Dial up: Why startups should use the phone

By Steli Efti , written on July 30, 2013

From The News Desk

Recently, my company canvassed some 150 VC-backed startups in Silicon Valley and were surprised to discover that only 10 percent were calling new signups. In contrast, 100 percent of them were sending automated emails to new users (though many of these emails needed improvement). This behavior is also evident when you consider how many startups exist to help you send or track emails (lots) versus how many help you make phone calls (very few).

Most founders we talked to said that using a phone is outdated. It doesn't scale, and their users might not want to be bothered (not that they called to find out). They argued that they can't afford to waste time doing something as manual and time intensive as dialing users, since they're trying to build momentum and scale their businesses.

Inspired by the latest essays from Paul Graham urging startups to "Do Things That Don't Scale" and followed up by 37Signal's Jason Fried's excellent post about why their newest product is launched using lots of strategies that don't seem to scale (one of them being setting up a call to do an online demo with every single interested user before giving them access to the product), I wanted to share some thoughts on why calling your users could make all the difference to your SaaS startup.

For starters, when you pick up the phone and have a conversation with a potential client, you can see an increased activation rate. In addition, you will be able to build customer development quicker, obtain feedback sooner, and gain more pertinent market intelligence right from the source. You will also see a higher closing rate, increased customer success, and loyalty, all while setting your brand apart from your competition.

Don’t worry about bothering users. You're not a telemarketer (I hope). Most of of your users -- at least the ones who are serious when they signed up -- will appreciate the extra attention. You're positioning your company as one that goes the extra mile for your customers.

Increase activation rate

Let's face it, when most people sign up for a free trial they almost immediately forget about it the moment they leave the site. At a minimum, they should be getting automated emails from the company offering the trial, but sadly this isn't always the case.

This is unfortunate for the startup working hard to capture an audience’s attention. But there is a simple solution.

By adding the additional layer of customer care, calling those interested prospects during their trial period, you will find that directly communicating with the prospect is an incredibly effective way to remind them about your service and give you the opportunity to solve the problem they sought you out to solve.

Another great thing about making an actual call is that it's much harder to ignore than an email. This means that you will be able to talk to your trial users, even if it's just a quick conversation. Offering them your full attention makes a great impression.

Make it a habit to call your new sign-ups regularly and then watch your conversion and activation rates go up.

Customer development / Feedback / Market intelligence

Many startup founders will argue that it makes no economic sense to call all your trial users. Now while this might be true in the long term, the idea is, at first, you need to test different models to arrive at your Customer Life Time Value (CLTV) and Customer Acquisition Cost (CAC). You shouldn't try to optimize too early for profits, but rather focus on learning more about your customers and your market in order to create a scalable sales model.

But there is simply no action more valuable than talking to your users and potential customers.

The goal in the early days of making these calls shouldn't be to close every single potential customer. Once again, your goal at this point isn’t to focus strictly on the revenue, you'll get to that goal soon enough. Instead, get your head around obtaining a deeper understanding about what brought them to your virtual doorstep.

Here are five questions you should ask when calling trial users:

  1. How did you hear about us?
  2. What is it that you're looking for?
  3. What's the biggest challenge you face in your business in regards to that?
  4. What questions do you have regarding our product so far?
  5. How are you going to make a decision if our product is a good fit?
Higher close rate

Once you see your activation rate improving and you get a grasp on what it is that your potential customers really want, you can begin to dig a little deeper. For example, you can start to see how your market on a whole works and what the consumer expects from you and your product.

Once you know you can deliver on those expectations, you can start building a sales model that includes calling customers and closing them on the phone. You'll be able to close more customers and make more revenue if you call every single one of your free trial users. Period.

The question is simply, can you do it efficiently enough to make a profit and be able to scale the process to fit the demand?

There is a lot of science that goes into answering that question. The simple math here is that if you cannot generate a CLTV above $3,000, it won't likely be profitable to call your customers and free trial users in the long term. If your CLTV is higher than the $3,000 threshold, you need to start setting up your business in a way that will empower you to focus greater on phone sales.

Customer success / Loyalty

You'd be surprised how many times a simple call to "check in" on your trial users will turn into a full blown support call that allows you to fix some huge issue they’ve had or better yet discover a major bug in your software.

There is simply no substitute for talking directly to potential customers and offering them your personal attention. This type of help translates into more people being able to succeed with your product and with more of them becoming happy repeat customers.

These real world conversations are also the perfect way to give a software product a human touch that allows you to connect on a personal level with your customers. After all, people are much more likely to feel loyal to another human being rather than to some anonymous software.

Remember, the more successful your customers are, the longer they will stick around. The longer you’re in a working relationship with them, the higher their customer lifetime value will be.

Brand / Differentiation / Positioning

If your competitors are not calling their sign ups/users and you are, then you have already begun to set yourself apart from the competition.

Not only does it impress upon your users just how much time and effort you are willing to invest into them, but also it’s a great way to differentiate yourself and your company in a crowded marketplace.

Most companies don't have the time and willingness to pick up the phone and call a prospect to simply say hello. That is why when your company does, it will prove to your target customer that you care. It will prove that you are different and special.

How do you get started?

There are just two things you need to do:

  1. Start collecting your user’s phone numbers (yes it may decrease your sign up completion rate slightly, but it probably is worth it).
  2. Start calling them.
Over time you can figure out ways to become more efficient at it. But the important part is to start phoning your users now -- it will be worth it.