Here are two tips from LucidEra veterans Ken Rudin and Darren Cunningham about BI in the mid-market: Forget “freemium” — the new term for free service leading to paid service — and be wary of users’ ability to analyze data.
Rudin co-founded the company and in June saw it fold for lack of renewed funding — in spite of what he described as “extremely happy customers” and a rapidly growing base. At the end, Rudin was chief marketing officer and Cunningham was vice president of marketing.
Unlike in sales to enterprises, the mid-market customers LucidEra pitched typically lacked skill in data analysis and had little time to learn.
At first, LucidEra offered a 90-day free trial of its SaaS analytics — the “free” model, which assumes non-paying customers are completely self-service. That failed. Half the prospects said it was great, said Rudin, but the other half balked.
“We asked them, ‘Well, didn’t it meet your needs?'” he recalled. “They’d say, ‘No, we just don’t see any value there.'” His voice rose as he recalled his surprise and exasperation. These customers had been using nothing more than spreadsheets. “It made no sense to me. How could they get no value?”
When he questioned further, he found they’d been doing “essentially nothing interesting” with the service. They had been running the simplest reports, not asking new questions or reaching for new insight in any way.
“We were offering a powerful tool,” he said, “and they were saying they didn’t know what to do with this thing.” He compared it to installing an MRI machine in someone’s living room and expecting the person to diagnose themselves.
“Free” has worked for some BI-related vendors — he mentioned Salesforce.com and Jaspersoft — but never to untrained users who must be convinced of the value.
LucidEra dropped free trials and instead offered the free Pipeline Healthcheck. It was a cookie-cutter approach, said Rudin, to demonstrate the value. He compared it to a routine medical checkup. Any doctor knows if the patient’s blood pressure is too high, as any analyst can tell if salespeople should let go of dead prospects sooner.
Customers liked it. Many came away with pages of notes from the discussion about what to do. For example, LucidEra found a significant opportunity for a cable company in the Northeast.
At first, Pipeline Healthcheck seemed to work. Then usage fell off. When LucidEra called to ask why, customers explained, “When you came out here and told us all that stuff, that was great. But we can’t remember what you did. We just aren’t as good a this as you are, so we can’t use it.”
Several customers asked if they could simply buy the analysis service. They wanted LucidEra to come in once a quarter and do a health check. “Instead of having an MRI machine,” said Rudin, “they just wanted a doctor.”
Cunningham said, “Don’t overestimate people’s ability to interpret data.”
That’s why we have professional data analysts.
I don’t know if freemium will work or not, for BI. There is an interview by Eric Schmidt (of Google) that they try to craft business models around free. It is an interesting strategy.
That said, I think we need to go back to basics. Whenever there is something new introduced in the market an incentive is needed for people to consider the new offering. Free, is one of the most tried and tested incentives. I wouldn’t measure Freemium’s effectiveness based on a company going under – there are too many factors that may have caused the company going under. Drawing a cause and effect line between Free and a company going under is over-simplifying.
“Free” is supposed to encourage consideration, not necessarily purchase. If a “Free” offering encouraged adequate consideration in the intended segment, then it worked and if it did not, then it did not work. That is why, I agree with Byron Igoe’s comment – it is about evaluation, not purchase.
I wouldn’t characterize LucidEra as a good model to take lessons from. They had a lazy BI salesforce dept that didn’t care to follow up. Read Havard Business Reviews about what makes a performant organization – there’s the differentiator.
Thanks for the article. I can understand the concerns people have about freemium, since it can feel like a bait-and-switch.
We’re positioning our free service more as an evaluation tool, lowering the barriers to trying our enterprise BI software. Let me know what you think: http://visualizefree.com
-Byron
An old friend, Klaus Mikkelsen once said me, “Neil, don’t forget, the average IQ is 100.”
People in this industry are (generally) pretty smart and it’s easy to overlook the fact that our customers might not all be so smart. This is true in the SMB market, and it’s true in the F500. Sometimes the people who gather information are the more expendable assets or they’d be doing something more creative.
-NR
At youcalc (SaaS analytics vendor) we signed up more than 4,000 customers across the world since our launch Dec ’08 – mainly with a freemium offering. (I am sorry I cannot disclose paying subscribers data).
We strongly believe in the freemium model, but it has to match the offering and the sales method. We have no sales team, no customer interaction, and a low price point. We believe this is is right strategy for the main SaaS user base today, but we do see that model change as we start to move up-market in the longer term. You have to be extremely cautious targeting too up-market now – big enterprise is simply not using SaaS for their business data yet.
BI Analyst David Raab just wrote a very clever blog on the differences of our approach vs. other SaaS BI vendors, it’s worth reading: http://customerexperiencematrix.blogspot.com/2009/08/youcalc-on-demand-analytics-without.html
Rasmus Madsen
CEO – http://www.youcalc.com
I actually do think “freemium” can work for BI, but the jump to the premium product has to be gradual. There also must be enough for IT/analysts to do on their own without vendor intervention.
The closest to this today are the commercial open source vendors, but the number of downloads needed is high and a refined inside sales model and lead nurturing maching are critical.
This then leads to the question of the sales model question. Ideally it’s fairly friction free and sales costs are low. Initially LucidEra thought we could hire reps who didn’t really know CRM (the domain) or BI (the differentiation). We quickly realized that solution selling expertise was required to properly position the value of an analytic application to senior management.
Good luck to vendors like Birst and Good Data who are trying to draw people in with a free app for spreadsheet analysis. Just make sure the jump to premium is manageable and be clear on your ultimate target market and sales strategy.
More discussion on this and other SaaS BI topics on the the LinkedIn group here:
http://www.linkedin.com/groups?gid=105766&trk=hb_side_g
I’m shocked, SHOCKED, to hear that just providing BI technology didn’t fix the problem… 🙂
More seriously: great post. This pinpoints one of the major areas where BI, especially for the mid-market, needs to improve.
Fully embedding the analytics into an sales force automation system may help, but I suspect there’s always going to be a shortage of “data doctors” willing and able to make the most of the data that’s available.
BI Questions Blog: http://www.timoelliott.com
I know from my career as a data analyst that analysts are extremely important. However, analysts aren’t the only one with insights.
Business managers and decision makers often have context that helps explain why the numbers are what they are. Data can’t be understood in a vacuum. That’s why most data gets understood and acted on in meetings, and conclusions are presented in PowerPoint.
I’m sorry to hear of LucidEra’s closing. Hopefully, many good things rise from its ashes.