Author: Don MacLennan

The 4 dimensions of product usage

~ Don MacLennan ~ 1 Comment

There are six ways to increase revenue with product usage data:

  • increase revenue by increasing trial conversions
  • increase revenue by spotting up-sell opportunities
  • reduce churn by spotting declining usage
  • increase revenue by finding and mobilizing evangelists
  • increase revenue by improving usability
  • increase revenue by increasing prices

Collecting and understanding each of the four dimensions of product usage enables us to maximize the revenue increases that result from this analysis.

Product usage dimension one: frequency

This is the easy one.  How often does a user engage your application?  Think “logins per week”.

Declining frequency, or no use at all, is a strong signal for churn risk.

And that’s about it.  Don’t be tempted to infer too much from this one metric, such as “active use = satisfied user”.  You’re covering the basics of measuring any use versus no use.

Dimension two: feature usage

Now we’re getting to the juicy stuff.  Imagine all of the features and functions in your application.

  • At a global level, which features are used the most?  Which are not used at all?
  • And for a specific user, which features do they use?
  • And for a group of users inside a business customer of yours, what’s their feature usage pattern as a group?  Is the product widely adopted, or only by one person?

To get started, consider the granularity of what you’re trying to measure.  Don’t go too deep at first by measuring every button action in your user interface.  Otherwise you get a list of dozens or even hundreds of unique actions.  Which is too much data and introduces “noise” into your analyses.  Even powerful statistical analysis will yield inconclusive findings if too many unique actions are thrown into the mix.

Instead, start with a list of 3-6 high-level features.  Where “feature” is a fairly high level concept like “uploaded a photo” or “shared with someone else” or “created a new project”.  You can always refine your approach to get to 10-20 features in your list.  You might even go beyond that once you master how to interpret and act on the data.

Remember: start with a few features to measure and grow only when it suits your needs.

Dimension three: configuration

Many products, especially business-to-business products, are highly configurable.  Even in a consumer app, users can configure many settings like notifications.

The act of configuring an app beyond its out-of-the-box settings is a form of user investment in your app.  And with that investment can come loyalty.

Just like feature usage, the goal is to get an understanding of the patterns of configuration settings that correspond to loyal users.

Looking at patterns on configuration settings also helps you spot new segments of users, and areas of the user experience you might want to optimize.

Dimension four: volumetrics

Volumetrics means the degree to which your app is used.  For example, you’re the vendor of an online project management app.  How many projects, over a period of time, does a user run in your app?  How many projects in total does a given customer run?

Another example: you’re the vendor of an online backup/sync/share app.  How many files does a user upload, and of what size?

Most apps have 1-3 primary data objects worth measuring.  The greater the volumetric usage, the greater the dependency of the user on your app.

Like measurement of features and configuration settings, volumetric measures can also lead to insights about user segmentation and user experience issues.

Summary

We’ve reviewed the four dimensions of product measurement: frequency, features, configurations and volumetrics.  We’ve talked about the revenue insights that can be gained, such as trial conversions, churn prevention and up-sells.

A big day for Bluenose Analytics

~ Don MacLennan ~ 2 Comments

Today we had the pleasure to announce our investors in my startup Bluenose Analytics. You can read about the $10m funding here.

It’s been over a year since we got started, beginning with customer research, then initial $2m in seed funding, then team building, then beta testing (still going) and most recently another $8m raised in a Series A round.  All the while, we were operating in “quiet mode” without disclosing most of what we were up to.

This mode has its advantages, but it’s awfully hard to keep quiet on the great progress you’re making when you’ve attracted two of the very best investors in our space.

Is it time to declare victory?  Not yet; it’s the “end of the beginning”.  But my co-founder and I now have the chance to realize our vision thanks to the resources we’ve been given.

This is an accomplishment that many, many startups don’t reach, so more than anything today is a day to be thankful.

Customer analytics | 8 data sources you can use now

~ Don MacLennan ~ 2 Comments

Customer analytics for SaaS companies is about reducing churn and increasing lifetime value of your existing customers.  While every company looks at acquisition metrics, SaaS vendors must do more because the customer lifecycle begins at the point of web conversion.

A customer that enrolls in a trial or subscription is beginning their relationship with your company. However, your SaaS offering will need to be constantly delivering the value your customer is seeking or you will fail at customer retention.

How do you know if you’re meeting customer expectations?

There is a recent body of research called behavioral economics.  In a nutshell, it states that what a customer does, versus what they say, is a truer measure of their satisfaction and intent. This means that a customer who says they are happy in a survey might not actually be happy.  Even worse is the customer who never tells you they’re unhappy, and they simply churn.

Customer analytics unlocks the power of this research by enabling SaaS vendors to understand their customers’ actions, focusing on product usage combined with everything else you can know.

How to get started?  Make an inventory of all of the data you have about your customers, and ways it can be used.

  • Traffic and volume metrics: Attributing customers to the channel that they came through will enable you to find patterns of valuable or less valuable customers.
  • Product usage: Logins, modules used, processes run, usage frequency.  This tells if your customers are using your product and what parts of it they are engaging with.
  • Sales CRM: (when you have a sales-assisted acquisition model)
  • Support CRM: Issues your customers needed help with. Use it to spot your customer’s frustration with your business.
  • Purchase & product plans: What your customer purchased and how much they paid.  Identifies customer tiers, potential up sells, upcoming renewals and payment status.
  • NPS ® (Net Promoter Score ℠): Surveys taken on a subset of your customers to gauge satisfaction.  Allows your customers to tell you qualitatively vs. quantitatively if they are happy with your service.
  • User comments: In emails, on support forums, or even Tweets. A second data source of customer sentiment that can be tied with NPS and Support CRM.
  • Customer intelligence: Key changes within your customer’s organization that could signal potential changes in the stability of your relationship.

Most SaaS companies review metrics from each of these sources independently.  Customer Analytics happens when we analyze our customers’ data across multiple touch points.   This reveals valuable insights you would have no way identifying if the data remained apart.

Look across all of your customer data, and consider what it means across the lifecycle.  The result? Better products and increased revenue.

Why I started Bluenose

~ Don MacLennan

Why take the risk of starting a software company?

I could answer this question with something trite, like “I want to save the world from crappy products”. But the reality is a bit more nuanced.  I’ve had 3 formative experiences in the last 12 years that convinced me there was a big problem worth solving with a packaged application.

Frictionless Commerce

At Frictionless, we built a SaaS company from pre-revenue to its sale to SAP in 2006. One of the most interesting things we did was to share adoption and usage data with the sponsoring executives of our customers during account reviews.  It wasn’t pretty; we wrote SQL queries to extract usage metrics for each customer. We made charts and graphs in Excel, then pasted them into Powerpoint decks. But the data didn’t lie. And it provoked all sorts of healthy conversations about the expectation gap between executive vision and actual user adoption. This experience made me an early believer in usage data and its healthy effect on customer relationship management.

RSA, the Security Division of EMC

My flagship product was a security appliance that was distributed to four corners of the world across many thousands of units and customers. The product was getting “long in the tooth” (my kind words) and we experienced availability issues at an increasing rate. The problem is that we didn’t have any data about the use of the product in customers’ environments.  This lack of data inhibited our ability to spot root cause drivers across our customer base. And it was made worse by the growing variety of customers by size and use cases. There was no “archetype” customer that we could build and test for.

Another challenge was to depict the health of my product line during each quarter’s internal business review. Was the average selling price the same in Germany via the re-seller channel as it was in Brazil via direct sales? Was our customer renewal rate the same across every geography, customer tier, customer vertical and distribution channel? Of course not.

We struggled to de-construct the global business to spot the outliers that inevitably exist. For both the sake of spotting things to fix and finding the most successful segments in order to replicate the winning formulas.

AVG

AVG is a provider of freemium security and related products to consumers and small businesses. Most of its revenue comes via online distribution. When I arrived, I had a team member inventory all of the customer data sets we had; reducing churn and increasing cross-sell of our newly expanded product suite were strategic imperatives for me. I was certain the data held the clues. What I found was a lot of data, but living in silos. Marketing had lots of clickstream data from the website. Engineering had lots of product usage data from constantly tuning the anti-virus product’s protection algorithms. We also had a huge self-care community online. And an e-commerce system.

I spent 2 years building an internal analytics team, starting with hiring. Then we collated all of this data into some emerging technologies with which we had little experience (“Hadoop”, “Datameer”, etc.). Then we started producing basic reports and metrics out of it. Then we built some early statistical models to discover relationships in the data. 2 years later and we were still scratching the surface in terms of understanding the user behaviors that drove churn and cross-sell, and how to operationalize the findings.  There had to be a better way.

What’s in common across these experiences?

Each experience was the same in several ways:

  • important data about our customers was locked in many silos
  • the effort to overcome that was expensive, time consuming and required real executive commitment
  • as a company, we lacked key insights about who our best customers were
  • we were trying to improve business metrics that everybody cares about: customer retention, Lifetime Value, ARPU, customer success and customer advocacy

Ultimately, it was these common themes that led me to believe this was a widespread issue for companies, and that a packaged solution could be the answer.

Why I support EARN

~ Don MacLennan ~ Leave a comment

In the last year, I’ve become a supporter of an organization called EARN.  EARN is a charitable organization that partners with people of modest means to help them achieve the goal of saving money.

How?

The simple answer is that EARN offers matched savings accounts.  Save $2000 in a defined time period?  EARN will match it with $4000.

The more complete answer is that EARN has learned, through years of trial and error, the techniques that enable behavior modification in the form of savings.  And this recipe enables people to reach goals they never thought possible.

What I love most about EARN is how they focus on empowering the individual.  You need only read the customer stories about how reaching small goals enabled them to reach even bigger goals over time; you’ll be moved by the life-changing outcomes.

A year ago, I heard Ben Mangan tell the story of EARN to a gathering of potential benefactors.  I was inspired.  But then my cheeks flushed in embarrassment.  I didn’t have money to contribute; I was just getting a startup off the ground with my own time & money.

The story Ben told was about their journey of learning how to partner with their savers to enable the behavior changes that are so powerful.  And how Ben was literally re-constructing his entire organization to take it from a local provider in San Francisco to a national platform.  His “BHAG” is to serve 1 million Americans in need.  And he thinks there are 30+ million Americans on the edge of poverty.

The only way EARN can reach 1 million Americans is online.  Which is the area that I’ve been helping ,with my advice and my time.

Check out EARN and consider how you might help them, too.

In memoriam: 3 friends lost in 3 weeks

~ Don MacLennan ~ 1 Comment

It’s not supposed to happen this way.  Clent Richardson dies at age 52 or so.  Bonnie Swymer at 52.  Klaus Kjaer in his early 70’s.  They all passed away in the last 3 weeks.  Like a wave of mortality crashing over my otherwise serene life.

It gives you pause.  And makes you reflect on how precious – and short – life can be.

My advice: follow your passion.  Happiness is about pursuing your dreams and passions.  Say no to shit jobs, shit bosses, shit towns, shit whatever.  Period.  No excuses.

It’s also time to celebrate these people and what they gave to the world.

Clent was the best business partner I ever had, with the exception of my current one.  He and I were engaged in an effort of transforming a company.  Having somebody you can trust completely makes the effort of driving change so much easier.  And tolerable.  He was a loyal and devoted husband and father.  He lived in several places around the world, and was worldly as a result.  In a good way.  He grew grapes that apparently make for awfully good wine.  How do you match that?

Bonnie was somebody I knew less.  But I know her husband, and know the truth in the adage that behind every good man stands a great woman.  When a man worships his wife as Rob did Bonnie, you know there’s something special about her.  I bore witness to both their good times and times they were building for something better.  She was the same supportive person, always.

Which leaves Klaus. They broke the mold for him.  For 25 years in a row, with a couple exceptions, I spent a long weekend with him and a couple dozen buddies playing golf in the mountains of New Hampshire.  Klaus helped define what the trip is all about: brotherhood, jokes, learning to swear in Danish, drinking good wine (Amarone was a particular vice of his), gorging on lobsters and steak.  This trip is a highlight of the year.

Klaus was as close to a playboy as I ever met.  He knew the intimate details of living “la dolce vita”.  From the best towns to stay in Switzerland to the best vineyards in Italy, to ski areas in the Alps that only a local would know about.  Or Klaus.

Klaus was such a strong personality that I can only imagine living with him.  Which explains why three women each took a try at it.  In all seriousness, Donna was a source of strength, love and stability that made Klaus a whole person.

In the swirl of sadness, memories, funny stories and all the feelings of loss, I can only hope that these people inspire me to live my life to the fullest.  Every day.

Godspeed.

The ghost of my father lives in Silicon Valley

~ Don MacLennan ~ 1 Comment

ghost ship[Father’s Day, 2015.  I added a few thoughts at the end.] Father’s Day.  A time to reflect on my Dad and the three years since he passed. You can read about that here.

About a year ago, I relocated from Prague to Silicon Valley.  One warm sunny afternoon, I was in the backyard chipping some golfs balls around with my son, and I had a powerful memory of my Dad.  One that has re-occurred many times since.

Many years ago, he told me how he almost moved our family to Silicon Valley in the early 1970’s.  Following his naval career, he was an executive in the aerospace & defense industry.  That industry was a huge part of Silicon Valley’s growth at the time.

Standing in my back yard, I imagined how happy he would have been here.  He loved golf; here you can play year round.  He loved sunny weather, probably because it was golf weather.  Plenty of that here.  He loved his industry; lots of innovation was happening here.

So what kept him from coming?  Probably what keeps many of us from pursuing our desires.  Other priorities.  The preferences of our spouses and partners. In his case, he had strong family ties to New England and Eastern Canada.  His wife (aka my Mom) was even more rooted in the East.

But the essential question remains: how can you know what makes you happy without change, experimentation, or exploration?

I’ve been fortunate to somehow do what my Dad didn’t (or wouldn’t) do.  My wife has been a willing partner in the adventure that led us from Boston to Prague.  And Prague to San Francisco.  I’d like to think we’ve been rewarded for the risk we took.

Maybe my Dad planted the seed for my eventual move here.  That would be cool.

UPDATE: it’s Father’s Day 2015.  Two years since I wrote this.  I’ve been working on my start-up for the last 2 years, in dogged pursuit of the Silicon Valley opportunity that’s a Siren Song for so many.  Including my Dad, who didn’t end up doing so.  One additional thought: without my wife’s support, none of my journey would be possible.  Even as we celebrate Father’s Day, we’re really celebrating the spouses behind the man.

Two security products you should use now

~ Don MacLennan ~ Leave a comment

Here’s two products you should use to get a lot of extra security without a lot of hassle.

Lastpass

Lastpass is a browser plugin that stores your online passwords.

It eliminates the need to remember usernames and passwords for your online accounts because it auto-fills the forms whenever you login.  Super convenient.

LastPass generates very complex passwords, which helps avoid having your password guessed by hackers’ programs.  You don’t need to remember them, because LastPass does.

LastPass has a great report that inspects all of your stored passwords.  It quickly shows you duplicate passwords you’ve used in two or more accounts.  And it rates each password for its strength.  Don’t like what it found?  Use LastPass to generate new ones.

LastPass runs on Windows and Mac PC’s as well as all smartphones.

LastPass also has a sister product Xmarks. It’s a bookmark manager and syncs across all of your devices.  This is great when you change devices, such as buying a new smartphone or PC.  One click and all of your bookmarks show up on the new device.

One drawback to LastPass: you must use a master password to access the LastPass repository that contains all the other passwords.  Even though they encrypt everything, you’ll need to choose (and remember) a sufficiently complex password to your LastPass account.  There’s some extra features that can make access to LastPass even more secure, if you’re so inclined.

AnchorFree

AnchorFree establishes a secure, encrypted connection from your laptop to a wifi network.  This is important if you use a public wifi network, and is useful even on a password-protected one.

Like LastPass, AnchorFree gives you a lot of security without a lot of hassle.  Once you install it, it auto-connects over your network connection.  You don’t need to remember to turn it on.

AnchorFree doesn’t noticeably slow down your connection, at least here in the U.S.  They have built out their global network over the years to the point that it should perform well from most countries.

Customers also purchase AnchorFree for two other reasons:

  • it provides some anonymity due to IP address obfuscation and encrypted communications;  people living in countries where their internet use is subject to surveillance find this useful
  • its IP address obfuscation also enables people living in one country to access online entertainment content in another. For example, streaming Netflix from a country other than the U.S.

One drawback: I had trouble using AnchorFree on my iPhone.  The Mac and PC versions work fine for me.

Salesforce.com created a revolution, but not the one you think

~ Don MacLennan ~ Leave a comment

revolutionIT departments in large and medium corporations face extinction thanks to SaaS, IaaS and PaaS vendors.  But it’s got nothing to do with “on-premise versus the Cloud”.

Rather, IT’s role in managing business applications is ending.  Business users can do for themselves in minutes what used to require an IT programmer hours and days.

What’s radical about SaaS business applications like Salesforce.com is their configurability.  The fact that they run in another data center called “the Cloud” is less significant, imho.

Think about it.  Using a browser, business users with admin permissions can do lots of stuff to tailor how the SaaS application behaves:

  • bulk import of data
  • add new fields to the database
  • create templates for workflows and business processes
  • provision new users
  • modify the role-based access model
  • design dashboards
  • …. and more

Contrast this to legacy on-premise applications like SAP.   Any change in application behavior required source code programming in “ABAP”.  Dozens of IT people would care and feed the beast, accumulating a long list of modification requests from the end-user community.  Upgrade cycles would require re-implementation of all of these changes against the new release.  Slow.  Expensive.  Brittle.

Thanks to the power of configuration, business department leaders are gradually and systematically dismantling on-premise ERP suites with a group of SaaS applications.  They are happy to be freed from the grip of a centralized IT organization.  And they’re voting with their feet (or, budgets) by consuming SaaS, IaaS and PaaS at an accelerating rate.

If IT organizations don’t re-invent themselves they’ll face extinction.  More in a future post on what re-invention might look like.

Are we underestimating the Cloud? One person’s story

~ Don MacLennan ~ 2 Comments

cloud imageI spent some time in the last couple months getting my new company’s tooling and systems in place.  Why?

Because when the full engineering team is here soon, we’ll be in heads-down development mode along with our early customers.  No time for other stuff.

The results are pretty staggering:

  • Everything we implemented is software-as-a service; it lives in the cloud
  • Everything is “industrial strength” in terms of feature/functionality; we’re not going to outgrow these tools and apps anytime soon
  • Everything was implemented within minutes or hours.  Enter your credit card number and go.  Tweak the configurations now or later
  • Little or no installed software on laptops
  • No servers required
  • Everything is licensed as a monthly or yearly subscription (often I had a choice of either).  Easy on the cash-flow and easy to budget for growth

All of this was done without an IT employee or consultant.  All of this was done without owning a server.  All this was done without installing (and maintaining!) software.

We get immune to the hype surrounding the Cloud, but this experience reinforced the immense power of this trend.  Think about what this means to small businesses and their ability to “act big” on a budget.  Or, what this means to the IT department of a mid-size or larger corporation.

Massive change is underway and we might be underestimating it.

For the curious, here’s what we deployed so far:

  • Salesforce.com
  • Webex for conference calls and web meetings
  • Accompa for product requirements management
  • Rally for Agile product delivery
  • Jira for defect tracking
  • Github for source code control
  • Basecamp for general-purpose project management
  • Box for file repository
  • QuickbooksOnline for accounting
  • ExpenseCloud for expense report management
  • Google AdWords for keyword advertising
  • Google Analytics
  • Algentis for outsourced HR, benefits and payroll administration

As we get closer to market launch , we’ll take the same appraoch for everything else:

  • Website content management
  • Marekting campaign management
  • Various web analytics tools
  • e-commerce and/or customer billing
  • Various software development tools

Kudos to New Relic for writing about their toolset and inspiring me to write this post.