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It is not often that a company can open its doors and get 100 paying corporate customers nine months later. But thanks to a service that lets companies measure how much their customers use their online service and take action to boost engagement, Totango is growing explosively.
Totango is an application engagement service that plugs into products like Zendesk to monitor how Zendesk's customers are actually using their products down to individual clicks. Totango's service monitors good and irregular behaviors that indicate things the customer likes or problem areas where they are having issues. These are then flagged to the company so it can take action to boost customer satisfaction.
As Guy Nirpaz, Totango CEO, explained to me in a September 27 interview, before co-founding Totango, he was EVP R&D at GigaSpaces Technology, a "big data and cloud infrastructure" company and Chief Architect at Mercury Interactive.
Totango has two Israeli investors -- Pitango Venture Capital and Gemini Israel Funds who contributed $4.6 million to its Series A round. Its staff -- located in Israel and Silicon Valley (from which Nirpaz hopes to raise more capital in the next year or so) -- has grown from 13 to 20 people. And its customer count has zoomed from zero to 100 in the first nine months of 2012.
At the core of this performance is the way Totango's service helps companies. By analyzing how customers engage with its client's services, Totango can distinguish between the 80% who are not ready to buy and the 20% who are evaluating the service.
Pinpointing these evaluators helps Totango's clients to focus their marketing efforts on giving them the information they need to go forward with their decision to purchase. In this way, for example, Totango helped Zendesk to increase by "more than 30%" its "trial conversion rate" -- yielding greater revenues.
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Nirpaz believes that Totango is targeting some very large markets. For example, he sees the Software as a Service (SaaS) market as its initial addressable market -- SaaS is $40 billion, growing at 15% a year. And SaaS is taking share from the declining $1.3 trillion enterprise software market.
But Totango is growing much faster than the SaaS industry -- adding 100 customers since the beginning of 2012. After all the number of users it services has increased to 10 million already and is expected to hit 18 million by the end of 2012. Totango charges customers an amount that varies depending on the number of accounts -- starting at $1,000/month and rising to $10,000/month.
Totango competes most often with companies who decide to try to build their customer engagement applications themselves. But when companies realize the simplicity of installation and use and the lower cost of using Totango's software, they are often persuaded to abandon their in-house efforts.
Totango would like to serve as many customers as possible over the next five years. To do that, it is working on the development of more "plays for its playbook." By this, Nirpaz refers to what may be the most interesting part of its service -- its ability to analyze a client’s customer engagement level and trigger specific tactics, in real-time, that the client should follow in order to boost engagement levels to increase satisfaction and generate more revenue.
Three common “plays” for Totango clients include: "contextual messaging – sending (the right message to the right customer at the right time), guidance – online and offline training, and encouragement through gamification."
Nirpaz wants Totango to grow -- but not at the expense of the value it creates for its existing customers. If it can continue to deliver competitively superior value to companies, its prospects for further growth look bright indeed.