leaving plenty of growth on the table. So Zyyne spent a lot of money on Adwords, trade shows and customer databases without knowing precisely which source was working for them (i.e was bringing customers at a good rate)
- bad segmentation: too much time spent trying to sell to everyone. If you do that, you water down your message, because you cannot address a sales manager the same way you address a software developer. Zyyne wanted to have the same message for everyone (“we provide flipbooks in html5″) which was too technical for their customer segments and in the end it ended up convincing nobody, because it didn’t speak to the needs of their target markets.
- wanting to automate everything: Zyyne wanted a scalable product, so they were diligent in automating everything so that they would have the least contacts possible with their users. By doing that they cut themselves off from their users. Most users would use the product for a couple of times but would give up after a while and Zyyne employees didn’t understand why.
- no price testing: They didn’t dare testing their pricing for too long because they were afraid of the potential consequences (“if a user would see one price and then few months later another price, wouldn’t they complain and make our life difficult?”) In the end, when they did test pricing, they understood a lot of things that were wrong with their pricing model and were able to iterate to a better pricing.
- not asking for a referral at the right time: so in the end they didn’t get enough referrals. For example they tried to ask for a referral right after signing up for a free trial but it’s not the best time because users are not invested in your product yet, so it’s better to delay that until your user becomes a passionate customer.
Chaib also repeated to be testing everything. A problem with the startup world is that there’s lots of advice floating around and so you have a tendency to jump from an idea to the next:
- let’s add live chat!
- let’s change our onboarding
- let’s send more emails
In the end, any of these ideas could be good, but you need to be testing, keeping what works, discarding what doesn’t, and most importantly creating hypotheses about it. With time you will develop a better understanding of things your customers need.
They also found things that worked for them
Mostly it was things they didn’t predict, but ended up being a win for Zyyne (can you see the importance of testing new things and keeping track of the results yet? )
- long tail SEO: they spent a year writing 1 article per week that was targeted to long tail keywords. The big advantage of writing for the long tail traffic is that there’s almost no competition because everyone is busy competing for the big keywords. But at the end of the day, all these long tail traffic sources add up, and you get valuable traffic from it. But you have to be patient and track it well.
- targeted landing pages: they created simple landing pages that were relevant to search traffic. They resisted the temptation to write too much on the page and instead just stick to the user intent (as expressed by his search query). So the result was a focused landing page that was connecting Zyyne to this very focused need, along with a clear call-to-action to test Zyyne.
- A/B testing: at some point they started to A/B testing to see what worked and what didn’t work and could improve their conversion rates.
- reaching out proactively on the pricing page: when people visited the pricing page, after a couple seconds a widget would show up asking the visitor if there was anything being in the way of them trying Zyyne. This ended up being a big win because Zyyne learned a lot about their visitors and their objections, and they managed to convert more visitors into users that way.
- In-app chat: on the website, adding a chat widget resulted in having lots of wannabees asking questions (but they were not really interested in trying the product). On the other hand, adding a chat on the product itself resulted in much more engagement: users were asking questions whereas before they would have just quit because they couldn’t figure out what to do.
- Welcome call: people are happy to be called, it shows the company cares. The company learns a lot about their users, uncovers objections, and gets them to use the product. It’s not scalable but it doesn’t matter, if you have a B2B SaaS, target at least a few welcome calls per day (you can identify the most promising leads and call these ones).
- Annual plans: by being more agressive on annual plans, Zyyne was able to improve customer lifetime value by 100%. The lesson here is: Don’t hesitate to test your pricing, and see what impact it has.
- Retargeting on social networks: what really worked for them was retargeting their customer base on Facebook. They were able to target each of their customers on Facebook and entice them to refer Zyyne to other people. This proved to be much more effective than asking for a referral over email.
To reiterate the biggest lessons that Chaib wanted to share with us, here they are:
- focusing on smaller goals of the growth funnel (should we focus on activation or retention this month?).
- being extremely data-driven and not being afraid of discarding what doesn’t work.
Thanks Chaib for the talk! check out the new SaaS product Chaib and his team are working on: Close More Deals.
And in case you can stand to watch a video in French for more than an hour, here is the video of the event (again BEWARE IT’S IN FRENCH )