Determining ROI and Benefits of a SaaS Product Based on a Free Trial
SaaS (Software as a Service) companies are everywhere, and they offer all sorts of potential benefits. SaaS provides access to a fully supported and constantly updated piece of software, typically in exchange for a monthly fee. Companies like Hootsuite, Buffer, and SproutSocial offer nifty services to easily manage your social media channels. Services like MOZ offer incredible tools for taking the tediousness out of SEO. The phones in our pockets are loaded with SaaS apps aimed at improving our lives in various ways. We at Geniuslink provide a service helping digital marketers bridge the Purchasing Gap through intelligent links.
Services like these can become crucial pieces of your business, but how do you know if a SaaS service is really worth it? Every service provides different benefits to each respective person or organization. Luckily, the “Free Trial” has become a SaaS industry staple and provides you with an opportunity to validate your benefit from using the service through real world testing, without shelling out any cash.
How do you know if it’s worth sticking with a service after a free trial?
To figure out if the offerings of a service are worth breaking out your wallet, you must consider the Return on Investment (ROI) and the Perceived Benefit you gain as a result of using the service.
For the data savvy and dollar conscious, there is no more reliable indicator of the value of a service than the return on investment. Calculating ROI takes the emotion and mystery out of measuring the value a service provides. Many free trials will provide you with enough time to generate sufficient data to estimate ROI.
Calculating ROI is simply a matter of comparing what you gain from using a service against what the service costs. The formula is simple:
(Gain – Cost) / Cost = ROI
Let’s look at a simple example of measuring ROI following a free trial of our service, Geniuslink.
One type of client that signs up for a trial of the Geniuslink service focuses on increasing the affiliate commissions that they earn through the Amazon Associates Program. In short, our service allows them to monetize their links for the entire global Amazon ecosystem, instead of just one Amazon store. This leads to direct and measurable increase in referral commissions.
So with this example, calculating monetary gain after the free trial is relatively simple:
Gain = increase affiliate commissions earned by using Geniuslink ($131.92)
Cost = the price paid for this period of service outside of a free trial ($10)
(Gain – Cost) / Cost = ROI
($131.92 – $10) / $10 = 12.2X ROI
In this basic example, the ROI is a whopping 12X! This means that for every dollar spent on the Geniuslink service, 12 extra dollars in commissions are gained. This is a significant ROI and easily justifies continuing the service after the free trial. (Click here for more info on calculating your ROI following a free trial of Geniuslink)
But measuring the ROI of a SaaS product is rarely this simple. There are a plethora of other factors that can influence the cost and gain you experience from using a service. The above example only takes into account the price of the service and the direct increase in revenue associated with using the service. There are many other variables to consider that can be more difficult to measure that influence cost and gain like:
Time Savings / Costs: What is your time worth? Does this service save you time, or does it take more of your time? Tools like MailChimp and Yesware can save you and your team enourmous amounts of time with email marketing with their automation features. Alternatively, some SaaS tools may be time consuming to learn or not work efficiently with your current processes. These factors can have a significant positive or negative influence on your ROI.
Money Savings / Costs: Are there competing services with the same basic offering? How does the price of this service stack up? If you’re saving money by switching from a more expensive to less expensive service, you can add these savings to the “gain” side of the equation. Alternatively, if there is a cheaper service that accomplishes the same thing, the difference in price can be added to the “cost” side. For example, a link management service like Bitly charges marketers $1,000 a month for their service. You could get the same functionality with Geniuslink for only $100 a month. At one-tenth the cost, switching services would lead to a dramatic increase in ROI.
Not all benefits of a SaaS product are measurable, especially under the short time frame of a free trial. In a modern data-driven tech world we often think we can measure everything, but some benefits are less tangible.
For example, using an SEO service like MOZ can have an incredible benefit to your bottom line in the long run by helping drive more traffic to your site, but measuring ROI after a trial can be challenging. ROI from using these types of services is likely to increase over time, so the perceived benefit is that you’re investing in a service that will pay off huge dividends in the future.
Global brands like HyperX, Volcom, and The Orchard use the data they get from their intelligent links powered by Geniuslink to enhance their business intelligence. While it can be very tough to assign a monetary value to that intelligence, it becomes fundamental for improving future marketing campaigns.
Sometimes an educated judgement on the potential future benefits of using a service needs to be considered alongside pure, dollar for dollar ROI calculation. Are the tools you’ve had the opportunity to use during the free trial an asset to you can’t live without? Is this an investment in the future of your company that won’t be measureable for months or years into the future? If so, what is the projected break-even point?
To Stay or Go?
Ultimately, there is a lot to consider when deciding whether to stay on board or jump ship after a free trial. Calculating the ROI of a service should always be the first exercise in trying to ascertain the value of a SaaS service to you and your organization. But as we’ve explored, rarely do you have all the information necessary to make a decision purely based on ROI after a free trial. Combining an ROI estimate with a thoughtful analysis of the perceived benefits can help flesh out the important details, and help you make a decision based on reason instead of emotion.
Editor’s Note: Check out Gary Vaynerchuk’s slide deck on “How to Determine the ROI of Anything” for a great resource on what ultimately determines the ROI of a tool. You can find that here: http://geni.us/1NK9.