Magazine Article | December 1, 2018

Back To First Principles: Be Different To Be Better

Source: Software Executive magazine

By Dan Ehrmann

A SaaS CEO shares how and why his company defied conventional software wisdom to stand out from competitors when it comes to product offering, pricing, customization, and support.

Back in 2004 when we launched ClubExpress, the notion that one could move a club or association completely into the cloud was a novel one. There were SaaS-based association management software (AMS) programs already around, but they focused on much larger associations with an office, a staff, and a large budget. There are more than a half-million membership-based organizations with fewer than 5,000 members in the U.S. alone, and this was the market we decided to pursue.

Most of the organizations in this target market are run by volunteers, meaning we would be selling to a volunteer board of directors that is often not tech-savvy and is also resistant to change. In putting together our marketing plan, pricing strategy, product segmentation strategy, and all the various pieces that go into bringing a product to market, we decided to go back to first principles, a concept Wikipedia defines as “a basic, foundational, self-evident proposition or assumption that cannot be deduced from any other proposition or assumption.” We wanted to make decisions based on what made sense for our target market, rather than just blindly following what our competitors were doing.

Many of our decisions were based on the philosophy of “no artificial barriers.” If we put barriers in people’s minds, we give them an excuse not to sign up for our platform. If we remove these barriers, the decision is more focused on whether we can solve problems for our customer by helping them to run their organization more efficiently, improve retention rates, grow membership, and strengthen the organization. Less volunteer time spent on “tactical” tasks leaves more time for “strategic” tasks that accomplish these goals.

Here are some of the different decisions we made, and why:

WE DO NOT REQUIRE A LONG-TERM CONTRACT.

Competitors lock up an association for 12 or 24 months. In contrast, our customers sign a subscription agreement that is month-to-month. Prospective customers get very nervous when they are asked to radically change how their organization operates and to be committed for such a long period of time. Our strong feeling was that if we’re not meeting their needs, they should have the right to cancel at any time and not owe anything. This removed a huge barrier in people’s minds.

WE DO NOT IMPOSE LIMITS ON STORAGE OR BANDWIDTH.

Clubs and associations can upload as many documents, photos, videos, or website pages as they want, and they can send as many blast emails as they need. Disk space and bandwidth in the cloud are effectively free, so why put artificial limits on these things? Besides, users really have no idea how much space or bandwidth they are using, so why force them to worry about this?

WE HAVE ONE PRODUCT THAT INCLUDES EVERYTHING.

Personally, I always get confused at the different product levels that some companies offer. Somehow, my needs never quite match the product offerings and there’s usually no flexibility to pick and choose. When everything is included, it’s much simpler for customers who may not initially use all of the features but who should be able to whenever they are ready. And when they are ready, they can adopt features without having to worry about any extra cost incurred by bumping up a level. It also simplified our programming.

"If the product is modular and well-designed, we should be able to add features for that organization, especially if that’s all they need to make the decision to go with us."

WE CUSTOMIZE OUR PRODUCT FOR DIFFERENT ORGANIZATIONS.

Each club or association is slightly different and has specific needs. If the product is modular and well-designed, we should be able to add features for that organization, especially if that’s all they need to make the decision to go with us. Then we also discovered that other organizations would be interested in some of these special features. It wouldn’t be fair if one club paid us to build a module, then everyone else got it for free, so we came up with an interesting variation. We charge the initial club a full programming fee. Then, if anyone else wants to use this module, we charge a one-time additional setup fee and rebate half this fee back to the club that fronted the initial investment. We keep the other half to cover our costs to enable and configure that module for the new club. And if enough other clubs pay the fee, the first club ends up getting that module for free! Using this model, we’ve built and sold more than 16 additional modules.

WE SET PRICING BASED ON ORGANIZATIONS’ MEMBERS.

Competitors base their pricing on total database contacts or on the number of administrators. We decided to base our pricing on the number of active members (those with an expiration date in the future), since this correlates closely with website usage. Customers can see that as we help them grow, our fees increase, which is eminently reasonable. This direct correlation makes sense to them.

WE DECIDED OUR MONTHLY HOSTING FEE WOULD INCLUDE UNLIMITED, TOLL-FREE SUPPORT FOR ALL USERS.

This is probably the biggest deviation from accepted software wisdom: Unlimited support covers all admins and all members. If members have a problem logging in, renewing their membership, registering for an event, making a payment, or changing their password, they can call us and we will help them. And if admins don’t understand how a feature works, they can also call us. This approach helps us in multiple ways:

  • It alleviates a club’s concerns about switching to an online platform. They know that if something isn’t working for them, they can call us.
  • Their club now has a real live person who can help members with their most common questions. This is unprecedented for an organization that’s run by volunteers.
  • It helps us improve the product. If we start getting a bunch of calls about a specific feature, we know that something is not working as well as it should, and we can immediately improve it. Once the volume of calls goes down, we know that the rough spot has been smoothed over.
  • It’s great for word-of-mouth referrals. As a consumer- oriented SaaS firm, word-of-mouth is a critical source of leads. When people are passionate about something (cycling, for example), they may belong to multiple clubs in that space. And someone who belongs to a cycling club might also be on the board of a professional association. When people see a product that’s easy to use and that is well supported, they will talk to their friends and associates about it. We get more than a third of our leads from word-of-mouth!

Surprisingly, we actually have a very small support department, just six people to handle thousands of clubs and hundreds of thousands of user accounts. And each support team member also has other responsibilities.

I encourage you to challenge “accepted wisdom.” Go back to first principles as you design your product, establish pricing, and refine your go-to-market strategy. Look carefully at who are your customers and users and how you can break down their barriers to adoption. When we founded ClubExpress 14 years ago this worked for us, and now we have a thriving product and customer base, including more than 250 customers that have been with us for over 10 years.

DAN EHRMANN is the CEO of ClubExpress, a SaaS platform he cofounded in 2002 to help volunteer-based or small-staff clubs and associations run the whole organization. He has also been an adjunct professor at DePaul University, teaching graduate classes in mobile technology.