The Weird World Of Economics
Thursday, February 16, 2017
Wednesday, June 08, 2016
Why Most 'Free CRM' Aren't Really Free
I’ve written about this subject a little bit before, when covering our approach to freemium. Today I want to go more in depth about why we decided to make Bitrix24 CRM free and unlimited for all practical purposes, and about our journey on the way to becoming the world’s most popular free CRM.
So why make yet another CRM, given that competition is huge and all attempts to create free open source CRM that will kill Salesforce have failed?
First, the niche of free CRM was totally free four years ago (no pun intended) and to a large extend still is. Most people looking for free CRM are small businesses and solo entrepreneurs. They’d never buy a server simply to install free open source CRM on it. Second, people wanted 24/7 access to their CRM, including mobile devices. That made freeware CRM with the 1990s look that you install on your PC a non-option as well. What people wanted was free online CRM that’s really free. And there was none.
Why is that?
Try googling ‘free CRM’ or ‘best free CRM’ or ‘free CRM reviews’. At least 50% of search engine results will be occupied by professional SEO companies that resell that traffic to CRM vendors. They are very easy to identify — they don’t provide direct links, rather they insert affiliate links or use redirects. Want to know how much they charge per click? Up to four dollars. This means that traffic acquisition costs for anything CRM related are VERY, VERY high.
So, you know that you have to spend a lot of money on traffic acquisition. You also have to pay your developers $100,000+ per year if you are in US or UK. Then there are hosting costs. Support costs. Conferences. Etc. The typical industry solution is this — offer a limited (sometimes severely) free plan (example 1, example 2), call it ‘free CRM’, get people to register and push hard to convert them to paying customers. Now, because your expenses are so high (paying $30–50 for trial is considered standard), you can’t sell your CRM cheap. That’s why pretty much every CRM charges for each and every user, typically $10-$50 per month. If you think that’s expensive, check out Salesforce prices.
That’s how 95% of all CRM vendors operate. This model makes it physically (economically?) impossible to offer people truly free CRM. So, if you want to offer people free online CRM, you have to use DIFFERENT model.
That’s exactly what we did. Because Bitrix is ‘old’ (the company was founded in 1998) we already had close to 100 seasoned developers by 2012 when Bitrix24 was launched. More importantly, 60% of ecommerce CMS market in Eastern Europe was controlled by Bitrix CMS. That meant that we needed (and still need) only two dedicated CRM developers. Not only we knew what businesses wanted from their CRM, we already had parts of it like product catalog or invoices already built for the CMS. And since an average developer in Eastern Europe makes $20,000-$30,000 per year, our development costs were laughable. Yes, you really can build world class CRM for $60,000 a year. If you are Bitrix, that is.
After we launched Bitrix24, we quickly became among top 10 biggest Amazon Web Services clients in Eastern Europe, so getting good deals on hosting was easy, especially when pre-paying for 6 or 12 months in advance. Good bless Amazon. To further control hosting costs, we identified all accounts that received no activity for over 30 days, notified the owners and after three warnings inactive accounts would be deleted. So we got our hosting costs under control pretty quickly as well.
So what you are left with are traffic acquisition cost and support. Let’s start with the latter. One thing that I skipped over was the decision not to offer overly simplified CRM. The reason why we didn’t want to offer free CRM that was simply an online contact manager was because these don’t deliver much value. A lot of people use Excel files or Google spreadsheets to keep track of their clients. When people get tired of these, yes, you can convince them to use your online contact manager. But if they want to use something that lets them run email marketing campaigns, issue invoices, generate sales reports, they would sooner or later dump you for a full featured CRM. So our CRM would have to be free AND full featured. I will explain how this played in our favor later.
Now, full featured CRM is a complex beast. CRM setup, workflow automation, data migration often time require involvement of CRM consultant. CRM consultants don’t come cheap. But in order to give away free CRM you have to keep your tech support costs reasonable. So how do you reconcile this problem?
Our solution was simple. We knew that it’s important to provide full support even to free users. However, we limited support strictly to technical issues. If a client has ‘how to’ question, they have two options. First they can use ouronline training courses and/or free webinars. Second, they can contactBitrix24 partner in their country. This makes everyone happy. Bitrix24 partners don’t have to do any prospecting — we send them a steady stream of leads. They keep all the money they make for CRM consulting or customization, plus their cut of Bitrix24 license sales, which is quite generous — up to 45%. People who are ready to pay for these services are happy too — they don’t have to read those damn manuals. The only unhappy, but very vocal minority, is a small bunch of superentitled users who use free plan but think that their questions should be answered immediately, preferably by phone. Those are the type that keep threatening they’ll stop using your software if you don’t solve their problem immediately, whatever it may be.
So we just overcame another hurdle — self service and no phone support (unless you buy through a partner) = super low support costs. To give you an idea, Bitrix24 has recently celebrated 1,000,000 company signups. That’s several million users. We have around 200 employees now. 13 are in tech support. 4 are dedicated cloud Bitrix24 support people and the rest handle self hosted Bitrix24 and Bitrix CMS. Four out of two hundred. For a typical CRM, 30–50% of their staff are ‘customer success officers’. These are people who answer your questions and keep calling you, trying to convince to upgrade to a commercial plan. The takeaway is this — people are expensive. This issue absolutely has to be address if you want to offer free service.
So we are left the the last expense — customer acquisition costs and as I said before, these are extremely high in our industry. There are three ways we keep CACs really, really low.
So best way to beat the competition is to not compete with them at all. This is what Bitrix24 has been extremely successful with. Let’s backtrack to 2011. A bunch of people are looking a business tools that everyone is talking about. Yammer (don’t laugh, it’s 2011). Dropbox. Basecamp. Skype. Salesforce. So the idea is born. Why don’t we combine Yammer with Dropbox with Basecamp with Skype with Salesforce, make it free and conquer the world? After all, we already beat Magenta, Hybris, Shopify and many others in our home market, so how hard can it be?
Yes, this really was and still is largely the plan. OK, it’s 2016 and Basecamp has fallen out of favor. Slack is the new Yammer/Skype. Ask yourself, if Slack or Asana offered CRM would you not at least try it? You would. And this is exactly what’s happening to Bitrix24. People may start using Bitrix24 as free Slack alternative or free Asana replacement that has Gantt and task dependencies, but they get really hooked once they start using our CRM, not only because it’s free, but because it’s really powerful (more on that later). Seventy percent of all active Bitrix24 accounts use CRM. That’s good for us because many of those people simply stumbled upon our CRM, costing us nothing.
The second factor that had a significant impact on driving our acquisition costs close to zero (at the time of the launch) was a decision to make our free CRM full featured. This is what lets us successfully compete with Zoho, Salesforce, SugarCRM, Dynamics and other big names.
A typical CRM consists of many moving parts. Sales funnel, pipeline management, quotes, invoices, email marketing, lead qualification, product catalog, agent performance reports, currency converter, measurement unit calculator, etc, etc. The idea was simple — identify parts of CRM that nobody is offering for free and make them available for free.
For example, there is no free crm with free quotes and invoices (as far as we know). But people are searching for free crm with free quotes and invoices. So all you have to do is to create as simple landing page and you’ll instantly land on the first page in Google, because you are the only game in town. Let me give you another example. Remember, most CRM vendors severely restrict free plans because they have no other option. In order to make folks pay they have to take something away that’s really useful. One of the most popular restrictions in free CRM plans is to offer no custom fields in the free plan or only a few. This means that people will search for free CRM with custom fields or free customizable CRM and they will easily find Bitrix24 or any other CRM that offers this. And your SEO costs for this are essentially nothing because, again, you have no competition. So far so good.
Next step. Most posts about free CRM are bullshit. More often than not they are pushing someone else’s free trial or limited free plan and this is NOT what people are looking for. So after you create a full featured free CRM, all you have to do is to hire SMM company or freelancer who’ll find those articles and explain why your free CRM is better in the comments. This costs next to nothing too. Pretty soon every article about free CRM that is written independently and not for the purpose of driving free trial signups will list your solution. Tried and true. Another score for the good guy.
No, let’s talk about our restrictions. Because Bitrix24 essentially gives away everything for free, the limitations of the free version were an extremely important decision for us. We didn’t want to make any unnatural limitations because our goal wasn’t to trick people into free trial and then try to convert them into paying clients. People don’t like the feeling of being cheated. But even if we decided to be evil and assholish, remember, we don’t have any sales people (sorry, customer success officers).
So we looked at what costs money and isn’t available for free. Online storage costs money. Nobody gives away free unlimited storage. So 5GB of storage in our free CRM seemed like a reasonable limit. I believe that to this very day no other free online CRM gives you 5GB, though I might be wrong. 1GB is more typical.
The second limit we implemented was that our CRM was free for up to 12 users. The reasoning behind this decision was simple as well — if you have more than 12 sales people, you are probably an established business. You can afford to pay. Nobody ever contacted us that we were assholes because we only offered 12 free CRM users. Our competitors, like Zoho, that only offered only 3 free users in their CRM and charged $1 for each user who wanted to use their mobile CRM in 2012, had to significantly beef up to their free plan. If you are a free Zoho CRM user now, it’s entirely possible that you have to thank us for those changes (it’s now free for up to 10 users and mobile CRM is free) — though don’t quote me on this, I might be mistaking. I won’t turn your offer of free beer down though.
So 12 users and 5GB were and largely are the only restrictions of the free plan. One of the mistakes we made in 2012 was that we offered sales automation tools free as well. Think of contact management as algebra. CRM is calculus. Sales automation is nuclear physics. Average person doesn’t get nuclear physics. So they don’t get sales automation neither. You have to have programming background for that. Most people don’t. This generated so many helpdesk enquiries that couldn’t be easily answered (a simple question of ‘can you automate this process’ would often time require developer’s consultation), were were forced to remove sales automation from the free plan and implement ‘workflow automation question = contact Bitrix24 partner’ policy. Things are peachy ever since. Old users got to keep their business processes free, new users contact partners if they need workflow automation.
So where did all this get us? Currently, we generate several thousand registrations each end every day across all our properties. That’s another important part that I omitted in this post but covered in the past — Bitrix24.eu, Bitrix24.cn, Bitrix24.es and other local Bitrix24 domains exist because some people need to host their data in EU rather than the United States or because they want to use free CRM in their own native language, be it German, Portuguese or Ukrainian. Quickly, how many free CRM that support Ukrainian can you name? I thought so.
So take these thousands of registrations, multiply by $30-$50 per registration as per industry average and now you are looking at having to spend $10-$20-$30-$50 million a year on customer acquisition. Which we don’t, again, because we don’t play by the CRM industry standards.
When I started as Bitrix24 CMO in 2012 my Adwords budget was $5K a month. I did ask you not to laugh earlier, didn’t I? So please don’t. After all I do have an excuse — we were (and are) entirely self financed, so my next year marketing budget is determined by this year profit and because we are giving away free CRM here, my CACs can only be 10–20% of the industry norm.
Another explanation, I am just a bad CMO who doesn’t know how to burn VC money.
Ok, let’s talk money now. No matter how stingy you are, once your free CRM becomes really, really popular, your expenses soon pass the million dollar mark no matter what you do. Pretty soon you need to start thinking how you’ll generate millions in revenue off your free CRM just to keep up with costs.
Lucky for us, we had the model already laid out for us — free to play games with in app purchases. Typical freemium model for SaaS requires that 1–5% of your free users start paying. 5% is hard to achieve though there are great exceptions, like Slack. They don’t provide registrations to paying users ratio, but their public DAU to PDAU is around 35%.
Anyway, 1–2% is more or less the norm for freemium SaaS that aren’t going to die and need to be self sufficient. Good free to play games, on the other hand, manage to make money even when 1 out of 1000 players start paying. That is if you have millions of downloads and keep your costs down (I am not trying to suggest that 0.1% is the norm here, there are many FTP games that manage to have 1–2% conversion rate as well).
So, we had to come up with several ways to monetize our free users without alienating them. That meant that we couldn’t take the typical freemium route (‘make it hurt’) and had to think out of the box. Our first insight, though it might sound really, really stupid, was that people don’t mind paying for something that they can’t get for free. Lemme explain.
There is no such thing as free gas. Or better yet, such thing as free electricity. Unless you are stealing, your only way to get those is to pay. So what you do is you compare prices at different gas stations. Or, as the case with electricity, you start buying appliances that have lower wattage, start running power hungry appliances at night, when the rates are cheaper, or you decide to install solar panels and you get a solar heater. People DO want to lower their electricity bills and they WILL pay for solutions to this problem.
So what do businesses use that they can’t get for free? How about telephones? You can’t get free phone sets. You can’t get free local or toll free number. And you generally can’t get free quality long distance phone calls.OK, it’s decided, Bitrix24 CRM will come with a built-in phone system (hat tip — VoxImplant).
Our phone system itself is free. If you have a physical VoIP phone, you can plug it into your computer and all your phone calls are routed through Bitrix24 CRM. This means phone call recording, Caller ID, and other features cool features. But if you want to rent phone numbers or use Bitrix24 telephony to make phone calls, if you want to connect your current PBX to Bitrix24 CRM, you have to pay, because these services are physically impossible to offer for free. There is no such thing as free toll free number.
There are other minor restrictions. Call recording, for example, is extremely popular feature. It’s used not only for compliance reasons, it is actually extremely convenient for sales managers who can go back and listen to a conversation that happened a while ago. Especially if you are being assigned someone else’s clients who you never talked to before.
Hundreds of millions of phone calls have been made through Bitrix24 and good chunk of those were recorded by clients. Each conversation is an mp3 file, so that’s hundreds of gigabytes or petabytes of data. That costs money. So we limit free accounts to 300 recorded calls. If you want to record all your calls, you need to upgrade — and people do. After all there is no free CRM with free unlimited phone call recording on the market. Our offer is the best on the market, no matter how you slice it.
I am not going to bore you with every ‘in-app’ purchase option that Bitrix24 has. That’s just an example of out of the box thinking. And I am dam proud that Salesforce has announced out of the box integration with Twilio two full years after this option has been made available to Bitrix24 CRM users. We nailed that one down.
Another example of monetization that doesn’t affect our free users but generates a lot of revenues for us is the sale of self hosted Bitrix24 editions. As I’ve mentioned, the easiest way to imagine Bitrix24 if you’ve never used our service before is Saleforce+Slack+Dropbox+Asana in one. All of those services are GREAT but they have a severe limitation built-in — they are only available in cloud.
Not all companies want to use clouds (thanks, Edward Snowden). And not all companies are ALLOWED to use cloud — there are many countries that require that certain types of data has to be hosted inside their countries. Are there Dropbox servers in Poland or Kazakhstan? I don’t think so.
So companies are constantly looking for ‘Salesforce’ or ‘Slack’ or ‘Dropbox’ they can put on their servers but still use mobile phones and other perks that these offer. Those aren’t mom and pop shops or solo entrepreneurs. These are typically fairly sizable companies that are ready to pay for a solution that works. Enter Bitrix24.
Another common scenario is when companies start using Bitrix24 in cloud and then decide they need major customization which isn’t possible in cloud for technical reasons (try customizing Slack or Dropbox, yeah, I thought so). Because our self hosted plans come with source code and CMS, which makes customization a fairly straightforward process, purchasing on premise Bitrix24 is the option that many choose.
OK, so far we’ve established that it’s possible to offer free CRM that’s really free with only minimal limitations, if you keep your costs under control AND that it’s possible to make millions in revenues, which is required because your free CRM is soon going to become very, very popular quicker than you think.
So where does it get you? How popular is Bitrix24 CRM, exactly? More importantly, how does Bitrix24 stack against its peers that took the traditional way, raised tens of millions of dollars in venture financing and have extensive in house sales teams? I can only speculate.
There is no reliable CRM usage statistics available for all CRM vendors. CRM revenue statistics is more readily available, but it’s heavily skewed. I might be exaggerating a bit, but 75% of all CRM sales (in volume) happen in US, UK and Australia. Though US is #1 market for Bitrix24.com, 75% of our users, paid or free, are actually outside these countries. And if you are giving away your CRM, revenue is a strange metrics to measure your success by.
That leaves us with three proxies that can be used to judge service popularity. One is website ranking systems, such as Alexa.com or Similarweb.com . Simply speaking, these services attempt to judge website popularity by the number of visitors they receive. So if your website gets more traffic than competing CRM (your site is ranked better), you are more popular.
Unfortunately, because we use multiple domains, we have 9 different websites. So I know that our Ukrainian website Bitrix24.ua is just about as popular as entire Insightly.com, but I have no idea what a combined Alexa score for all our properties might be. Plus, I have found both Alexa and SimilarWeb to be extremely inaccurate in the past. Strike this one out.
Google Trends is another proxy worth considering. If your brand name searches are more frequent than competitors, then your service is probably more popular. Consider Bitrix24 vs SugarCRM. OK, so we are more popular than SugarCRM in Google and understandably our user base is larger. SugarCRM is a very traditional CRM vendor that took over $100 million in venture capital, was bleeding money for seven years prior to reaching profitability last year, but the Google Trend would suggest that company is in a steep decline. That’s hardly the case. The real reason why people are searching for SugarCRM a lot less is probably because of their decision to no longer free open source edition several years ago. Free beats paid. SugarCRM has pissed off A LOT of people when they made this decision.
Again, like Alexa ranking, Google Trends might be inaccurate. Especially when talking about software that’s deployed on premise, when you can have one or two people deciding for tens of thousands of users which platform they’ll be using for collaboration or client management.
The third proxy I use is Android app statistics from Google Play. Obviously, not every CRM user is going to download Android app, but the more people install your app, the more popular your CRM is (kind of). Now I can compare Bitrix24 with new hip CRM like Pipedrive or old boring Zoho CRMor Salesforce itself. Looks good.
This approach isn’t without its flaws either. First, some CRM vendors have ‘mobile first’ mentality. Base CRM is a great mobile CRM, for instance. It might have a bigger mobile user base than Insightly, but Insightly might have more users overall.
Second, some CRM systems don’t have free plan — only free trial. Understandably these will attract fewer app downloads, but they still might have a decent commercial user base after few years in operation. Third, adding features like instant messaging or task management inside your mobile app, which are available in Bitrix24 and some other CRM apps, but not in most, can really drive those app downloads. Finally, depending on which country or countries you target, your Android vs iOS user statistic may vary widely.
Still, with all these three ‘inaccurate’ methods of estimating others combined, plus vendors own statistics that they sometimes make publicly available, gives me a fairly accurate picture, in my opinion. So in just about four years that Bitrix24 has been existing, we are now world’s #1 or #2 most popular free CRM, depending on whether you consider Zoho free CRM or not. We are still behind Zoho CRM, which is not at all surprising, given their company size (2000+ employees), CRM launch date (2006) and the fact that they share most of the same advantages with us — no VC money, out of Silicone Valley mentality, dirt cheap development costs, full suite of business tools that drive CRM registrations, and a ton of free organic traffic. Plus, Zoho ads are EVERYWHERE you go online. I bet Salesforce is scared of Zoho.
If you consider all CRM systems, free and commercial, we are definitely in the top 10 by the size of the user base. Probably somewhere around the fifth spot. Again, not bad for starting four years ago with $5k/mo marketing budget.
Lots of great CRM solutions with very experienced backers have been launched between 2010 and 2015 have been launched, Nimble CRM and Hubspot CRM immediately comes to mind, but none seem to be growing fast enough to compete with Salesforce, Zoho or Dynamics. This, to me, is an additional proof that the traditional CRM model is broken and will be disrupted by free CRM in the coming years (yes, I am still waiting for the advent of free Google CRM that will change the game ENTIRELY).
Hubspot CRM probably deserves a separate post, it’s a tragic example of product/market mismatch (Hubspot CRM was created to drive Hubspot sales, but free CRM is used by small and micro businesses who have ZERO need for Hubspot marketing automation services — which are neither simple nor cheap). The CRM itself is pretty sexy and is free to unlimited users.
I do apologize for writing such a LOOONG post. There simply isn’t a TLDR way write about the past four years of launching a product that takes on the biggest players in the industry. We are getting ready to disrupt live chat and helpdesk industry this summer as well (Is Bitrix24 going to offer most powerful free live chat on the market? Gosh, I don’t know.)
This, coupled with upcoming vacation may mean that I won’t be posting for a while. I do hope this post gives you at least a couple of new ideas with regards to marketing your SaaS differently. Over to you.
Wednesday, March 16, 2016
Three Awesome Call Center Hacks
1. Сallback form
Callback request forms are nothing new. Phone is a perfect medium to have your questions quickly answered. But many prospects are cautious about leaving their phone number because they are afraid of hard sell. A new generation of callback solutions is smart – they analyze visitor behavior and engagement (generally measured by visiting multiple pages and spending over two minutes) before displaying a callback popup screen. Typically, the screen says something like ‘You are welcome to keep reading information available on our website. But if you are busy, our consultant can call you back within the next 3-5 minutes and answer your questions about our CRM’. This is a win-win situation. You get a phone number and a chance to convert a prospect into a client, while the person on the other side of the screen gets a chance to talk to a real human being and get his questions answered quickly.
2. Intelligent Call Routing
New generation of online CRM and cloud contact center solutions come with ACD and ICR. ACD stands for automatic call distribution. It’s a system that distributes incoming phone calls between your agents. ICR stands for intelligent call routing and it distributes incoming phone calls, well, intelligently. When an existing client calls your phone number, ICR system automatically routes the phone call to the manager who has been assigned to this account. If you have a new caller on the line and the phone call gets dropped for any reasons, when this caller dials your number again, their call will not be put in the phone queue but rather routed to the agent who this person talked to before. Finally, if a new person calls your company and his call is transferred to a certain employee, when the caller contacts you again, the system will route the call to the same employee. ICR systems are designed to save time and avoid unnecessary transfers. Pretty smart, aren’t they?
3. Caller ID
All modern CRM systems come with CTI (computer telephony integration). Caller ID is an essential part of any CTI system. It checks the caller phone number against your CRM records. When a match is discovered, an agent sees the name of the person who’s calling and the history of recent interactions. This gives him or her a chance to greet the caller by name and anticipate the reason for calling (‘Hi Betty, I bet you are calling to find out if we sent you the contract yet’). It’s a small thing, but it does make an impression on your clients.