A friend of mine invited me to speak about Product Design and Skimpl in this meetup of UX designers in Cebu last month.
During pizza break, a young woman approached me to ask a question in private. She seemed hesitating at first, as though torn between nagging curiosity and concern that I might find her question improper.
"If Skimpl is for free, why are you doing it?"
Then I told her about our subscription packages, which we plan to implement as soon as we've launched the final version of the product. This one's not gonna be til October this year though. There's still some things to do, but that's where we're heading soon. We'll also be making and API available for developers to use.
There's still a lot of other ways to make money out of SAAS. Some may not be applicable to Skimpl, but they could work for SAAS products. I've listed some of them below along with some examples:
Most all SAAS businesses charge subscription fees for the use of their product. The pricing could be fixed monthly or yearly. Pricing could also be tiered based on certain criteria such as number of users/seats (Jira), amount of space being consumed (Dropbox, Amazon AWS), number of projects entered (Basecamp), and others. Below is an example of tiered pricing. I got it from the pricing page of Basecamp.
Referrals and affiliate sells
If Skimpl were to partner with third-party affiliate providers or other companies on an affiliate program—say, for example, we refer our customers to them, every referral that we make could be a point towards us. If we get to refer 1 million people and every referral is equivalent to $10, then that means we get richer by $10m.
We could also be the other party in an affiliate agreement, where for every customer referrals sent to us, we pay the referrer a certain percentage of the revenue.
Below is a referral form from Yesware.
Add ons or upsells
In addition to subscriptions, SAAS businesses could charge for related services, products, or features that may not be part of their core offering but could be valuable to their existing users. These are called add ons or upsells. You’ll find this in mobile games where game providers sell to their existing players more lives or more power or ammunition or others. Below is an example of an upsell screen from Zynga's Farmville.
One way to grow beyond proportions is to take advantage of this phenomenon they call “network effect”. Wikipedia defines "network effect" as the effect that one user of a good or service has on the value of that product to other people. The more people that come to use your product, the more valuable your product becomes.
One of the ways to achieve network effect is to position your product as some sort of ecosystem where other products can also reside, make money, and bring in new customers.
If you look at Facebook, for example—there are so many applications that are now sitting on top of it, including games. Statista published a report on top-performing games from Facebook based on number of daiy active users. Candy Crush tops the list at 11.61 million users.
Top Selling Facebook Games as of May 2015
These game companies make use of Facebook’s application programming interface (API) so they can have their apps “reside” within the Facebook ecosystem.
Some companies charge for the use of their APIs, others don’t. But regardless if they charge or not, having APIs that can be available to the public is still one of the best ways to expand your product.
There are other tools worth considering but may not be applicable for Skimpl. Example:
White Label Licensing
White label licensing is partnering with another party and allowing that other party to brand and sell your product as their own. In exchange you get to share in their revenue, at the same time you get to charge them license fees. We used to do this when I was working in a gaming company. We operated a software platform. Our customers were licensees of our product. Our customers get to “custom clothe” the product and sell it as their own. We make money out of fixed license fees as well as share in the revenue of our licensees.
Selling white papers, books, and reports
Distimo, Basecamp, Salesforce have all made millions out of selling books and industry reports. In the case of industry reports, what they do is compile customer data from their database and come up with market research based on those. Am not sure if we can do this for Skimpl. Perhaps when we’re big enough have zillions of customers already. But sure, this is a really huge income stream. In fact, for Basecamp, this is what’s making their founders billionaires.
To me, this sucks. Why companies charge for customer service is beyond me. But true, some SAAS companies charge additional fees for extra customer service.
The first SAAS product I remember using with total seriousness was SAP. We were integrating accounting systems with offices from our other locations outside of the country and were asked to adopt to what the central office was using.
They paid one SAP guy to go to the office to “onboard” everyone. He made a presentation about the product and lectured us on how to do accounting things with the product. Which really made everyone in the conference room sleepy despite the abundance of coffee.
In the days that followed, we had additional dry runs and conference calls with our head office to get everyone in synch. But, a few months already after the implementation and everyone still struggled with the tool. I suppose SAP may have made money out of customer service, but that to me, was stupid. We didn’t need to ask for customer service if their product was clearer in the first place.
Anyways, that was 10 years ago. I’ve now gotten over the trauma. And I’ve learned to love SAAS.
Now am also venturing into my own SAAS and I’ve discovered how profitable this venture can be if done right.
Startup book project
Well, it turns out someone noticed one of my business articles online and actually invited me to contribute 2 chapters in their book on Philippine startups. How cool is that. :D I've never written any book ever. I'm also unsure if I can do 2 chapters within 3 weeks given that there's too much happening now, but well -- how can I decline? :)
Am gonna write about writing business plans for startups and designing an online product. My two favorite things! Argh. Well, actually, I don't like writing business plans. It's messy work and it entails a lot of research. But it's not too bad. I think the challenge is how to make the process more fun. :)
I hate writing about my thought processes, but everything's silent these days and there's no one around to talk to. So allow me to be silly here for a while.
Am torn right now...
Should I make a new blog or not?
Am supposed to write blog posts about Skimpl and my product design experience and all the things we've been doing so far. Since the app is already underway, we need to start talking about it online. We don't have a writer yet, so I'll take a first stab at it.
But am not sure if it's a good idea to lump everything here. This is all MBA stuff and am not sure if people will appreciate having to weed through all these information.
On the other hand, I can easily get distracted. I might not be able to handle having to manage 2 blogs at the same time. Hmm...
Strama refers to Strategic Management. In Ateneo GSB, it is the last subject an MBA student needs to take before graduation.
Strama is an application of all learnings at MBA school. A student is required to have passed all other core subjects before he/she is allowed to enroll in it. Strama is unique in that it involves the top 2 things that could possibly kill a student's MBA ambition: the Strama paper and the panel defense.
The Strama paper is a 100-plus-page paper on a subject company describing that company's problems and the student's offered solutions. It's like a science investigative project, only that it's for business.
Before starting your paper, you need to find a company that has at least 50M pesos in yearly revenue and has at least 3 years worth of financial statements. Ateneo is very strict with these requirements. If your chosen company doesn't pass any one of these 2 criteria, they will not let you proceed. The sooner you get this part cleared, the earlier you get to start with your actual Strama work.
May I also add that before deciding on your company, it helps to do a quick Google check first on the industry where it operates. For instance, if you've chosen Jollibee, check out the quick-service restaurant industry first. If you can find data on market size, competitors, etc, then you're good.
The defense happens a few weeks after your paper has been accepted. During the defense, you get to present your paper to 3 panelists for 30 minutes. But then they also get to grill you for 30 minutes. So make sure to prepare thoroughly.
Before I took my Strama, I used to ask MBA grads about their Strama experience. I'd feel uncomfortable whenever they talk about being “grilled” by professors. They make it sound so awful I could really visualize them being barbequed while presenting. This image haunted me the entire time I was preparing my Strama paper.
Perhaps this also helped me, in a way, since it made me more attentive to advises. I took notes of what everyone had to say.
But now that I’ve finished my Strama, I could very well tell you that the defense wasn't really as bad as others portray it to be.
My defense started with me going through my keynote sides with the panelists. I had 20 slides all in all. Since I only had 30 minutes, I just went through the most important part. After that, the panelists started asking questions. Each of them had printed copies of my paper, complete with notes and highlighting. They seemed to have read everything prior to the presentation, so they came in with all sorts of questions already. They also asked about the presentation. And they compared my presentation to my paper. If you practice ahead, then there's no need to worry.
The panelists had positive comments. They had not-so-positive comments too. At first I felt intimidated by their seemingly endless questions and comments. It seemed to me that they'd never run out of things to say about every slide I presented. It was one versus three, so somehow it felt like the inquisition. But then I decided to make it sound like I was just brainstorming and gathering ideas with them. This worked for me. I took note of all their comments and feedback and promised to “update my paper” based on this.
After the defense, they asked me to go out of the room so they could deliberate. Then they called me and told me I passed and that it’s now ok to take photos. We took a groupie and that was it. :)
Update: Here's part 2 of this post in case you want additional tips.
I'm passionate about business, art, and technology. For more about me, click here.
Not sure if you'll find this one helpful, but here's a book I co-wrote with a bunch of industry colleagues. You can click the image if you wanna check it out.
Ateneo Graduate School of Business
University of San Carlos