SaaS Marketing Best Practices

If there’s one thing I’m asked more and more, it’s about SaaS marketing. SaaS stands for Software as a Service, and it’s viewed by developers and businesspeople in that industry as a different animal altogether when it comes to marketing.

Every business within every industry has unique characteristics. Otherwise, if there’s no point of differentiation, they will fade into irrelevancy, which is also known as “go out of business.” Ostensibly, each firm has its own marketing strategy, its own vision as set by the leader, whomever that may be — usually the founder and/or CEO, but sometimes the CMO.

I have experience with two scenarios. The first is where someone deliberately develops a product, and markets it, which is to say, carefully controls the 4 “P’s” of the marketing mix:

  1. Product – Attributes of an organization or offer within this segment include delivery system design, technology, quality, services provided, and availability.
  2. Price – This silo of the marketing mix includes costs to users/supporters, payment periods, arrangements, and terms. Note: Some have also argued “costs” are more than dollars … a full cost analysis should include emotional (for those seeking greater purpose, advancements, victory), sacrificial (for people giving time, energy, focus) and relational (what does one’s association with an organization do for their relationships … will people think more or less of them).
  3. Place – An often-overlooked part of the marketing mix, this “P” covers strategy and executionary elements surrounding service distribution channels, coverage, locations, logistics, and e-services.
  4. Promotion – Likely the most known aspect of the marketing mix, this piece considers strategies and tactics related to advertising, logo/identity, and promotions. But it also covers development/fundraising, communications, events, and public relations as they are all tools to be considered and deployed as part of the greater marketing and branding strategy.

These elements should be aligned with the sales and marketing funnel, which has been updated. This should make a lot of salespeople’s lives easier. Marketing and Sales should always be integrated, but where the baton should be handed off is the big question. If the sales team isn’t behind the marketing initiative, there will be evident glitches in the customer’s journey. And that’s what it’s about. Which requires Account-Based Marketing. Or at least leveraging some methods from that strategy. Every approach will be a hybrid and customized to the firm and the goals it’s set. Here is a great discussion about “middle of the funnel marketing.

marketing and sales funnel

The second scenario is where a developer or team of developers create a piece of software and a business grows up around it.

This is an exciting predicament but also scary for people who may not have any business experience at all. And it happens. A LOT.

Another fascinating phenomenon I encounter All. The. Time. is a highly profitable, successfully-run company that managed to get where it is with NO marketing plan and NO marketing budget.

I’m not shaming these firms, by a longshot. It’s a testament to their viability and business acumen to have grown a competitive business without properly applying what some may call “sophisticated polish” and others may call “foundational elements.” Hundreds of thousands of businesses have come and gone in the US and each founder who discovered themselves at the epicenter did it in their own unique way. That’s something I love about living in America.

Not having a marketing budget is forgivable and even reasonable. That’s something that agencies understandably like to lock into place when they’re brought on board to help a company market itself. They must work within constraints and know what they have to work with, which makes sense. You can’t call up a real estate agent and tell them you want to buy a house without giving them a budget. It sets the scope and scale of the marketing strategy that they should be coming up with.

But many business owners, CEOs, founders, or whatever the title may be of the person at the helm with the checkbook in their pocket see little need for a strict budget. Spend what makes sense, is reasonable, and can be justified, and see what kind of ROI is realized. If it helps reach the stated goals, whether that’s higher revenue, more units sold, greater market share, or whatever, then do more of that. If it’s a loser, pull out and try a different strategy.

Personally, I prefer the second scenario. Not because it is more free-wheeling, because it isn’t. In fact, more thought must be given to the expense than if there’s simply a pile of money on the table that’s finite. That’s also limiting.

It’s all about how you want to look at the expense. Are you framing it so that it’s relative to……?

Revenue? What you spent last year or quarter on marketing? If you have a budget, then you can at least frame it as a percentage of your budget. But how strict is that budget? If your ROI is gangbusters, then you’ll probably rethink the budget’s limits. 

Moving along, when marketing SaaS, there are some important KPIs that don’t necessarily apply to other sectors:

  1. Customer Churn: how much business you’ve lost within a certain time period.
  2. Revenue Churn: take the net revenue lost from existing customers in a given period and dividing it by total revenue at the beginning of that period. You’ll end up with a number between 0 and 1, which is expressed as a percentage.
  3. Customer Lifetime Value: the average amount of money that your customers pay during their engagement with your company. Find your customer lifetime rate by dividing the number 1 by your customer churn rate. For example, if your monthly churn rate is 1%, your customer lifetime rate would be 100 (1/0.01 = 100).
  4. Customer Acquisition Cost: divide your total sales and marketing spend (including personnel) by the total number of new customers you add during a given time. Only include new customers that you have acquired.
  5. Months to Recover CAC: divide CAC by the product of monthly-recurring revenue (MRR) and your gross margin (gross revenue – cost of sales): = CAC / MRR x GM 
  6. CAC: LTV Ratio: compare your CLV and CAC. Easy.
  7. Customer Engagement Score: how often they’re logging in, what they’re using your software for, and other contributing metrics that indicate the likelihood they will or will not churn.
  8. Qualified Marketing Traffic: use event tracking to count each time a visitor reaches a log-in screen or clicks the link in the navigation. Another way is to use in-app analytics to identify log-ins and usage per month as well. 
  9. Leads by Lifecycle Stage: (This is according to Hubspot, who uses MQLs and SQLs) Marketing qualified lead (MQL): A prospect who has taken additional research steps, such as downloading ebooks and returning to your website. Sales qualified lead (SQL): A prospect who has moved beyond the initial research phase, is most likely evaluating vendors, and is worth a direct sales follow-up.
  10. Lead-to-Customer Rate: Take your total number of customers for any given month, divide it by the total number of leads, and multiply that number by 100.
  11. Customer Health Score: Using a customer service tool that involves predictive analytics is critical to building and maintaining a customer base.

These KPIs are only the beginning, but for a SaaS business, they’re some of the more relevant ones. Each business (hopefully) is different, so there will be opportunities to measure all sorts of things that may not be germane to another business.

Something else I’ve been thinking a lot about recently is competitor intel. Knowing what your competitors are doing is integral for seeing what’s working for them, what isn’t working, and why and seeing what they’re up to. But more importantly, perhaps, is to be able to see what their customers are saying about them. This opens up a lot of opportunities for you to solve pain points and grievances they’re, and your, prospects and customers are having and may not be saying straight to your face. You can use tools like SEMrush for competitor analysis.


Word of Mouth Statistics

SaaS Marketing – A Discussion Group on Quora