SaaS marketing is tough. Not selling a physical product already possess its own challenge, but the recurring revenue model—that is not familiar to many people— can further complicate things from conversion to cash flow management issues. Not to mention, SaaS marketing can be very demanding, where not only growth, but rapid growth is the requirement to stay in business.
With that being said, in this guide, we will discuss all the ins and outs of SaaS marketing in 2019.
The Uniqueness of SaaS Marketing
SaaS marketing, in many ways, is unique and in some cases, more difficult than other types of marketing.
This has a lot to do with the nature of SaaS business itself, and so let’s briefly discuss the concept of SaaS.
SaaS, Software as a Service, is essentially businesses selling cloud software over the internet, where the user wouldn’t need to install the software. SaaS businesses typically adopt a subscription-based, recurring revenue business model.
This will mean that the financial aspect of the SaaS business is significantly more complicated. Let’s say your software is developed with a cost of $20,000, and you are selling the software with a subscription fee of $9/month (discounted for $100 if paid annually).
In this case, let’s say that you have 100 active users that paid the annual subscription, for the sake of simplicity. Then, you have recouped $10,000 of the cost— or $10,000— lost. This will obviously be more complex when some customers are subscribing to different plans or when some of them are cancelling mid subscription. The bottom line? Your cash flow can be more complicated.
This will translate into several unique requirements of SaaS marketing, such as:
1. Maintaining customers long-term is the secret to growth
It’s a fairly new insight that maintaining existing customers turns out to be more profitable than acquiring new ones. This is even more prevalent in the SaaS environment where, as discussed, a customer’s monthly subscription fee is usually only a fraction of your software production cost. Meaning, it will take a long subscription commitment—or a long time— before you make a profit from a customer.
So, maximizing customer retention is an integral part of SaaS marketing, and should be emphasized more than acquiring new customers. It is also worth noting that new customer acquisition is significantly more expensive than retaining existing ones.
To summarize, customer retention should be the focus of SaaS marketing.
2. Unique sales process
What is the typical purchase decision process for a SaaS product?
If it’s a B2C product, for example, DropBox, it’s usually like this:
- We learn about DropBox from somewhere (recommended by friends, through an article/video, advertisement, etc.)
- We signed up for the free trial
- We decide whether to buy or move on
With B2B products, it’s slightly more complicated but quite similar
- Someone in the company is looking for a solution for a specific problem and stumbled upon your product
- They signed up for the free trial
- They presented the product to other decision makers on the company if they liked it
- If the stakeholders agree, the purchase happened
So, the lead nurturing process is usually non-existent replaced by the free-trial period. The sales process is very transparent and in most cases, the sales cycle is relatively short.
How will this translate to our marketing approach? First, there’s no workaround to a bad product (and customer service as a part of SaaS). Second, you will need to provide as much information without overwhelming the prospect and convince them as best as you can within the short time-frame.
On the other hand, it will be very hard to convince a prospect that simply didn’t like your SaaS product. In this case, if you can generate sufficient leads, move on to the next.
3. Content is king
While content marketing is definitely very important for any businesses, it is even more true in SaaS marketing that depends on information.
When we take a look at most of the biggest players in the SaaS industry, they all have one thing in common: strong content marketing game. Buffer, a SaaS leader in the social media tools niche, is famous for its blog as one of the best resources for social media marketing. The same can be said with HubSpot or Moz in digital marketing.
Your content marketing should encompass two things: educating your audience on how to use your product better, and establishing your position as the thought leader of your niche.
This will extend to your approach in social media marketing: aim to provide information and establish your position as the expert.
Credibility and trust are very important assets in the SaaS industry, and you can get them not by keeping—but spreading— valuable information.
4. Free stuff is the way
Again, this is something contradictory to the traditional marketing practice: in the SaaS business, giving away your product (and even your full product) for free is the norm.
Free-trial in its several different forms is the core of SaaS marketing. However, this doesn’t mean we should go blindly without any strategy.
Optimizing the conversion rate within the free-trial period should be the focus of any SaaS marketer, and this will also mean one other thing: your product must be good.
Also, since there’s the service aspect of SaaS, the free-trial period is also the chance to showcase your customer service excellence, which we will discuss below.
5. Product and service as a package
Remember that the service is also a half of the SaaS business. In fact, it’s often that the service aspect is even more important than the software product.
This is not saying that your software is not important, as we have discussed above, it’s virtually impossible to sell a flawed SaaS product due to the transparency of the free-trial period. However, service quality will often be the decisive factor in determining a purchase.
This will include excellent and fast-responding customer service, frequent updates so your software can stand the challenges of time, resources and training to help customers with the learning curve, and other services.
Developing a SaaS Marketing Plan
Due to the uniqueness and complication of SaaS marketing, developing a proper marketing plan is necessary for success.
In developing a SaaS marketing plan, there are four key areas to focus on:
1. Your Audience
A proper marketing plan must be customer-centric, that is, all the included aspects must be planned with your audience’s needs, behaviors, interests, and problems in mind.
This will start by defining your audience, which is done via proper market research and developing a buyer persona(s). The more specific you can define your audience, the more specific you can plan a strategy that can capture them.
There are four key considerations in this aspect:
- The specific problem they are trying to solve
Your SaaS product is a solution for a problem. The successful ones are the ones that can alleviate a huge problem (quality) or a problem that is affecting a lot of people (quantity). Figure out the problems that can be fixed by your SaaS, and find the audience that are most likely to have this problem(s).
- Their buyer process
There are various different factors that can affect the purchase decision. B2B purchase decisions will usually involve several stakeholders in the company (we will discuss this below). Your price tag, as well as the pricing model will affect how your SaaS product will be purchased—and thus should affect your marketing approach——. Design your pricing plans according to your audience’s preferences (and your competitors’ approaches)
- The key features of your SaaS product that will interest your audience
Identify how your buyer persona will relate to specific features of the product. For example, if you are selling a cloud storage software, a buyer persona might be interested in a huge storage space. On the other hand, another buyer persona might be interested in a good mobile app.
- Their potential obstacles in choosing your product.
What are the potential objection points for every buyer persona? It can be your high price tag, it can be lack of certain features/technologies compared to your competitors, and so on. If you can define these potential obstacles and find ways to convince your audience over these, you’ll get a higher chance of success.
It’s also important to define different buyer personas for different types of stakeholders if you are a B2B SaaS business. For example, if you are a tech-based SaaS software, these stakeholders might include IT officers/managers, finance managers, and CEOs. Each of them might have different needs and behaviors based on 4 factors above. So, adjust accordingly.
2. Define Your Goals
Effort without the right direction is meaningless. So, defining clear and realistic goals is the key to a successful SaaS marketing.
Your goals should be specific and measurable:
- Figure your overall business goals. For example, to achieve revenue growth by X%. The idea is that your marketing goals should align with these business goals. For example, we can achieve this growth by increasing leads by 30%, which will be the responsibility of the marketing team.
- It is also important to figure out how the sales and marketing team can align to achieve the organizational goals. For example, the marketing team must commit to deliver 200 sales-qualified leads to the sales team. This way, we can also figure out how many salespersons/account executives will be needed.
- Find out how each marketing goal can be measured by assigning KPIs and key metrics. Also, determine the way(s) to measure these metrics (i.e. by using a certain analytics tool, will be discussed below).
- It’s better to set realistic, attainable goals. Goals that are too hard to achieve can hurt your team’s morale. You can break down bigger goals (and company mission) to smaller, more realistic milestones to tackle this issue.
3. Define Tactics To Achieve The Goals
Based on your SaaS marketing goals, and your audience’s behaviors, devise the right tactics to achieve your goals.
With all the available digital marketing tactics, this can be a very broad subject. However, in general there are three core tactics to implement in SaaS marketing:
- Content Marketing
As mentioned above, content marketing is very important for SaaS businesses. In 2015 or so, those with strong content marketing game are virtually guaranteed with success. That is no longer the case nowadays as content marketing is now the norm—-no longer the luxury. Think of content marketing as the prerequisite foundation of your SaaS marketing success.
Regarding SaaS content marketing, there are several factors to focus on:
- There are three different stages in the SaaS buyer’s journey: lead generation, lead nurturing, retaining customers, and delighting them to become your advocate. While you should develop content for each of these stages, you should focus on one or two of these to emphasize your strengths. These examples of 17 SaaS companies with strong content marketing game might inspire you.
- There are always two different ways you can approach with each piece of content: be the absolute best or be unique. You can for example, develop a comprehensive, in-depth, most informative content about digital marketing, or you can also develop a piece covering a totally unique tactic no one’s discussed before.
- Remember that content nowadays come in many different forms from a blog post to infographics to podcasts and videos. Diversify your content (or, use several forms in one piece) according to your audience’s preferences. You can also cover one topic in many different forms to attract as many prospects as you can.
- Use various tools to help you. Keyword research is a fairly standard practice nowadays: aim for keywords with high search volume and yet manageable competition. Tools like BuzzSumo or Uber Suggests can help you find topic ideas, and you can also analyze the performance of competitors’ content to gain valuable insights. SaaS content marketing is already so saturated, so get all the help that you can.
- Developing good content is important, but it won’t bring you any value if you can’t attract prospects. Promoting your content is just as—if not more— important than the content creation itself. SEO is obviously the best way to promote your content, but you will need to get help from various other promotion channels to get traffic and get those valuable backlinks for your SEO.
The key to successful SaaS content marketing is a proper understanding of your buyer persona (discussed above). The better you can engage your audience (and promote your content to reach this audience), the better you can convert them into valuable leads.
- Paid Promotions
Although content marketing is very important (and very effective) for SaaS businesses in generating and nurturing leads, it has one major flaw: content marketing is long-term, and you will need to invest at least 6 to 12 months of consistent content publication—or more— before we can get significant results.
This is where paid marketing channels can fill the gap. If you do have the budget, advertising, paid endorsement of influencers, etc. will virtually guarantee short-term results. The issue, however, is cost, as they can be very expensive if you are not careful: you can get a lot of traffic but not making any money in the end.
So, paid promotional channels and content marketing should work hand-in-hand to maintain cost-efficiency and yet shorten the time required to get results.
While there are certainly many options where you can invest on paid advertising, there are three main channels to focus on:
Retargeting is, display advertising where you only show the ad to those who have visited your website (via content marketing, social media, or other promotional channels). Some retargeting ad publishers (i.e. Google Ads) also allow us to target users that have triggered certain actions like visiting other sites (including your competitors) or searched for specific queries— essentially a more affordable paid search ad.
You can implement retargeting campaigns in Google Ads, LinkedIn Sponsored Updates or Facebook Ads, while there are also platforms like Perfect Audience that can spread your promotions into several different publishers.
- Paid Content Promotion
There are various channels where you can promote your content. The idea here is to support your content marketing so that it would take a shorter time to get results by reaching more people. The most prominent channels here are Google Ads and social media advertising (Facebook Ads, Linkedin Ads if you are a B2B SaaS company, etc.). Paying for guest posting opportunities (so you can also get backlinks from the site) can be included here.
- Paid Influencers
Influencer marketing can be effective for certain niches of SaaS. An influencer can help promote your content and/or your SaaS product.
The key here is obviously to find the right influencer that is relevant to your niche, and various influencer outreach tools can help you in this aspect.
Depending on your niche, working with micro or even nano-influencers might be more effective—and cost-efficient.
Remember that these paid promotional efforts should amplify your content marketing. Aim to get backlinks at every possible opportunity, so you can also generate sustainable SEO results.
3. Resources to Execute The Tactics
Now that you’ve figured out the right tactics to achieve the goals, it’s time to consider the necessary resources to execute these tactics.
This, will start with planning a marketing budget:
How much should you spend on marketing? While there are no set rules to answer this, there are several key points we should consider:
- SaaS companies typically have low production costs. You don’t have to manufacture a new physical product for each user, so the costs of developing your SaaS product is spread over all your users. This, will allow more leniency when it comes to marketing budget.
- As mentioned at the beginning of this article, maintaining customer retention is very important in the SaaS industry. Your marketing budget should reflect this, and you will need to spend more on preventing churn than acquiring new customers.
- Since you are not selling physical products, it’s often difficult for customers to differentiate your SaaS product from your competitors’. Extra effort (and investment) is necessary to educate prospects about your unique value proposition.
With those points being said, it’s important to understand that a big marketing budget in a SaaS business is pretty common—if not necessary.
Tomas Tunguz from Redpoint Ventures mentioned in his article that in the first three years, SaaS companies spent 80-120% of its revenue, and this number will go down to around 50% after five years.
In the end, the exact amount of your marketing budget will be up to you. However, in general, every dollar you spend will generate $2.20 in a two-year period. The more you spend (properly), the faster you can grow your business.
Another important consideration is who will execute your SaaS marketing strategy. Planning without execution is—well—, nothing.
In general, you have three options:
- Building an in-house marketing team (or, you probably already have one and will only need to make improvements.
- Outsourcing to a marketing agency
- Working with an expert consultant as a freelancer
Or, any combination of the above.
Also, you might need to invest on digital marketing tools and other assets.
Plan your resources needs carefully while weighing all the possibilities.
4. Setting Up an Evaluation Process
SaaS marketing is a long-term game, and we should also consider the fact that the field is rapidly evolving. It’s important to figure out how your marketing efforts will be measured.
Set up KPIs for your goals, and find out how each KPIs can be measured with the right metrics.
Here are some important metrics to pay attention to:
- Customer churn rate: essentially, the number of customers you’ve lost within a specific time period.For example, if you originally have 100 customers and 10 of them cancelled their plans within one month, your churn rate for that month is 10/100 x 100%=10%
- Revenue churn: the loss of actual revenue (related to the customer churn above) in any given time. Some customers might generate more revenue than the others (i.e. subscribed to a more expensive plan)
- Monthly Recurring Revenue (MRR): the projection of your monthly revenue stream. Calculating MRR can be very simple or very complex depending on your pricing model, among other factors. You might want to check this guide for a more detailed calculation.
- Marketing-Qualified Lead Velocity Rate (MQL velocity or LVR): your growth in qualified leads in a monthly basis. You might want to check this guide for more about LVR.
- Customer Acquisition Cost: the amount of money you’d need to spend to acquire a single customer.
- Customer Lifetime Value: the (projected) amount of revenue generated by the average customer during their relationships with your brand.
There are certainly many other metrics you can track to measure the performance of your SaaS marketing efforts. This is a very in-depth guide discussing all the metrics you need to know in SaaS marketing, a good place to start to set up an evaluation system.
Measure your progress regularly and whenever possible, analyze your competitors’ performances. Make your adjustments accordingly.
While SaaS marketing is certainly unique, and can provide more challenge than most other industries, a proper planning can help you significantly in achieving success.
In the guide above, we have discussed several key steps you can take to develop a SaaS marketing plan, and how you can execute and evaluate the strategy. Executing SaaS marketing strategy can indeed be daunting and tedious, and if you need a partner, contact us immediately!