Cutting-Edge Marketing for SaaS Start-Ups

By | Small Business

If you are looking to scale up your SaaS company, here are my top three marketing tips:

Growth of SaaS revenue

Growth of SaaS revenue

  1. Have the right marketing team in place

Most SaaS ventures are so product-driven that even fast growing ones do not take marketing seriously. Referrals, partnerships and direct marketing activities are excellent to begin with, but once the company starts growing you should complement them with other tactics or your business will under deliver. No matter how high is their conversion rate, direct marketing tactics tend to be less scalable than digital ones.

Teamwise SaaS companies should start with a generalist, a channel agnostic professional who is able to translate high-level objectives into key metrics – SMART please -, define a go-to-market strategy, set-up a campaign using a number of different channels and manage the execution. This is typically a hands-on job as all start-ups must be highly resourceful.

Content is often a good strategy even if it takes longer to deliver. Awesome B2B content is more expensive than B2C because, unless it is technical and high quality, it won’t generate good leads, nor reflect well on your brand. Your website is the starting point, as the vast majority of customers will check it before making a purchase. If you are publishing educational material, equal attention must be put on content distribution (eg. via PR, social, syndication, etc…). Here is an excellent article on how to hire a nimble content marketing team.

  1. Address viability of the sales model

To have a profitable sales model your customer acquisition cost should meet two fundamental criteria:

  1. Time to payback CAC < 12 months
  2. Lifetime value > 3x Customer acquisition cost

Credit for these criteria goes to David Skok; if you want to know more, here is his legendary post. In calculating your customer acquisition cost (CAC) make sure that it is always fully loaded, in other words include every expense you incurred to get the customer.

You want to understand very well the drivers of your acquisition cost and how CAC varies for segments of your business. Calculate different versions of it, not only per channel and customer group – these are vitally important – but also per product and geography, if you’re selling in multiple countries.

CAC per customer is especially important for those SaaS ventures that have high customer lifetime value and fewer customers, or for which there is a high price difference between entry and premium products. The entry level may be marginally profitable and 80% of the profits come from 20% or less of premium accounts. You want to understand which channels deliver the best customers and how much they cost you. However never forget that you can later upsell less profitable customers.

In making comparisons, remember that, when you start using a new channel or target a different customer group or geography, CAC will be higher and then go down as you learn by doing. Also beware of those segments that have a good CAC but are too small, or present a steep CAC curve; at the end of the day you always want to maximize the NPV of the company.

When you analyse and compare your CAC and LTV you can draw key conclusions and take critical decisions: identify and target most valuable customer segments, define the most appropriate marketing mix, set your pricing strategy and cost structure. Once a sales model is viable, the company is ready to expand.

  1. Adopt Minimum Viable Marketing concepts

Minimum viable marketing (MVM) is an approach that takes ideas from the lean methodology. It incorporates experimentation and iterative learning cycles into the classic approach based on personas and buyer modality. Rather than creating a big campaign – which takes long to plan – and then leave measurement to the end, the main idea behind MVM is to start small, spending the lowest possible amount and activating only core channels, leaving bells and whistles for later. Basically it aims to validate the initial marketing mix on a small scale through constant measurement and evaluation, making changes as you go.

MVM provides a number of remarkable advantages, namely a quicker go-to-market, greater budget control, better forecasting and lower financial risk. Obviously this approach favours those channels that can offer real time analytics, low minimum spend and short planning lead times. Anything digital works great but you should not discard other channels just because they are not easy to measure.

The right channel mix will depend on your customer lifetime value (LTV), which in turn is a function of the periodic spend and the churn rate. The higher the LTV and the more options you have. In any case there is always value in testing a number of different channels to compare and contrast ROI and CAC per channel. And then focus on the ones that deliver best.

Once you start using different channels you will certainly debate with other stakeholders about the channel attribution process. If you are already measuring your CAC, chances are that all tracking processes are in place. You can keep going. And don’t forget to let me know how it goes!

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This article was syndicated from Business 2 Community: Cutting-Edge Marketing for SaaS Start-Ups

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