Towards the end of 2014, Taylor Swift took a decision to ask for her content to be removed from Spotify, citing the imbalance of return for the artist from the revenue streams created around their content. It was a notable move at the time as it appeared to fly in the face of the new conventional wisdom that control of the content no longer lay with the artist in terms of generating a return from it and that they should simply ride the wave of the incremental merchandise and ticketing opportunities it created. However, she has spoken out again in the last couple of days against the fact that Apple’s new music service was due to offer 3 months service for free to the end users as a means of attracting users but in parallel expecting the artist to foot the bill by means of not receiving royalties. Interestingly, in this case, Apple have backed down, reversing the decision around artist royalties, and effectively taking the cost burden on themselves.

So how could this have an implication in a business (and specifically a SAAS) context?

The effect of the stance taken by Taylor Swift against both Spotify and Apple creates an interesting pretext for the commercialisation of SAAS products more generally. The accepted wisdom of SAAS products, be those consumer or business products, in terms of the go to market offering, is such that a free period (which varies from one business, country, product to another) is usually offered as a teaser to get customers onboarded and using the products before they begin paying, in other words….try before you buy. The question around this business model has perhaps thus been, who foots the bill for the free period? Conventional logic would dictate perhaps that in the case of a smaller player that they hold little sway over their stakeholders in terms of the value chain and thus have to foot the cost of new customer trial / free periods and conversely for the bigger players (such as Apple or Spotify) the imposition of the cost of the trial period is on the service providers. However, it would appear that Taylor Swift has inadvertently struck a blow for the providers of the service components, levelling the playing field, and putting the cost implications of the provision of free trials to would be users back on the service owners.

So, now that the rules of engagement are set, what are the realistic implications for providers of SAAS products?

My personal view, as a result of this quite visible backing down by Apple, on the cost implications of free trials is that these costs are fast becoming a marketing cost or a cost of sales. Effectively, cost of service provision, unrecouped by customer revenues during free trial periods, become a cost of to the business of acquiring and securing the customer and as such, depending on what way the business accounts for this cost, this effectively either becomes a cost of sales or a marketing cost. Either way, this means that cost of service provision during trials, effectively should be measured as part of the overall Cost Per Acquisition (CPA) of the customer to be played in against the customer Lifetime Value (LTV) to provide the metrics by which cost effective customer acquisition should be measured.

For those of us familiar with the world of marketing and selling SAAS products, the key to success is not actually in attracting customers to trial and use your product while it is free, the trick is in fact in driving the conversion from trial to paying through the onboarding process. Whilst a responsibility for driving conversion from trial to paying sits with the UX and product design teams there is equal reliance on marketing and product marketing functions in enabling the discovery of value in order to turn a triallist into a paying customer. As a result this gives greater control of the customer journey from discovery to onboarding to the expertise (and budget line) of the marketing functions and thus greater expertise and budgetary bandwidth perhaps needs to be played in as well as making this element of the work remit more clearly defined for the product marketing function.

The key take away for the product marketer?

Beyond assisting in driving the customers from trial to paying, the product marketers ongoing role is then to drive the “surprise and delight” factors in ensuring that customers that are less financially committed to your product than ever before remain sticky…and its for this reason that us product marketing professionals must be more aware than ever of the key metrics of CPA and LTV…and the rule setting of Taylor Swift of course…

Taylor Swift references aside, the key take away is this,  a rounded understanding of customer experience from acquisition to retention has never been as important as it is in the current SAAS environment, and as such, the management of the flow of the customer journey needs multiple touch points and engagements from all those involved in the product marketing function with a vested interest in the customers ongoing success to ensure this is realised.

I’d appreciate any thoughts on this from others in the SAAS space via the comments below