The concepts of “free” and “sex” sell more products than all other promotional elements, and if you are offering free sex people will line-up at your door.

SaaS companies, among others, like “free” lead generation.  Most SaaS providers give away a limited version of their offering to collect people’s contact info and build long-term connections to the product.  Their grand scheme is always to up-sale freeloading bottom feeders into paid accounts.  Yet most SaaS companies have no plan of action for up-selling.

It’s a SaaS underpants gnome problem.

One of the problems is that online up-selling is a target moving faster than the one on Osama bin Laden’s back (we will get ya, boy).  Rules that made sense when Marc Benioff first started pimping Salesforce.com do not apply today.  There is no template, just a growing list of things to stop doing.

The most prevalent mistake made in up-selling is poor targeting.  When you open your SaaS solution to everybody and their cat, many to most of your freemium customers will not fit any description of “qualified lead.”  Most are individuals or small players with no elaborate needs and who are too cheap to buy some desktop software to do the same job.  Spending time trying to up-sell them is a lost cause, and might irritate them to the point of becoming a vocal brand detractor.  Thus, segmenting your freemium lead list, into the qualified and not, is an essential first step followed quickly by figuring out when an unqualified users changes status to qualified (and that subject will take too long to discuss in any tome shorter than War and Peace).

The next processes is nurturing both qualified and unqualified leads — and it should be blindingly obvious to a blind man that the processes must be different for these very different groups.  The similarity in promoting to each group is demonstration of additional value possible through paid version of your SaaS system.  The key difference is that the unqualified leads need to see practical how-to demonstrations for the free product, and to start getting material value from it before even considering an upgrade.  Instead of hyping the benefits of the paid product, you need to spend your effort assuring they are getting the most from the free version until they are using it as a regular and indispensible part of their day.

Qualified leads likely use your product with rigor, and their usage can be profiled.  For each feature, function and outcome, you have insight into what they can achieve by using more of the same, tangent features, or expanding to a larger pool of their employees.  Lead nurturing qualified clients involves lighting a path from their current state of happiness to an advanced (and paid for) state of euphoria.  But before you can light a path you have to locate the body — know what the qualified lead is doing and not doing.

One interesting and underused element of profiling SaaS users is comparing demographically similar companies who are paying and not.  Let’s say you had ten grocery store chains who used a paid version of a SaaS application and another ten skulking about with the free edition.  Let’s also assume that they are not radically different in size geography or customer base (for example, contrasting the software uses of Texas Tom’s Big Beef Outlet with Veronica Vegan’s Veggie Basket would be a horrendous mistake, especially after Tom catches and BBQ’s poor Veronica).  Examining what features and functions paying customers use most often gives you the information necessary to know how non-paying customers could benefit from upgrading.  Make promotions match the needs of freemium users (as demonstrated by non-freemium users) and you can not only make immediate and valuable sense to the prospect, but you can even supply statistical proof of how upgrading makes a prospect more competitive.

In all cases relevancy is primary.  Sending an endless dribble of emails is an electronic Chinese water torture that produces the same degree of loyalty.  Sending any stream of irrelevant materials is spam.  Neither is welcome and when combined you get the typical SaaS up-sell campaign as practiced in the world today.

Phase 3, profit.

The marketing lesson herein is targeting with ample opportunity.  The price paid by users for free SaaS is information.  Not just contact info, but demographic info — data on which you can later profile your customers.  SaaS is uniquely capable of acquiring this data because of the long-term rewards offered with free software.  Be a little hungry, ask for meaningful data up front, and if necessary make adding to their demographic profile a requirement of continued free use.  Then break out the BI tools and start segmenting, profiling and targeting.

And if anyone from Al Qaeda is using your SaaS software, send their contact info to the Marines.