ant colony algorithm applied to SaaS conversions

What we can learn from Ants to improve SaaS conversion rates

SaaS onboarding is the beating heart of your business. In our era of freemium, trials and other piloting processes, ramping up prospects who signed up for your product can make or break your forecasts. Increasing free-to-paid conversion rates is therefore a daunting task. You may feel overwhelmed by the incredible amount of factors you can tamper with. The myriad of solutions out there while doing a great job at solving specific problems rarely help identify the main levers of improvement for SaaS conversion rates.
Today, we’ll discuss an approach to identifying these levers and how to execute against them.

Ant colony optimization

At this point you might be wondering what’s this business about Ant Colonies helping improve SaaS conversion rates.
In the real world, ants have developed a rather intriguing heuristic to optimize their path to food patches. They initially wander in random directions away from the colony, laying a pheromone trail on their path. As they find food and return, they increase the amount of pheromone on the path to the food. The other ants from the group are attracted to the strongest trail which will be the closest to a food source. As the pheromones evaporate, the shortest paths become increasingly more attractive until the optimal path is found.This optimization algorithm is called the ant colony algorithm. Its goal is to mimic this behavior with “simulated ants” walking around the graph representing the problem to solve.

At MadKudu, we’ve built such an algorithm and its goal is to mimic this behavior with “simulated ants” (trial users) walking around the graph (performing sequences of events) representing the problem to solve.

Identify milestone events

You’ve probably heard about Facebook’s famous “7 friends in 10 days“. The key drivers of conversion, or “key conversion activities” are user activities that are most associated with conversion. Identifying those key activities allows to focus your engagement efforts on things that truly move the dial. For example, you can write content that most effectively helps users get value from the product, and convert them.

At MadKudu, we use a standard decomposition of onboarding events into 3 groups. Using advanced analytics, we identify and distinguish between those 3 types of activities:

Activation Activities

These are activities that users absolutely need to do to convert, even though doing them does not indicate they will convert. In other words, they are required but not sufficient.
These activities are typically things like “setting up an account” or “finishing the onboarding steps” or “turning on a key integration”.

Engagement Activities

These are the core activities of your product. This is where users get recurring value from your product. Users who perform these activities often will convert. Those who don’t will most likely not.
The key is to find which activities truly matter and how many occurrences are necessary until the point of diminishing returns is reached.

Delight Activities

These are activities that are done by few users, your most advanced users. Users who don’t do those activities are not less likely to convert. But those who do are very likely to convert.
Make sure to identify what these activities are and promote them to advanced users when the time is right.

DIY

In order to map out your onboarding events, you can calculate for each event:
– the conversion rate of users who performed the event: P(X)
– the conversion rate of those who did not: P(¬X)

You can then determine the impact of performing the event (average conversion – P(X)) and the impact of not performing the event (average conversion – P(¬X)).

Finally you can graphically represent your onboarding events as such:

Anything on the left is a requirement to have a chance to convert. Anything at the top is strongly correlated to converting.

Or you can contact us ;-)

From analytics to results

There are many ways to make this actionable, here are just a few:

  • Create a behavioral onboarding drip (case study)
  • Close more delighted users by promoting your premium features
  • Close more delighted users by sending them winback campaigns after their trial (50% of SaaS conversions happen after the end of the trial)
  • Adapt your sales messaging to properly align with the user’s stage in the lifecycle and truly be helpful

If you’d like to dive deeper into your onboarding funnel or discuss implementing some of the tactics above, you can signup for MadKudu or reach out to us.

Photo: www.cusuitemusings.com/
Image: Multiobjective Optimization of an Operational Amplifier by the Ant Colony Optimisation Algorithm (http://article.sapub.org/)
Plot: MadKudu “Happy Path” Analysis Demo Sample