Saturday, February 7, 2015

Avoid random acts of marketing

After months or years of development, your software-as-a-service (SaaS) solution is finally ready.  Now you just need to find customers.

So you put up a website, attend a tradeshow, and produce a video.  Then you host a webinar and
post to a blog.  On top of that, you toss in a bit of search engine marketing and prepare a couple of press announcements.

You could call this an "all of the above" customer acquisition plan.

But it might just be random acts of marketing.

Poor connections, poor results

Though the individual elements may be executed well, this shotgun approach to customer acquisition usually doesn't produce much in the way of results.

You end up with an attractive website, a beautifully-produced video, and well-written blog.  Unfortunately, you don't end up with lots of paying customers.

That's because the individual elements are not connected and don't fit into a logical process.  They don't move a buyer step-by-step toward a purchase.

You might generate lots of visibility and web visitors, for example, but unless there are elements in place to capture contact information from the visitors, all that web traffic doesn't mean much.  Unique visitors, by themselves, do not generate revenue.

Or maybe the website is, in fact, capturing contact information.  But there's nothing in the marketing plan to cultivate those leads and convert them into qualified opportunities and buyers.  In that case, you've collected an impressive list of contacts, but no revenue.

Or maybe the tactics in place are effectively leading prospects far enough through the process that they actually purchase your solution.  But there's nothing in place to retain these paying customers.  So you end up with lots of customers that go away after a few months.  

Why does this happen?

These kinds of gaps in the process happen all the time and it's very understandable.


By the time they're ready to go to market, companies have spent lots of time and money building their SaaS solution.  They're proud of what they've built and eager to tell the world about it.  And they're in a hurry to start selling it.

So they just starting "doing marketing stuff."  There's lots of scrambling to put up a website, get out emails, crank out press announcements, post videos, and do whatever else seems like it might be a good idea.

Some of these might actually be good ideas.  And I'm all in favor of trying different tactics to see what works and what doesn't.  (See "There is no marketing magic bullet.")

But companies really need a plan in place before they start executing on all these tactics.  Otherwise all that activity is a waste of money.

That's money no company can really afford to waste, especially SaaS companies.  The website, email, webinar, video, tradeshow and whatever else seems like a good idea costs money now that they need to earn back over time.   That's how the SaaS business model works.  

Step back and put together a plan

When it comes to marketing, resist the urgency to "just do something... anything, and let's do it
ASAP!!"

There's a better way.

Start with a plan.  Specifically, put together a plan that meets three criteria:

  • Make sure the individual elements fit together.  For example, if an email campaign is intended to drive visitors to the website, make sure there's a way to capture contact information from those visitors.

  • Cover all steps in the customer acquisition and retention process.  Don't focus exclusively on programs that generate leads, but neglect tactics to convert leads into customers.  Don't work hard to acquire paying customers, but forget about programs to retain them.

  • Match up with your prospects' behavior.  If your customers look for your kind of solution at tradeshows, for example, go to tradeshows.  If they don't use Facebook to evaluate solutions, don't spend time with Facebook.  To know how customers buy, it's best to ask them.  (Call me if you need help.)
For most SaaS companies, it shouldn't take more than a few weeks to put together a workable plan.  It's time well spent.










Saturday, January 10, 2015

Two essentials for SaaS marketing

If you're marketing a software-as-a-service (SaaS) solution, where should you start?

It's obviously something SaaS companies about to bring their solution to market for the first time should be thinking about.

But established SaaS companies should be asking a similar question:  Do we have the basics in place?

Most companies should have two essential items in place as the foundation for their customer acquisition efforts:
  1. a value proposition & messages document
  2. a customer acquisition plan.
A compelling value proposition and messages document

Before you start promoting your solution, you need to have a clear message on what you’re
promoting and why anybody should care.  That's exactly what an effective value proposition and messages document can do.

It answers a few fundamental questions:
  • What is the solution?
  • Who should buy it?
  • What problem does it solve for them?
  • How costly is that problem?
  • Why should they buy it from you instead of someone else?
And it should answer these questions very succinctly.  A condensed version should be able to cover the basics in a few lines.

It's best to capture the value proposition and messages in a single document.  (Some people refer to it as their "messaging bible.)  That way you can “cut & paste” from it and be consistent.

A customer acquisition plan

The customer acquisition plan spells out who you intend to reach with your value proposition and how.  It specifies which tactics you’ll use to reach your audience at each point in the customer acquisition process. 

A plan is much more effective than random acts of marketing:  firing off an occasional press announcement, showing up at a trade show,  pushing out an email from time to time, etc.

A plan helps avoid gaps or bottlenecks in the process.  For example, you don’t end up generating lots of leads… with no means to follow up.  Or attracting lots of free trials… with no way to convert them to paying customers.

Putting a plan in place beforehand can save you lots of time and money.

Start sooner rather than later

Putting together a compelling value proposition and messages document and an effective customer acquisition plan takes a good amount of thought and time. 

If you’ve not yet made your solution widely available, you should try to put this material together well before you go live.  It will make the launch process much easier and more productive. 

But if your solution is already in the market and you’re actively promoting it, it’s still worthwhile to prepare a value proposition document and a customer acquisition plan.  You’ll fill in critical gaps and get a better return on the time and money you’re already investing in marketing and sales.

Of course feel free to contact me if you need help.




Saturday, December 6, 2014

SaaS Buyers are Quick to Buy

Most SaaS buyers make their purchase decision quickly. 

When they need a solution, they do some online research, maybe ask a colleague, try the solution or
watch a demo, and then buy.

The whole process might take a few days, maybe a few hours.

There’s no long, drawn out sales engagements, RFIs and RFPs, head-to-head “bake-offs,” contract negotiations, blah, blah, blah.  Customers find it, they see it, they like it, they buy it.  Done.
 
Neither vendors nor buyers can afford a long sales process

Why the quick decision?

For one thing, lots of SaaS vendors won’t engage in a long sales cycle.  All that schmoozing, demo’ing, and negotiating is too expensive and doesn’t fit their low-touch sales model.  They can’t afford it.

More importantly, SaaS buyers can’t afford it either.  Or at least they can’t afford all the time.

Remember the SaaS buyer is usually someone whose main job isn’t evaluating and buying technology solutions.  It’s not like traditional on-premises software where IT was the gatekeeper and did most of the evaluation. 

With SaaS solutions, the end-user is often doing the evaluation.  It’s the sales manager who’s evaluating a SaaS sales tool, the finance manager who’s evaluating expense reporting solutions, or the HR manager who’s evaluating a time & attendance tracking solution.

Besides evaluating software, these people have a day job.  They manage sales, or finance, or HR.  
 
Rapid deployment and no long-commitment speed up the process
 
The fact that SaaS is a lot easier to install and deploy and that there’s often no long-term commitment also speeds up the evaluation cycle.  Buyers figure they can try something for a few months, and if they’re not happy, they can walk away without much lost.

 Enterprise sales could be an exception

Of course there are exceptions to this scenario.  Larger enterprises may go through a more formal evaluation process than small or mid-sized businesses.  And companies might take more time with applications that they’ll be distributing broadly throughout their organization, those that will need customization, or require a long-term commitment. 

But that still leaves a lot of SaaS solutions that will be bought PDQ. 

Good news and bad news for SaaS vendors

A shorter evaluation cycle can be good news and bad news for SaaS solution providers.

The good news:  They can cut some of the time and expense from the process.  Most buyers won’t force vendors through an arduous RFP, a months-long evaluation process, and innumerable exchanges of red-lined contracts.

The bad news:  Vendors need to be quick.  The evaluation window is only open for a short time.  Jump now… or miss your chance.

Once a prospective buyer expresses interest - they call the vendor, download a free trial, ask for information, whatever - the SaaS vendor needs to respond.  Not in a few days… now!

That doesn’t always mean they need to get on the phone ASAP.  A free trialer might be eager to get a
call from the vendor, but other prospects might not be so far along in the process.  

But companies should at least acknowledge the person’s interest and provide a way for them to move ahead in the process. 

Make a positive impression... quickly

Once vendors do get an opportunity to put their solution in front of the prospective customer - with a demo or a trial, for example - don’t waste that precious time.  Knock their socks off in the first few minutes, showing off high-impact features and benefits.  There's no need for a plodding walk-through of every feature and function.

Lost prospects often aren’t really lost

If SaaS buyers didn’t purchase the solution, SaaS vendors shouldn’t necessarily count this as a “lost” sale.  In many cases, the prospect just got distracted by other priorities (a.k.a. their real job.) 

Once they work through those “distractions” and focus on SaaS solutions again, the vendor wants to still be in front of them.  Newsletters, invitations to webinars, news of valuable white papers, for example, can be cost-effective ways to do that.

I often explain to people that marketing SaaS solutions is strategically different from marketing traditional software.  Different audience, different message, and different process.  The shorter evaluation process is one of the key differences. 

Get in sync with your prospective customers.  If SaaS buyers are quick to buy, SaaS marketers can’t be slow.



Saturday, November 8, 2014

Acquiring Customers Ain't Cheap

It costs SaaS companies $1.07 in sales and marketing expense to acquire $1.00 in annual contract revenue.

So says excellent research on the experience of SaaS companies, prepared by David Skok along with Pacific Crest Securities. 

The SaaS companies included in their survey spent, on average, $1.07 on sales and marketing to win a customer that would be worth $1 in annual contract value.

Some might react with horror at that news.  “To grow a SaaS business to $100 million in annual contract value, I need to spend $107 million to acquire customers!!”

Not me. 

Spending $1 to earn $3 is a good thing

That ratio - $1.07 in customer acquisition costs (CAC) delivers $1 in annual contract value (ACV) - is great news.

Here’s what that number means.  If a SaaS business wisely invests $100 million in customer acquisition costs, they’ll earn nearly all of it back from customer revenue in the first year. 

And if they can hold onto those customers for a second year, they’ll earn another $100 million in revenue, and in the third year, another $100 million. 

In other words, the first $100 million in CAC earns nearly $300 million in contract revenues over three years.

With that kind of return, the SaaS company should put as much money into CAC as it can get its hands on.

Before folks bombard me with objections, let me be clear on a couple of points.  For one, I’ve made an assumption that the money spent on sales and marketing to acquire customers is spent efficiently.  (Call me if you need help with that.)

And second, for the sake of making a point, I’ve omitted the cost of retaining an existing customer.  The Skok survey shows that companies will pay 12 cents annually to retain an existing contract worth $1.00.    Factoring that in, the cost to acquire $300 million in contract value over three years is closer to $131 million.  Still not too shabby.

SaaS is a "pay now, collect later" model

So with such an impressive return, why the resistance to spending on customer acquisition?

It may come from a couple sources.

Perhaps there’s some misunderstanding about the SaaS business model.  SaaS companies spend money on customer acquisition in the present in order to generate revenue over the life of the customer.  (See "SaaS customer acquisition:  Feed it or starve it?")  It may take 2 or 3 years to recover the sales and marketing costs.  (If you need more than 3 years to recover CAC, let’s talk.) 

That’s a lot different than the traditional on-premises business model that charges large up-front fees for software, plus on-going maintenance fees.  In that scheme, companies might allocate 4, 5, perhaps 6 percent of annual revenues to marketing. 

Effective sales and marketing costs money


There might also be a misperception about how much sales and marketing really costs.  Companies should expect to pay well if they want it done well.  
  • It costs money to design and maintain an effective website.  
  • It costs money to prepare compelling content.  
  • It costs money to design an effective customer acquisition plan.  
  • And it costs money to execute effective search engine marketing and social media campaigns.  
The experts who do this work don’t do it for free.
Of course, companies should take advantage of newer sales and marketing tactics, like social media and inbound marketing.  These can get them in front of prospective customers much less expensively and more effectively than they could have done several years ago.

And for some solutions, building a viral component into their product can be a powerful way to gain customers. 

But even with greater efficiency, customer acquisition still isn’t cheap.

SaaS companies pay a lot for excellent developers and UX designers.  They should expect to pay a lot for excellent sales and marketing people too.

There’s a reason that sales and marketing expenses at even well-established SaaS companies account for their single largest on-going expense.  Workday’s sales and marketing expenses, for example, represented 56 percent of their annual revenue according to their most recent annual financials.

Instead of looking at customer acquisition costs as an expensive burden, people should be looking at them as an investment.  And with returns of 200, 300, maybe 400 percent, a fairly lucrative investment at that. 

Thursday, October 2, 2014

Your message should be boring

Why in the world would I want a box of business cards with a different design on each one?

In radio ads, I’ve heard a company that sells business cards promoting that very feature: “Business cards with a different design on each one.”

I’m sure they use some very nifty software to make this happen.  But why?
  • Do people expect me to hand over more than one card when I introduce myself? 
  • Are they comparing the card that I gave to them with the ones I gave to others in the room?
  • Are people collecting my business cards to have a complete set? 
  • Do they swap them on some secondary market?
Probably not. 

If they’re like me, they enter the info into their contacts app, put the business card in the stack of other cards bound by an elastic band, and stick them in a desk drawer.

So why tout "a different design on every card?" Here’s the only explanation I can come up. 

The company thinks that a person gets bored looking at the same, same, same business card every time they hand it out.

Boredom can be a good thing

Maybe people do get bored. 

But here’s some news:  They should be getting bored.  They should be getting tired of showing the same thing every... single... time.

When it comes to your business card, boring is OK.  In fact, whenever you're talking to someone about what your business does, boring yourself is actually a good thing.

You should be saying the same thing over and over and over.

Note that I said “boring yourself,” not “boring the other person.”  Just because you've delivered the same message a thousand times doesn't mean you can't muster some passion.  This is your business after all.

Stick with the core messages

Once you’ve figured out the core value proposition and messages - who should be buying your solution, what problem does it solve, and why is it better than alternatives - you should tell that same story... every time, everywhere.

Why? 

Because the folks who you want to hear your message are hearing lots of other messages along with yours.  They’re positively bombarded with messages.

Repeating your message consistently is the only way that your value proposition can possible get through.  It's the only way people will remember it.

They should see it on your website, your blog posts, your presentations, your demos, your ad campaigns, and yes, even your business cards.

Staying on script improves impact, saves time & money

Believe me, I’ve been doing marketing for a long time and I understand the urge to step out, go off script, get a little crazy. 

And by the way, it’s perfectly OK to be creative.  There are ways to present the same fundamental message in different ways.

But if you wander from the basic message, you’re losing impact and squandering resources. 

If every time you want to prepare a video, a press announcement, a white paper, or any other kind of marketing material, you need to figure out the basics - who’s the audience, what’s the problem, how do we solve it, why should you buy from us - you’re going to waste a lot of time and money.

That’s bad for all companies and especially bad for software-as-a-service (SaaS) companies.  They have no time and no money to waste.  (See "SaaS customer acquisition:  Feed it or starve it?")

SaaS companies are much better off developing a compelling value proposition and message... and sticking to it.

Sure, the same message every time can get boring to you.    But you are not the person you’re talking to.

Tuesday, September 2, 2014

A Free Trial Isn't Really Free

Free, free, free. 

It sure is a powerful word.  Which probably explains why “free trial” is used so often by software-as-a-service (SaaS) marketers.

Lots of SaaS solutions, whether they’re for business or for personal use, let prospective customers use the solution for free.  And then after 15 days, 30 days, maybe 60 days, they ask them to actually pay for it.

(For now, I’ll focus on free trials.  I’ll leave the subject of “freemium” or “free forever” for another day.)

Here's one reason free trials are so common:  they work.  They can attract lots of users, and even lots of paying customers, if they’re done properly.

I’ll let you in on a secret about free trials, though.  They’re not really free.

Not free for solution providers

Free trials cost money for the SaaS providers.

There’s the cost of developing, hosting, and maintaining the solution. 

There’s the cost of supporting the solution if you offer help to the  trailers.

There’s the cost of attracting prospects to the free trial in the first place.  Search engine optimization, pay-per-click, email, PR, or whatever other tactics you’re using to drive people to find your free trial cost time and/or money.

And then there’s the cost of trying to convert the free trialers into paying customers.  Whatever you’re doing, it’s not free. 

If you’re not doing anything to convert trialers to paying customers, we should talk... soon.

Not free for the customers

Free trials aren’t really free for prospective customers either.

It takes time for them to find the solution and figure out if it’s something worth trying.

It takes time to register and then download the solution.

It takes time for trailers to learn to use the solution

And then it takes time for them to input some data and actually work with the solution enough to see
any value in it.

None of these activities are costing customers cash out-of-pocket.  But their time isn’t free.  

These prospective customers evaluating your solution are busy folks.  They've got a long list of things to take care of during the course of a day.  If they want to use the free trial, they’ll need to make time to do that.

By the way, if the folks using your free trial have all the time in the world, you might wonder whether they have the authority and budget to eventually make a purchase.

Think before you go free

If you offer a free trial, or you’re considering one, keep the costs in mind… both the costs to you and to the customer.  Ignoring them usually leads to failure... namely, high costs and low revenues.

Free trials, done well, can be effective.  But they’re not really free.

Monday, August 4, 2014

The human touch wins SaaS customers


Lots of smaller software-as-a-service (SaaS) businesses are tempted to try to sound “corporate” or
hide their real personality when they talk to prospective customers.

They act impersonal, like some alien borg.

They think that “sounding bigger” makes them more credible.

It's a bad idea that usually doesn’t work.


How can I trust you?

It’s hard to gain the trust of prospective customers if the provider is faking it.  People usually see through that.

And it's hard to sell SaaS without trust.

When customers buy a SaaS solution, they’re not buying a product;  they’re buying a promise.  They are relying on the vendor’s promise to deliver certain functionality and service over the life of the subscription. 

Which means that before they subscribe, the customer needs to trust the provider.   They need to believe that the SaaS provider will deliver as promised.


Instead of faking it, SaaS companies would be better off acting naturally.  If a company is smaller, friendlier, and can treat customers with a more personal touch than its larger competitors, it should flaunt it, not hide it.


The buyers are also the users
 
The prospective customers care about the kind of people they'll be working with over the life of the
subscription.

Whether they're in HR, sales, marketing, finance, or somewhere else in the organization, the people that are evaluating the SaaS solution before its purchased are often the same people who will actually be using the solution after its purchased.  There’s often no “intermediate buyer” in IT or procurement.

What that means is that the people making the purchase decision will also be considering the “personality” of the SaaS provider.  Besides thinking about features and functions, they’ll be asking themselves, “Are these the kind of people I’m going to want to work with if I subscribe to this solution?”

In most cases, they'll prefer friendly, personable experts over an impersonal, corporate borg.