Return to Chaotic Flow home >>>

Archive for the category: SaaS Marketing

Driving SaaS Growth Through The Customer Lifecycle

saas growth SaaS growth isn’t a goal; it’s an obsession. The good news is that SaaS growth can be very smooth and predictable, because of the SaaS recurring revenue subscription model. The bad news is that SaaS growth can also be predictably slow the bigger you get. After a few years of rapid SaaS startup growth, it’s easy to find yourself on the short end of the hockey stick if you don’t know the right levers to push.

The Three Levers to Break Through the SaaS Growth Ceiling

At any given time, you can calculate the SaaS growth ceiling for your SaaS business with a simple formula: customer acquisition rate divided by percentage churn rate. For example, if you acquire 200 new customers each year and your percentage annual churn rate is 20%, then at 1,000 customers ( 200 / 20% ) your growth will slow to zero, because customer churn will equal new customer acquisition of 200 customers per year. New customers come in the front door, while old customers leave out the back. Moreover, you will begin to hit the SaaS growth ceiling in exactly one average customer lifetime of 5 years, equal to 1 divided by your 20% churn rate. Finally, your SaaS growth revenue ceiling will equal 1,000 customers times your average customer subscription, e.g., $10M per year for an average subscription of $10,000 in annual recurring revenue. Without a fundamental change to your business, that’s all the SaaS growth you get.

This SaaS growth ceiling depicted in this example is calculated generally by the following basic formulas from the SaaS metrics series.

max SaaS company # customers = acquisition rate ÷ % churn rate

max SaaS company revenue = acquisition rate x average subscription value ÷ % churn rate


max SaaS company revenue = acquisition rate x average customer lifetime value

This last formula highlights two of the three fundamental SaaS growth levers: acquire customers faster and increase customer lifetime value. If you double your customer acquisition rate, the SaaS growth ceiling doubles with it. Double customer lifetime value by doubling average subscription value or halving your churn rate and again the SaaS growth ceiling doubles.

In the end, however, churn always wins. Churn scales with the size of your customer base. Churn is negatively viral and can only be countered completely by a positively viral growth lever: network effects. Adding more sales reps and increasing your marketing spend are not enough. These strategies may increase your acquisition rate, but to outpace churn you must increase your acquisition rate again and again and again.

The SaaS Growth Levers Follow the Customer Lifecycle

The three fundamental SaaS growth levers: customer acquisition rate, customer lifetime value and viral customer network effects arise naturally and sequentially as a SaaS business matures. Read more »

SaaS Branding | 6 Challenges of Killer Cloud Brands

SaaS branding has some unique challenges that aren’t covered in the average MBA program. As a new communication channel, the Internet has altered the rules of branding for almost every category of product. However, cloud brands that owe their very existence to the Internet often find that the message, the medium and the merchandise are a confusing tangle of clicks, words, sounds, images and experiences that is difficult to describe.

I’m not going to re-hash branding 101, there are plenty of resources available for that. I’m also not going to provide a fool proof recipe for creating killer cloud brands. Anyone who says they have that is lying. What I will do is provide some SaaS branding food for thought by exploring 6 key questions you need to ask before committing to your SaaS branding strategy. Because once you commit, it’s not easy to change. All brands, not just cloud brands, are ultimately owned by their buyers, not their sellers. Once you put yourself out there, the evolution and results of your SaaS branding strategy are no longer your own. Your first impression may also be your last, so you should strive to get it right.

Are You in a Category unto Yourself?

saas branding categoryWith respect to cloud brands, everyone wants to own the category. It’s where the big, BIG money is. Moreover, the combination of network effects and switching costs common on the Internet often demand that you attempt to own the category, as everyone else is destined to be an “also ran.” Consider the status of the direct competitors of, Google, and Facebook.

I like Al and Laura Ries description of the relationship between categories and brands.

“The mind is like a sorting rack at the post office, which has a slot or ‘pigeonhole’ for every name on the letter carrier’s route. Every piece of mail is put into the hole corresponding to the name on the mail. If there’s no hole for a new piece of mail, it’s set aside in a pile called ‘undeliverables.’ So too with brands. The mind has a slot or pigeon hole for every category. If the pigeonhole is named ‘safe cars,’ this is the hole for a brand called Volvo.”

When you are creating a new brand, your challenge is to shove your way to the top of the slot by focusing on your unique and valued qualities over the competition. Building a new category is 3X more difficult, as you must first clarify and create a new pigeonhole where none currently exists, second promote the unique and valued qualities of the fuzzy new category relative to unclear alternatives, and third hold on to the top of the slot by outpacing the competition (which will come eventually if the category is real).

If you find yourself in the enviable position of being a BIG category unto yourself and the nature of that category demands that you own it, then your SaaS branding strategy should focus on crystallizing that confusing tangle into a simple, easily describable position that is unlike any other. No easy task as we all have very big, complex post office racks. Fail and your brand becomes “undeliverable.” If you find yourself in a crowded category where you must fight your way to the top, then focus on your unique differentiation to pull away from the crowd. In either case, realize that positioning alone will not win the battle of the cloud brands; you must also deliver.

Are You Experienced?

saas branding experiencedCloud brands are the most experiential of service brands. What you see and hear isn’t always what you get. You can’t taste them. You can’t smell them. You can’t touch them. You can only do them. Cloud brands must be experienced to be truly understood. In addition, most cloud brands follow a recurring revenue subscription model which precludes any ongoing discrepancy between your message and your service. Your SaaS branding strategy must be tempered by reality, such that your service absolutely delivers on the promises made in the name of your brand.

The experiential nature of cloud brands is one of the myriad reasons behind the free trial imperative of SaaS. If you are tired of explaining and explaining and explaining your cool new category or you can’t quite come up with the perfect words to describe your difference, any car salesperson will tell you that there is no better way to seal the deal with an uncertain buyer than a test drive. With cloud brands, doing is believing.

The cloud brand experience does not begin or end with your product. Read more »

Customer Self-Service | The Holy Grail of SaaS

self-service holy grailOne hundred percent customer self-service is the holy grail of SaaS. Everyone looks for it, but it is never found. Even if your product is simple enough to provide complete self-service purchase, you are unlikely to get away with complete self-service support, because you can’t hang unhappy customer’s out to dry or you will ruin your reputation. Nonetheless, the divine power of the Internet to help customers help themselves combined with the promised land of lower customer acquisition cost and lower cost of service will always enrapture the true SaaS believers and hasten them on their quest.

SaaS Top Ten Do #3 : Accelerate Organic Growth depicts the SaaS self-service holy grail as revenue generation with zero marginal costs, because your customers can find, try, buy and use your product even if no one shows up for work. But just because your customers can, doesn’t mean they will. It’s very hard to build a product that enables one hundred percent customer self-service. In some cases it is impossible. Imagine your frustration when you finally achieve it and those pesky customers simply refuse to do it.

The Self-Service Maturity Model

The closing post of my recent New Breed of B2B Buyer series introduced the concept of the self-service limit in B2B sales. The self-service limit is that point where a customer’s desire for instant gratification is thwarted by the complexity of purchasing and using your product. Purchase complexity comes in two flavors: informational and emotional. Informational complexity arises when the buyer requires education to consummate the purchase. Emotional complexity arises when the purchase entails a personal risk to the buyer. When either or both of these purchase barriers becomes high enough, the buyer simply will not make the purchase without the aid of a salesperson.

Complexity, however, is a subjective measure that is different for every single customer. In particular, and this is the point of this post, it is very different for the novice and the experienced buyer. An experienced buyer knows your company and trusts your brand. An experienced buyer knows your product and fully understands both its value and its use. As your customer base increases, so does the percentage of experienced buyers in your market, your knowledge share.

saas self-service

The percentage of experienced buyers in the market, knowledge share,
increases as a SaaS business matures.
Experienced buyers that trust and understand your brand,
are not only capable of one hundred percent self-service,
they usually prefer it, bringing you closer to this holy grail of SaaS.

Increasing knowledge share reduces both the emotional and the informational complexity of buying your product. A strong brand reputation reduces purchase risk and Read more »

SaaS Product Marketing | Upgrade and Upsell Strategy

I think it would be hard to overemphasize the importance of upgrades and upsells in SaaS product marketing. In an industry where free trials, freemium versions, bargain basement subscription prices and simply hoping to recover customer acquisition cost with first year revenue are the norm, few things are sweeter than a customer that actually wants to spend MORE money with you. Upgrades and upsells can lead to orders of magnitude difference in SaaS financial metrics. If you can acquire customers at $100/mo and rapidly upgrade them to $1,000/mo, then you may be able turn a profit in one year instead of ten years. And. if those $1,000/mo customers have a lifetime value of $100,000 instead of $10,000, then you may also turn a $50million SaaS company valuation into a $500million SaaS company valuation. ‘Nuff said.

Hunting is not just for acquiring new customers.
If an existing SaaS customer has a value gap
that can be closed by an upgrade or upsell,
then you should hunt it down and sell it.

Upgrade vs. Upsell in SaaS

Although the terms upsell and upgrade are often used interchangeable, I personally use them to distinguish between two very specific SaaS product marketing scenarios. For the purposes of this discussion, I will use the following definitions:

  • Upgrade : Higher revenue from increased usage of current SaaS product capabilities.
  • Upsell : Higher revenue from new SaaS product capabilities.

The reason for my distinction is that the buying dynamic is very different for the two scenarios. Upgrade potential of a SaaS product depends on the customer’s need to increase consumption of a known solution to a known problem, and deepens commitment to a particular capability. Whereas upsell potential of a SaaS product depends on the customer’s need to find new solutions to new problems, and widens your SaaS product footprint. This is not to say that upgrades and upsells are completely independent, because the need for increased usage can be highly correlated to the need for new capabilities as a growing customer’s business often entails greater volume as well as greater complexity.

Now that we’ve got the housekeeping out of the way, here are 8 SaaS product marketing tips to help your maximize the potential of upsells and upgrades in your SaaS business.

SaaS Product Marketing Tip #1 | Measure Value, Not Use

When SaaS product marketers think of upgrades and upsells, their minds immediately turn to pricing and packaging. Pricing and packaging are important, but you should always keep in mind that they are just a means to an end: purchase. The most important principle to follow in designing your SaaS product offering is to align pricing and packaging with customer value, or in B2B sales lingo “customer pain,” because the more a customer values a particular capability of your SaaS product, the more a customer will pay for it. In order to price what the market will bear, you must package your SaaS product into value bundles and price them using the measures that most closely correlate to customer value. You can use features, users, usage, performance, or any measure you like to price and package your SaaS product into bundles, but never forget that these measures serve as surrogates for customer value. A hundred bucks might buy you one feature or one hundred, but if that bundle of features doesn’t equate to value, your customers won’t pay it, or worse they might pay for it and still feel cheated or manipulated in the process.

SaaS Product Marketing Tip #2 | Bundle Purchase Scenarios, Not Features

While customer value is the proper measure of your SaaS product bundles, it won’t tell you where to draw the pricing and packaging lines between your subscription plans. Read more »

SaaS Marketing Tips | The Truth Shall Set You Free

In SaaS, it’s virtually impossible to sell someone a lemon, because SaaS customers typically get to try before they buy, and they can walk at any time simply by canceling their subscription. In contrast, traditional enterprise software vendors are notorious for obscure product capabilities and pricing, because up-front purchase creates a short term financial incentive to avoid disclosing any more information than the minimum necessary to close the deal. The enterprise customer thus enters a long and intricate dance with the enterprise sales rep in order to develop the trust required to overcome the risk of signing that fat license check. When combined with the uncertainty of buying a business critical application over the Web, most SaaS startups quickly find themselves between a rock and a hard place by the need to engender an even higher level of trust than their enterprise competitor, while simultaneously having nowhere to hide their shortcomings.

saas marketing open
A SaaS marketing strategy of complete and total business transparency
removes constraints to unleash the volume and deal size of online transactions.

So don’t! The best SaaS marketing strategy for building trust is complete and total transparency. With the right attitude, this apparent weakness can be deftly turned into a competitive strength that accelerates growth by streamlining SaaS adoption costs and risks. When you apply the SaaS marketing tactic of public online disclosure of your product capabilities, pricing, terms, service level agreements, support process, performance metrics, platform security, privacy policy, company history, customer satisfaction ratings, etc., you remove constraints to unleash the volume and deal size of online transactions by simplifying the buying process, preempting risk-related objections, and building a reputation of the highest integrity.   Moreover, you ensure high rates of customer satisfaction and success by avoiding the project failures that have historically characterized enterprise software by only signing customers that are a good fit for your service.

Ask yourself how much you spend right now on Google AdWords without ever having spoken to a sales rep. How does this compare to your own average selling price for online transactions?  Now, ask yourself why.  The answer is transparency, from company reputation to cost-per-click.

PS Trish Bertuzzi from Bridgegroup asked for specific examples, so please see the comments if you are interested in the response. And, feel free to add your own examples of SaaS vendors that are doing a good job at transparency.

More posts in the SaaS Marketing Tips Series:

SaaS Marketing Tips | Metrics that Make a Difference

Most marketers are obsessed with metrics, and this is particularly the case for online marketers. Metrics not only demonstrate performance, they often form the basis for decision making, creating buy-in and defusing politics. But, for the life of me I can’t recall ever seeing a decent presentation on metrics in any marketing book or course. In this post, I’m going to present a simple, process-centric approach to metrics that will help you develop the specific metrics that are right for your particular business and provide insight on where and when each metric makes a difference. This approach to metrics owes more to statistical process control (total quality) and activity-based costing than to marketing, but the the concepts are considerably (over)simplified. The goal is to achieve a comprehensive, integrated, insightful process view with as little math as possible.

Three simple concepts to master for developing great metrics

A process is a stable, repeatable set of dependent activities
Process = Activity 1 > Activity 2 > Activity 3 > … > Activity N

Activities consistently turn inputs into outputs at a certain efficiency and speed
Output = Input > Activity
Efficiency = Output Volume / Input Volume
Speed = 1 / Cycle Time

Activities are produced by resources that have a certain cost and capacity.
The bottleneck resource constrains overall output, therefore maximizing output
and minimizing costs amounts to improving throughput at bottleneck resources.
Total Cost of Output N = Resource1 Cost +…+ ResourceX Cost + … + ResourceN Cost
Unit Cost = Total Cost / Output Volume
Max Output N == Max Activity X == Capacity of Bottleneck ResouceX

Kinda theoretical right? OK, so here is a concrete example that I think will be useful to many readers. Below is an inbound new purchase process model for a typical B2B SaaS company.

saas metrics

General process metric model applied to a top-level B2B purchase process.
For a lower level process example, click here to see the model applied to email marketing metrics.

Chances are you’ve heard or seen most of these metrics before, but they were probably jumbled around on a spreadsheet in random order with a few critical metrics missing and few irrelevant ones thrown in for…uh…good measure. However, when you see them laid out as they relate to the purchase process, their meaning and inter-relationships become much clearer.

Tips for Defining and Using Great Metrics

Keep it simple

So, the reality is that since we are talking about sales and marketing, and not manufacturing nuts and bolts, our processes are never as clean and predictable as this little model appears. It will at best be an approximation to reality. But, you have control over that approximation. Read more »

SaaS Marketing Tips | Don’t Be CRUD on the Cloud

In this post, I will offer up two SaaS marketing tips to help you achieve Do #3 Accelerate Organic Growth of the Top Ten Dos and Don’ts of SaaS Success where organic growth is defined as revenue generated with zero marginal acquisition cost. In other words, customer self-service. The first marketing tip is to map out the purchase experience from the customer’s point of view from beginning to end: awareness to trial to purchase to use. The second is to let go of any pre-conceptions you may have about the separateness of your SaaS product from other Internet content, yours or otherwise. It’s a mashup world! My reason for combining these two SaaS marketing tips into a single post is that much, if not most of your customers’ online experience related to your product happens outside your product, and even off your website.

SaaS Marketing Tip: Map Out the Purchase Process from Your Customer’s Point of View
In most online businesses, marketers focus on impressions, click-through rates, registrations and leads, while the sales team organizes itself around a pipeline. Each of these metrics provides an important snapshot at a particular stage in the customer lifecycle. However, functional divisions within the company often prevent a integrated view of the entire process. And, metrics are often seen as a measure of business efficiency as opposed to customer success, i.e., marketing converts a visitor to a registered user as opposed to a customer consciously decides that in order to get closer to solving a problem it is worth giving up personal information in exchange for the value received on the other side of the registration form. Create a table that depicts the detailed stages your customers go through before, during and after purchase with particular attention paid to their likely online location and intent at each stage. Then, map out the information they require to progress successfully to the next stage and get closer to achieving their intended goals. Finally, put in place metrics to track end-to-end progress that can be portrayed in a single, integrated view.

SaaS Marketing Tip: Create a Seamless Internet-Product Experience
At its core, the Internet doesn’t really care if you are distributing a Google Ad or an ERP application, it is all just information. Read more »

SaaS Marketing Tips | Search Is About People, Not Engines

You have to understand why and how your customer uses search if you want to be successful at search marketing. Unfortunately, ninety-nine percent of what you read about search are tips on how to work the system, attract the engines and increase rankings. Alot of it is good information, but it doesn’t provide solid direction to your marketing programs, because without your customer a search engine is simply a mindless algorithmic tool. You will often see this shortcoming with PPC firms that focus exclusively on trial and error to develop your programs, the proverbial throwing of the spaghetti at the wall to see what sticks. Experimentation is fundamental in exploring and optimizing alternate search strategies, but without a firm grounding in customer buying needs and behavior, this approach is simply garbage in, garbage out. The SaaS marketing tips below are designed to help you turn your thinking about search inside-out by considering the experience from customers’ perspective.

SaaS Marketing Tip: Honor Customer Intent
One of the most interesting descriptions of search fundamentals can be found in Jon Battelle’s book, Search. In it he describes the sum total of keywords and click streams captured on the Internet as the “Database of Intentions.” I really like this word: intent, and I recommend to every search marketer to stop thinking about keywords and start thinking about intent. Or, more specifically to think of keywords as a shorthand for intent. How do you use search? How do you select keywords? If you think about it,you’ll quickly see that the process goes something like this: I have a problem that I need information to resolve. To get that information, I need to clarify my intent in my own mind and distill it down to the simplest possible set of keywords, otherwise I don’t get the results I want. Your potential customers may sit down in front of a search engine with a wide range of problems and associated intentions: exploring entertainment options, looking for a job, or finding your product. If you don’t honor their intent and provide help with the specific problem they are trying to solve, then your ad is no better than a billboard. Sometimes they may very well be looking for exactly the product you offer, these are the highest value intentions(keywords) to capture, and identifying them should be your first order of business, i.e., your first set of keywords should always be those that prospects type into a search engine when they are specifically looking for your product category. To identify them, at a minimum you have to think like your customer and at a maximum do some market research. Throwing spaghetti is weak. Beyond this set of keywords, you cannot offer your product in your search ad. You must offer alternative content that is useful to solving the searchers problem at hand, but establishes a relationship that you can nurture to a future purchase.

SaaS Marketing Tip: Every Website Page is a Landing Page
In software, we like to create these things called use cases. A use case describes how a user will use a system to accomplish a specific task. Most people design their websites for the use case of someone arriving at their home page with the intent of learning about their product, and then navigating around to learn all they need to know before making a purchase decision. However, if you’re even remotely successful at SEO you will quickly find that many of your visitors are arriving at keyword optimized internal pages after finding them in their search results. Read more »

Transform your SaaS into a Web 2.0 business

Quiz: What is the most successful enterprise SaaS application to date?
Hint: It’s not

It is ironic, but the unfortunate fact is that most SaaS vendors see the Web as little more than the browser through which they deliver an enterprise software application. In fact, the phrase itself software-as-a-service, creates a subtle bias toward viewing the business as simply a piece of traditional software delivered on-demand over a network. Connecting an application to the Web unleashes disruptive economic forces that go far beyond multi-tenant architecture and reduced TCO. It enables viral organic growth, low cost customer acquisition, business productivity gains across-the-firewall, and new monetization models to augment simple license subscription. That is why the most creative SaaS vendors are realizing that the real opportunities for business innovation lie outside the firewall and are transforming their SaaS offerings into Web 2.0 businesses.

Below is a list of principles that can help you transform your low-cost, commodity SaaS into a high-value Web-based business.

Accelerate organic growth

  • Master “free” online marketing tactics
  • Streamline and automate the entire customer life-cycle

Reach out and become a hub on the Web

  • Links, links, links
  • Encourage community

Build the business into the product

  • Automate the customer lifecycle
  • Crowd-source new capabilities

Reach across the firewall to unleash disruptive economic forces

  • Re-engineer external processes
  • Integrate through the cloud

Monetize creatively

  • Leverage the network
  • Look beyond subscriptions

After I’ve had a chance to elaborate on each of these ideas in a separate post, I’ll provide the answer to my somewhat trick question above.  However, I’m hoping that the solution will emerge as obvious.

« Previous PageNext Page »