Welcome to episode five of #TrackThis, my recurring webinar series with Matt Rissell, CEO of TSheets!
This episode’s topic is something we at Palo Alto Software are constantly discussing, and that’s why I wanted to share it with you. If your company provides Software as a Service (or SaaS), then you’re probably familiar with how to track customer behavior, and what behavior to track. Unfortunately, a lot of gurus and bloggers like to talk about the “how,” but then never discuss what success looks like. What’s the golden standard—or at least a rule of thumb—you should be looking for?
That’s why Matt and I wanted to discuss this. Let’s move away from discussing the how of tracking. Now that you’re tracking your customer behavior, what do the numbers mean? How do you know if your company is doing well?
I’ve included the full audio and slide deck above, and the full transcript below:
What’s the Golden Standard for Tracking Sales Conversions?
Sabrina: Hi everybody. I want to welcome you to the fifth episode of TrackThis, the small business tracking tips from CEOS. As always I love to do #TrackThis with Matt Rissell, the CEO of TSheets. We love TSheets. Really when they say we love employees it’s because their software is the best timesheet software out there. So if you need something like that check it out. But Matt just runs a killer SaaS company. He’s done some really cool things with small business SaaS and he knows what he’s doing. Like I said, I just love to get him there and talk with him. Here is our tracking tip.
Matt: Well thank you for the introduction. We love doing the episode with you too as well Sabrina. We love partnering with Palo Alto Software. It turns out and the topic for today is tracking the sales funnel conversions in SaaS or “software as a service.” We’re going to use those synonymously in the next just couple of minutes as we go over this.
It turns out that this topic is unbelievably popular. As a matter of fact just recently as of yesterday I tweeted the fact that I’m typically highly critical of articles on software as a service mainly because of this one reason. A lot of people try to talk about software as a service, but very few of them are actually talking from a perspective and from having a successful experience. Versus some of the articles that are posted, again, very few of them, where they’re past CEOs or past executives from a software as a service that it’s actually is a true software as a service and it’s to market it from a business-to-business sales model, which is exactly what Palo Alto Software and LivePlan are and TSheets.
So this topic of sales funnel conversions and the idea of the concept of tracking this is actually one of the most important things that we ever implemented into TSheets. It was about three and a half years ago when I came up with this basic model and I said, “Guys, look, I found a new way for us to measure success in our sales funnel,” because we were switching from trying to sell TSheets in a direct sales salesperson format to all automated online.
We broke it down. This is actually a mock up of what I very first drew up on a whiteboard. Essentially I have all of these people with lines drawn into our website and I called the little people icons eyeballs. Then our website where essentially it’s our front page in the website. Then I drew our application in a cloud. There was a big cloud on our app. That’s what T is for. Then I have a little back door for people that are leaving TSheets. Hopefully that stays a little back door. Then I sliced up the middle in between our website and the TSheet’s application and I drew a line down in the middle between those two and I said, “The first 10 minutes of TSheet.”
That was our progression. Ever since then that’s the way we have measured and helped our customers, facilitated them through their experience of TSheets. Then what we’ve done is we’ve tracked the conversion rates, specifically from a visit to our website to a trial start. Then from a trial start to an activation. Then from an activation to churn. It’s difficult to actually define the golden standard for those conversions.
Everybody always asks me what our conversion rates are, and they’re private. But what I can share with you is what we have found out that are the golden standards. It turns out that actually our metrics have been there internally for TSheets. I’ll be interested to hear what Sabrina has to say for theirs, but the golden standard, what we have found for a website visit to a trial start is 2.5 percent as the golden standard again. Again, these are only for software as a service and the business to business sales model.
The second conversion from a visit. I’m sorry, yeah, I’m sorry a visit to a trial start. So they actually push “trial” and start a trial with your company. That conversion rate is 17 percent as the golden standard.
Then the last one is churn. If you are staying below a 15 percent annual churn, then you are above the golden standard. Those are a little bit of the standards that we have found as we’ve talked to other leading SaaS true B2B SaaS organizations out there. It’s something that I could not encourage you more to track yourselves for your company. Sabrina, I’m interested to hear your perspective.
Sabrina: Yeah. No, that’s fantastic. We do very similar things. Being SaaS, being business-to-business, we track traffic to our website, and then click through to the buying page, and then conversion, and then conversion to sale and then churn. Ours is a little bit different as everybody’s will be because we don’t do trials.
The nature of our software is that people really need to get in there and start using it to see how great it is. We do a 60-day money back guarantee, which is unusual in fact, but works great. Our customers seem to love it. We go from traffic directly to conversion, because in order to get to LivePlan you immediately have to give us your credit card and start paying.
As we tested everything that was the best for us. It could be in the future we change things, but to your point Matt, I think the big thing is to understand, diagram it out, and then understand what the golden standards are, and if you’re not there, [inaudible 06:24] and do different things and change it up until you get to that golden standard. If you’re not getting to that golden standard it means you’re leaving money on the table.
We track traffic to conversion, and then we of course track churn. I totally agree with Matt that you really have to work on churn. For those of you who are really out there going, “Okay, what’s churn, and what are all these things?” Churns means the people who go out of that back door that Matt got up there, those are the people who cancel. You don’t want them canceling. You want to provide so much value that they stay with you. That’s what we’re all looking for.
In order to really understand where you’re leaving money on the table, you have to have your own diagram like Matt has put up there. You have to understand how you’re getting people to your website, what do they do next, what are your calls to action, where are drop-offs. Then once they get in your product, how do you retain them and keep them there.
If you can understand all these pieces at your business, then you know where to adjust. I think that’s the biggest thing small business owners want to know, “Where do I adjust things? Where am I going wrong?” Understand that 2.5 percent to trial, understand that 15 percent of annual churn, understand your golden standards for your industry and that will allow you to get out there and make the adjustments you need to make, and not to break things that maybe aren’t broken.
Matt: That’s so true. What you said that’s so true is that while our companies are both growing, both successful, both very vibrant, are actually in approach to this is a little bit different. What is so important about what she said is that they know what’s working for them and what’s not working. So you have to setup the ability to track and measure which ones are working and which ones aren’t working. As soon as somebody comes and tells you what you should do, let me just, how do they know? Make sure that a.) they have success in a particular area, and b.) make sure that it’s something that you test first. Don’t just implement something without testing it.
Sabrina: Oh God, and that’s so true because everybody will give you advice, and I, and we, we are giving you advice too. But I love that Matt’s put in perspective of “this is what happens in SaaS, small business, B2B, this is what happens, these are the golden rules.” So that at least gives you something. When someone is telling you something different, hold them to the data, ask them to show you the data that points to why their solution is better. The beauty of what we all do in SaaS is that we have data.
Matt: That’s exactly right. We can measure everything and take full advantage of it. I’d suggest if you have any questions about any of these things, if you want us to break it down any further, please let us know what specifically you’d like to like to hear from us.
Sabrina: Great. Thanks so much. Matt, like always, it’s a pleasure. Remember everybody listening to tweet your business tracking questions and comments to the hashtag #TrackThis, @LivePlan, @TSheets. We want to know what you’re interested in and we want to talk about it in our next #TrackThis episode. So thank you very much!