Many B2B SaaS businesses will succeed or fail based on the volume, cost and quality of inbound leads. The reason for this is straightforward: subscription price. If you are like most SaaS vendors, you are probably offering an annual subscription price that is 5%-25% of the equivalent upfront perpetual license of a traditional enterprise software vendor. There is a lot of analysis by VC firms etc. regarding what the real benchmarks for these numbers should be, but I’ll suggest we just go with the theory that you have to generate leads for A LOT LESS. If your subscription rate is $5000/year, then you need to acquire customers for anywhere from $2,500 to $7,500 total absorbed sales and marketing cost (the lower value if you don’t have a lot of cash, the higher if you can absorb a three year payback timeframe).
Therefore, you can’t afford expensive lead generation efforts in the $1,000/opportunity range, or direct selling costs in the $10,000/deal range, which are the bread and butter of traditional enterprise software, i.e., outbound telemarketing, print advertising, direct mail, trade shows, and heavy field marketing backed up by field sales reps making $200K/yr on $2M/yr in quota. While you may be able to apply some of these methods selectively for concentrated, high-need, high-value market segments, most SaaS startups will find them unprofitable. You must strive to develop marketing campaigns that bring customers to you and a sales model that can close a deal for around $1000. What are you to do?
You are a Web-based business—act like one! Your first plan of attack should be Website search engine optimization (SEO) and search engine marketing (SEM). Your Web site should be built for SEO from the ground up on the day you launch, not optimized (or sub-optimized) later on. Your competency in online marketing and public relations will be as critical to your success as your engineering effort. You should be leveraging every possible low cost, online vehicle including search optimization, search advertising, directory listings, affiliate programs, email, online articles, newsletters, online interviews, Webinars, blogging, social networking, banner advertising, podcasting, flash tours, free mash-up widgets, viral customer referral programs, free trial, and online purchase before you even consider direct mail or an expensive trade show. Why? Because you don’t just need leads, you need the Glengarry leads. Internet-laggards will be too hard and too expensive for you to close.
After this, your second order of business should be offline PR—because it is free. Opt for evangelism over outbound calling, speaking engagements over booth space, and online case studies articles, and interviews over advertising. Many startups fall into the trap of over-analyzing their highly-fragmented, SMB target markets and coming to the conclusion that a heavy field marketing effort is required to get in front of these hard-to-reach customers. This is not the case. The right answer is that your most important prospect qualification criteria is not industry sector or application need, it is comfort with the Internet. If your target industry sector is food service distribution, then your target prospect is food service distributors that are online, with broadband, and Web-savvy. You cannot afford to communicate and educate with late-stage adopters who are not 100% online today. These customers will come along as they educate themselves. If you visit the Web sites of successful SaaS companies like www.salesforce.com and www.taleo.com, you’ll see ten times as many online events as offline ones, and the offline events lean heavily toward road shows, local seminars, and user groups, i.e., prospects that came there just to see them! If you find that you are spending too much on offline marketing to generate leads or you aren’t getting enough leads, the problem is not the efficacy of your offline marketing program; it is your qualification criteria and your allocation of marketing expenses.