Why would we need a digital marketing plan for our SAAS product? Isn’t our great, game-changing product going to market itself? Trust me, many if not most SAAS businesses think the same way, but the truth is, only less than one percent of SAAS products out there can truly be classified as ‘game-changing’.
While it’s true that the product/software itself should be the core of our marketing strategy, there are many other aspects of marketing that should be done to support it, so the product will unlock its full potential.
Let’s do a quick review on the three most important reasons why you need a digital marketing strategy for SAAS company.
Why You Need SAAS Digital Marketing Plan: The Top 3 Reasons
1. Convincing Your Customers About Your Product Value
Let’s assume that your product is indeed the holy grail, you still can’t sell it unless you convince your customers. Even the greatest products in history like the original Microsoft Windows, the Mac, and the iPhone were marketed extensively to convince buyers. You will need to convince your customers that your product is worth the money. On the other hand, if you are selling an affordable product, you will need to convince customers that your product is not cheap in quality. Marketing is about convincing people, period.
2. Getting rate.
By 2020, the market size is expected to reach $270 billion.While it is a good news that you will have so many potential customers to sell to, it also translates to a tighter, harsher competition.
Your customers are faced with a much wider choice of many different products than ever before, and you will need a proper marketing strategy to get ahead of the pack.
3. Acquiring New Clients AND Increase Retention
Notice how we emphasize the AND here, because one of the most common mistakes of many SAAS marketers is putting too much focus on one side and neglecting the other. Both customer acquisition and customer retention are equally important for growth (link to SAAS growth strategy article), and having a proper digital marketing strategy can help you put a balanced focus to both aspects.
SAAS Digital Marketing Strategies: Your Ultimate Checklist
Now that we’ve understood the importance of having a proper SAAS digital marketing strategy, how can we begin to formulate one? Below, we will discuss several key factors you should focus on when planning your digital marketing strategies for SAAS companies.
Let us begin with the first one.
1. Knowing Your Target Audience
This one might seem obvious, after all, isn’t your product already designed for a specific audience? Yet, there is a lot more to actually knowing your target audience, and if you truly understand them, your marketing strategies will be much more effective.
One of the most common (and effective) ways to truly understood your target audience is by creating a buyer persona.
Buyer persona is a research-based portrait of your ideal customer. What problems they have (and how to answer them), what goals do they have in mind, how they make their decisions, and most importantly, how to influence their behavior.
How to do it? If you already have a customer base, your can analyze the data to develop your buyer persona. If not, you will need to do a competitive analysis (link) and figure out your competitor’s target. As a side note, even if you do have your own customer data, analyzing your competitors’ is still a good idea.
Now, there are obviously a lot of data attached to your customers. To make things easier, you can divide the data into two big groups:
- Demographic factors
- Marital Status
- Psychographic Data
- Lifestyle factors In
Here is another quick tip. Since most SAAS businesses are B2B in nature, keep in mind that the bigger your target companies are, the lower manager level you will need to deal with, in general. So, if you are targeting small companies, most likely your buyer persona is a top executive. On the other hand, if you target big, multinational companies, in general you will need to target mid managers.
2. Build Your Inbound Infrastructure
SAAS marketing is now all about inbound marketing, what is it? The idea is, instead of pushing ads and campaigns to disrupt your customer’s buying journey, we provide them with valuable contents to attract them to our site (and hence, our product). So, a huge part of your SAAS digital marketing strategy should be about content marketing.
There are several benefits of applying inbound marketing to your SAAS business:
- Most of SAAS customers are not searching for a specific software, but a solution for an issue related to their industry. By providing them with valuable contents and solutions, you make yourself discoverable
- If you can provide a valuable, informative content, it will establish your credibility in the eyes of the customer.
- Inbound marketing (and content marketing in general), is far more affordable than traditional marketing where you must spend money for advertising and campaigns.
Inbound marketing is a pretty broad subject by itself, and we won’t give it much justice here. So, refer to our previous guide on inbound marketing here (link).
3. Choosing The Right Marketing Channels
With so many different marketing channels available, it can be very difficult to choose the most effective ones for your business. On the other hand, most of us simply don’t have the unlimited budget to utilize all the available marketing channels, creating the dilemma.
So, what should we consider when choosing our marketing channels? Here are several key factors you should focus on:
- Cost: compare costs of different channels
- Scale: how large is the said channel, and how scalable?
- Flexibility: how much control do you have over the said channel?
- Targeting: how specific can you target your audiences with the said channel?
- Impact: how much ROI do you expect?
- Time: how long do you need to set up a marketing effort through this channel, and how long you should wait for results?
Also, you should consider looking at your available marketing channels from your customer’s point of view, so it will be tied with the first step in discovering your buyer persona:
- Interview/survey your existing customer base, especially the specific sites they visit and the social media channels they use
- Based on that data, launch several campaigns (maximum 5), and wait for results
- Measure your conversion rate
- If your conversion rate is low, there are two possibilities: your buyer persona might be improper, or you are not providing enough solutions for their problems
4. Measure The Right Metrics
After you’ve specified the marketing channels you are going to work with, it is also important to define the right Key Performance Indicators (KPIs) for each channel.
By measuring the right metrics, you can figure out whether your strategies hit the spot, or whether you will need to make the necessary adjustments.
Our previous guide on important metrics for digital marketing might help you (link). Yet, here is a quick recap on the important metrics of SAAS marketing you should measure:
- Churn Rate
Churn represented the number of customers who stopped using your software every month.
Churn Rate (measured in percent)= (The number of lost customers this month/ All customers at the start of the month)x100
- CPL and CPA
Cost Per Lead (CPL) and Cost Per Acquisition are pretty self-explanatory, the amount of money you spent to get one new lead (CPL) or one new acquisition (CPA)
CPL=Marketing cost/total number of new leads
CPA=Marketing cost/total number of new acquisitions
- Monthly Recurring Revenue (MRR)
Total income you expect to achieve every month.
There are several different methods to measure MRR depending on your business model, but the simplest one is:
MRR=Total number of customers x Average revenue per customer
- Lifetime Value
A forecast of total revenue you will get during your relationship with the customer
Again, there are several different approaches to measuring LTV, but the most basic one is:
LTV= Average Revenue per month per customer* expected customer lifetime in months
5. Plan Your Budget
Ultimately, a marketing strategy is about how to optimize your budget. The better you can manage your budget and the better your ROIs are, the better your marketing is.
So, how can we determine the ‘proper’ digital marketing budget for SAAS? There are two key metrics you can use as indicators: first is your Customer Acquisition Cost (CAC), which is the amount of money you spent to acquire a customer, depending on your business model, your CAC might differ with your CPA (Cost Per Acquisition). The second is Lifetime Value (LTV), we have discussed both in the previous step
Ideally, your LTV should be more than 3 times higher than your CAC. Or, your CAC should be recoverable in less than 12 months.
Confusing? Let’s use a quick example.
Let’s say you are going to invest on content marketing to get a new customer. There are 3 things you should consider:
- Your Target CAC
Say, your average customer brings you $100 every month and on average, they use your software for 2 years. The LTV of this particular customer is $2,400. Since, based on the above formula, your LTV should be at least 3 times your CAC, your target CAC should be at least $800.
- Lead Generation Rate
Depending on your industry, a conversion rate for a content might vary. Let’s say after your research, you figure out the average rate is 2%. If 100 people is clicking on the content, 2 will become leads.
- Conversion Rate
Again, let’s assume 10% of those leads convert into a paying customer. So, you get 1 new customers out of 10 leads.
By considering those 3 factors, we can figure out the maximum amount of money you can spend on your content marketing:
Content marketing budget= lead generation rate x conversion rate x target CAC
= 0.02 x 0.1 x $800 =$1.6
So, you should only spend $1.6 on a specific content, based on this simulation.
The most important principle of SAAS digital marketing strategy is that your marketing should always be embedded and aligned with your product. A great product with a bad marketing or no marketing at all is simply suicide. On the other hand, as David Ogilvy once said. “Great marketing only makes a bad product fail faster.”
With the several key factors we have included in our checklist above, you can have a more effective digital marketing plan to align with your SAAS product.