Succeeding in SaaS requires a fundamental shift in sales and marketing mindset from push to pull revenue generation. Lower revenue per transaction, and even lower first year subscription revenue creates intense pressure to decrease average customer acquisition cost. It is not possible to drive revenue through the high-cost offline marketing and sales approach that is well known to enterprise software.
This shift entails an unpleasant loss of control over the sales process and forces SaaS companies to focus more keenly on facilitating purchase than on driving sales. If this sounds like semantics, consider how you personally develop interest in and buy products on the Web. Are you more likely to respond to an unsolicited email and attend a Webinar or click on a link in a blog post? How often do you click on sponsored search links versus organic results? Your prospects don’t behave any differently. You as the customer are in control, and there is no marketer or salesperson present to wrestle that control away from you.
With the customer firmly in control, the role of sales and marketing shifts from chemist to catalyst—from driving revenue to accelerating organic growth. Accelerating organic growth entails stimulating demand and facilitating the purchase process by understanding and leveraging a prospects natural buying behavior. The goal is to eliminate purchase barriers and to respond on-demand with whatever information or motivation is necessary to encourage the prospect to take the next step in the buying process.
Being at the right place at the right time requires up-front investment in so-called free marketing tactics, e.g., SEO, public relations, blogging, social marketing, video, automated nurturing, newsletters, case studies, interactive demos, product trial, etc., so that content is ready and waiting to be served up when needed. In reality these activities are not free; they are simply free at the time of use, shifting the economics of revenue generation from direct, variable sales and marketing costs to indirect, fixed costs. In fact, this characteristic provides a convenient financial definition of organic growth:
Organic Growth = New Revenue generated with (near) Zero Marginal Acquisition Cost
No advertising, no outbound marketing campaigns, no sales calls, no technical inquiries, and no manual order processing. This viewpoint clearly highlights the primary benefit of accelerating organic growth: leverage. Increasing organic revenue decreases the average acquisition cost per deal and increases overall profitability. Moreover, accelerating organic growth and lowering marginal acquisition cost systematically expands available market potential by enabling the business to sell to the outer reaches of the long tail.
SaaS business owners and managers should continually ask themselves the simple question: How can I get more prospects to find my product, evaluate my product and buy my product over the Web even if no one comes to work in the morning.
This is post number 2 in a series of 5 on transforming SaaS for Web 2.0 success.