Saturday, September 10, 2016

Your prospects have a day job

Just because you may be spending all your time trying to market and sell your solution, doesn’t mean your prospective customer is spending all their time evaluating it.

These prospects have other things do to.  In most cases, the person looking at your software-as-a-service (SaaS) solution isn’t assigned full time to evaluate and buy new software for the business.

Instead, they're accountants working in Finance, recruiters working in HR, or sales managers trying to hit their quota.

Or if you sell into a particular vertical market, they might be property managers dealing with tenants, consultants working with clients, or dentists treating patients.

Evaluation is an on-again, off-again process

Rarely do they have days or weeks to pore over every feature and function.  And their research is often interrupted, so they can only focus intermittently.  One minute they’re carefully considering your solution, and the next minute there’s something more pressing that’s grabbed their attention.

Even when they sign up for a free trial, most prospects will only spend a couple of hours actually trying out the product.

It's not that they don't care.  They know the solution may be critical to their business and that making a bad choice will be painful.  The problem is that they simply don't have a lot of uninterrupted time to do a thorough evaluation and make a purchase.

With so little time, in fact, they often end up doing nothing.  When I talk to “lost prospects,” many of them aren’t really “lost” at all.  They’re just “on hold” and haven’t made any decision at all yet.

I’ve learned a few lessons on how marketers can reach busy prospects like these.

Stay in front of prospects over a long period

Because your prospects can only focus on your solution in a bit of time here and a bit of time there - and you’re not really sure when exactly when that bit of time will be - you need to stay in front of them over a long period.  When they’re ready to refocus on finding a solution, you want them to remember you.

By the way, when I talk about staying in front of your prospects, I’m not saying deluge them with spam.  Educational material on best practices or industry trends will usually make a better impression than a stream of promotions.  And of course, offer an easy way to opt out.  (See "Content:  More isn’t always better.")

Provide a clear path for them to take the next step  

In your communications, make it easy for the prospect to signal that they’re ready to take the next step.  Provide a form, put up a “Chat Now” box, or post a toll-free phone number.  Lead scoring and other techniques can help you know when prospects are ready, but sometimes they’ll just tell you themselves.

Do it cost-effectively

To make this “stay in front of them for a long time” approach work, you need to keep your costs under control.  SaaS companies need to pay close attention to the cost of acquiring customers.  Staying in contact via email, newsletters, and webinars might be more cost-effective than other means. 

Save the more expensive outbound calls for prospects who have already signaled that they’re ready to talk directly with someone.
 
Be ready when they’re ready

When prospects do signal that they’re ready to talk about a purchase, make sure you’re ready too. If you drop the ball here and ignore prospects that are eager for attention, that’s frustrating for them and lost sales opportunities for you.

Someone should be available to quickly answer their email, pick up the phone, or respond to the “Tell me more” form.  The window of opportunity is open for only a short while.  (See "SaaS buyers are quick to buy.") 

Selling solutions to busy people is a challenge, and for most SaaS solutions, you’re always selling to busy people.  I’ve found, in fact, that when a prospect does have lots of time on their hands, they’re usually not very a good prospect.




Saturday, August 6, 2016

To deliver a consistent message, you need a script

Here’s the easiest way to waste your marketing budget:  spend money to promote your message… before you know what your message is.

Until you’ve developed a compelling and consistent value proposition, there’s no sense in broadcasting anything out to the world.

Unfortunately, I see this all the time: a beautifully designed website, a well-produced video, or a clever email campaign that doesn’t clearly convey the company’s message.  They make the prospective customer work way too hard to figure out what’s being sold and why they might buy it.

And to make matters worse, often each of these marketing deliverables tells a different story.  It’s tough enough to make an impression on a prospect; it’s almost impossible if you deliver a different message every time you get in front of them.

Without a consistent and compelling message, none of your marketing programs has any impact.  The money spent on search engine optimization, paid search, email campaigns, webinars, events or whatever else you do to promote your company is wasted.  

And in the software-as-a-service (SaaS) world, wasting the sales and marketing budget is a quick ticket to failure.  (See "Bad leads cost you money").

What should someone buy your product?

Here’s the good news:  the problem is fixable.   But it does require work.

For one thing, you need to think hard about what your value proposition really is.  Who should buy your solution and why?

Hint:  it is not just a list of features, no matter how long or technologically sophisticated.  
 
The value proposition needs to clearly specify:
  • The target market:  The target audience should know “Is this solution designed for me?”
  • The key features and benefits.  “Does this solve my problem?  Why would I spend money on it?”
  • The advantages over alternatives.  “Why should I buy this solution from you?” 
 
Write it down!
But once you’ve thought through a compelling value proposition, you’re not finished yet.  There’s an important second step:  Write it down.

You should prepare a written document.  When I work with clients, I call it a “Value Proposition and Messages” document.  Sometimes they call it a “Messaging Bible.”  It comprehensively addresses all the key issues:  target market, key features, benefits, and advantages.  And it’s all in a single place.

Depending on your market and solution, the full “Value Proposition and Messages” document could run more than a dozen pages.  However, it should also include a one-page “boilerplate” description and a concise one paragraph version that can be added on to press releases or email signature lines.

Required reading

Before anyone prepares any marketing material - website copy, white papers, videos, whatever - they should first consult this document.  That way, they’ll know exactly what messages they are expected to convey.  They won’t be making it up as they go along.

Of course, the value proposition can be adjusted over time as conditions in the market change.  But it’s not something you want to be constantly tinkering with.  Get the messages right, and then use them over and over and over.  Consistency is a good thing.  

Working from a single written document makes it easier to be consistent from one marketing deliverable to another.  Everyone is working from the same script.  The website, videos, and webinars, all sound like they’re from the same company, promoting the same solution.  Wherever and whenever a prospective customer sees you, they get the same message every time.

Saturday, July 9, 2016

Nothing simple about SaaS benchmark metrics

There are lots of simple questions about SaaS that don’t have simple answers.  Here are a few I hear all the time:
  • How much should I spend on sales and marketing to acquire customers?
  • How many leads do I need to attract?
  • What’s the right leads-to-paying customer yield?
  • What’s an acceptable level of attrition?
There are certainly plenty of surveys and published benchmarks on SaaS metrics that try to provide 
guidance.  Just do a Google search on "SaaS conversion funnel." 

And some of the rules-of-thumb you'll find can be helpful.  For example, it’s tough to make the SaaS business model work when attrition exceeds 10 percent.

Use caution with rules of thumb

But you should be careful not to take these SaaS benchmarks as gospel.  Just because they apply to some SaaS businesses doesn’t necessarily mean they apply to yours. 

Though some survey may show, for example, that 50 percent of leads should convert into paying customers, it’s easy to imagine a scenario where a business could succeed with only a 20 percent conversion, or at the other extreme, a scenario that requires an 80 percent conversion.  

Focus on CAC/LTV and payback period

Ultimately all that matters is this:  Can you earn back more than you spend to acquire a customer, and how long does it take to do that?  

It’s all about the average customer acquisition cost (CAC)/long term value (LTV) ratio and the payback period.  (I've written about this in "Acquiring customers ain't cheap" and elsewhere.  David Skok and others have also written about the topic at length.)

Realistically, a successful SaaS business cannot afford a CAC/LTV ratio that's greater than 1.  You cannot invest $1 in sales and marketing expenses and get 75 cents in return.  If you put one dollar in and three dollars come out, that's good.  One dollar in and ten dollars out is even better.  In any case, the LTV must exceed the CAC, eventually.  

The payback period tells you more precisely how long “eventually” is.  The longer the payback period, the deeper your pockets need to be to sustain the business.  SaaS companies that can recover their customer acquisition costs in less than one year, for example, need less capital than those that require three years.

No single "right" answer

Working within those guidelines however, there are plenty of ways for a SaaS business to succeed.  A
company with a high subscription price and long subscriptions can afford a high customer acquisition cost.  It could succeed despite low conversion rates and high attrition.  For them a lead-to-paying customer yield of 10 percent and attrition of 20 percent, for example, may be sustainable.  Obviously, there’s an opportunity to operate more efficiency, but a high LTV can cover a lot of sins.

At the other end of the spectrum, a company with lower subscription prices and shorter subscription terms needs to be much more efficient with its customer acquisition spending.   To succeed, it may need to hit a lead-to-paying customer yield of 40 percent and attrition below 5 percent.  For them, operating at optimum efficiency is critical for survival.

By the way, if your company finds itself at either of these extremes - or somewhere in the middle - give me a call.  I may be able to help you get more from your investment in sales and marketing.

I wish there were simple answers to some of the basic questions... but there really aren't.  There’s no “right” level of spending to acquire customers, no “right” leads-to-paying customer yield, and no “right” level of attrition.  It all depends on your particular business and your particular market.

Saturday, June 4, 2016

Content: More isn’t necessarily better


When it comes to content marketing, more isn’t necessarily better.  If one blog post per month is good, it doesn’t always follow that two posts will be really good.  In fact, it might be worse.

Don’t get me wrong, I’ve seen content marketing work.  It can be especially effective for software-as-a-service (SaaS) companies that need to keep customer acquisition costs under control.  If you provide good content - blog posts, newsletters, white papers, webinars, infographics, etc. - prospective customers are more likely to find you.  And that’s usually a lot less expensive than you trying to find them. 

Quantity vs. quality

But effective content marketing work doesn’t mean pushing out a deluge of content.
For one thing, producing good content isn’t easy.  I mean “good” in the sense of “useful to the intended reader.”  You want them to find some value in the material.  Prospective customers should be impressed with your expertise, not your word count.   

Some folks can crank out useful content day in and day out, but unless you’re Dear Abby, it might be better to give yourself more time to pull together your thoughts before publishing.

Over-burdening your audience

You should also think about content from your readers’ perspective.  Even if you do have the skill and bandwidth to crank out lots of content, do they have the bandwidth to read it? 

Remember, in the SaaS world, the person you’re targeting is usually a very busy person.  Besides evaluating solutions for their business, they have another full time job.  While they’re thinking about HR software, they’re also running the HR department.  While they’re considering marketing automation software, they’re running marketing campaigns.  Or while they’re evaluating, financial management solutions, they running Finance.  It’s not like they have all day to read, watch or listen to everything you push out during the course of a day or a week. 

A few thoughtful pieces are far more valuable to your prospective customers than a non-stop barrage.  There is a line between helpful content and spam.



Saturday, May 7, 2016

Looking for customers in all the wrong places

When asked why he robbed banks, Willie Sutton explained “because that’s where the money is.”

Not that marketers are bank robbers, but the same idea applies to finding prospective customers.  If
you want to get their attention, you need to go where they are.

If you’re at they'll never look, it’s unlikely prospects will see you.

This idea certainly sounds logical.  In fact, it may sound blatantly obvious.

So why do so many companies ignore it?  Why do they spend time and money on marketing activity that doesn’t get them in front of prospects?  

It’s not that they have money to burn, especially if they’re software-as-a-service (SaaS) companies.  For these companies, spending too much on customer acquisition costs is a ticket to failure.

Infatuation with shiny new objects

One reason I’ve seen companies spend money to be in the wrong place at the wrong time:  an infatuation with novelty.  They’re mesmerized by new marketing tactics and channels.  

Right now, most of the new and novel techniques are intended to generate visibility online.  Companies are spending a ton of money, for example, on search engine marketing and social media marketing.  I’ve seen companies posting multiple blogs post per week, regularly updating their Facebook pages, pushing out a steady stream of tweets, and doing lots of whatever you’re supposed to do with Pinterest.

I won't dismiss these things out of hand, and neither should you.  But if your customers aren’t paying attention to these social media channels, most of your work there is wasted.

If a prospective customer is looking for a SaaS solution that’s critical to their enterprise, something they’ll be spending thousands of dollars on, are they really going to be looking for it on Facebook?

There are some products and markets where a social media campaign is a perfect way to get in front of prospects.  But they’re not always a good fit for enterprise SaaS solutions.   

And by the way, while marketers are fixated on new tactics, they’re probably overlooking some tactics that may be old, but may be much more effective for them.  I’ve worked with clients that have found that participation in well-selected trade shows or USPS mailings- yes, snail mail - can attract lots of qualified opportunities.

Don’t know where the prospects are

Here’s another reason companies look for prospects in all the wrong places:  They just don’t know the right places.

Marketers can make all kinds of guesses about their prospects’ thought processes.  And some of these
guesses are fairly sophisticated and involve deep demographic and behavioral analysis and the development of detailed “buyer personas.”

But sometimes all this analysis doesn’t give much guidance on precisely where you might find these prospects.  When they're considering a new solution, where do they go, what do they look at, and who do they talk to?

When I work with clients to build an effective customer acquisition program, I often talk with prospects and I simply ask these questions.

Sometimes they’ll talk about searching online, but often they’ll mention a particular trade show or

publication.  And sometimes I hear of totally unexpected sources.  I’ve worked with a client whose customers have found them through state-mandated licensing classes.  Another client found that one particular independent newsletter writer was virtually required reading for people in their market.

Once we figure out where these prospects go when they’re looking for a solution, it’s a lot easier - and less expensive - to get in front of them.

Saturday, April 2, 2016

Why Drive-by Marketing Doesn’t Work

So you’ve just shipped your new software-as-a-service (SaaS) solution, and for sure you’re eager to tell the world:  get out a press announcement, roll-out a search engine marketing campaign, sign-up for industry events, and whatever else you can think of.

Here’s some advice:  Slow down.

As tough as it is to resist the urge to do something, hold off a bit before going full blast with all this marketing activity.

And if you’ve already started, hang on and take a deep breath.  You may have already found that all this activity isn’t delivering the results you were expecting.  The hodgepodge of tactics and the drive-by approach is taking up lots of time and costing money, but at the end it’s not generating much business.

When SaaS companies find themselves in this bad spot, there’s usually two culprits to blame:  
  1. A poor message
  2. No plan.

The prospect doesn’t really care how your solution works

I’m sure you can do a great job explaining how your solution works and what each of its functions do.

But the prospective customer has other issues on their mind, such as:
  • Who is this for?
  • What problem does it solve for me?
  • Why is it better than alternatives?
It doesn’t really matter how well you execute on a search engine marketing plan, direct mail, or other tactics.  Without a well-thought-through value proposition and messages that answer these questions, the prospective customers won’t respond.  They really don’t care.

Activity without a plan doesn’t move you forward

Just because you’re scrambling to execute on all kinds of marketing activities doesn’t mean you’re making any meaningful progress in the right direction. 

Effective customer acquisition requires a well-structured plan.  It needs to walk through each step of the evaluation and purchase process:
  • Build visibility and generate leads
  • Convert leads into qualified prospects
  • Close prospects into paying customers
  • On-board customers
  • Retain and upsell
Drive-by marketing is unlikely to get prospects through this entire process.  Instead you’re likely to be stymied by bottlenecks and gaps.  Perhaps you’ll generate a huge volume of leads, but find yourself with no mechanism to convert them to prospects, or you'll close a steady inflow of new customers, but have no way to make them successful and retain them.

You can experiment with a whole range of marketing tactics.  There are no hard and fast rules about what might work for your particular audience.  But without a compelling value proposition and a well-structured customer acquisition plan, you may be just wasting time and money.

Saturday, March 5, 2016

Competing in a crowded market

First a confession.  Every once in awhile I get a call from a SaaS company looking for help with their customer acquisition plan, and my first thought is "Are you kidding?

The company tells me that they've developed a wonderful solution with a boatload of impressive features.

But they're selling into a market that's already crowded with other vendors.


Just what the world needs - another HR or CRM or email marketing or whatever solution.

Finding an unmet need, a hole waiting to be filled

But on second thought, I think maybe there's a way for this to work after all.  Maybe we can make the case that the world does, in fact, need another solution.

The challenge is to figure out a way to present this new solution as something different and better than the other choices that are already out there.  We need to determine if there's an important unmet need in the market that this new solution can fill.

Sometimes being late is an advantage

By the way, sometimes there’s an advantage to being a late-comer to the market.

The early entrants have already done much of the missionary work, educating the market and customers are already familiar with the category.

Having had more experience with other solutions, the customers may better understand their needs and preferences. It’s easier to determine what’s really important to them.

A late-comer can also learn from the experience of the established vendors and avoid their mistakes.

Tough to differentiate on features or price

Sometimes, companies’ first inclination is to try to differentiate themselves on features.  “Our solution has this function and the others don’t.”

Unfortunately that’s hard to pull off.  For one, getting prospects to carefully evaluate all their choices feature-by-feature can be tough.

Besides, since SaaS companies can develop and deliver new functions fairly quickly, it’s hard to sustain this advantage for very long.

Others will consider positioning themselves as the “lowest price” solution.  There are ways to make this approach work, but it can present challenges, especially when competing against larger, more established vendors that have deeper pockets and can match the low prices.

Lots of options to look different and better

But there’s no reason for SaaS companies to limit their differentiation options to just features or pricing.

They could, for example, decide to position themselves as the vendor providing the best support or expert guidance.

Or they could highlight the fact that they specialize in a specific industry or market, and they better understand the needs of those particular users.

Or they might consider making a virtue of their smaller size and claim that they are more attentive to each user.

Or… whatever other benefit that might be valuable to the prospective customer.  (Contact me if you need help figuring that out.)

If you’re competing in a crowded market, trying to stand out from the rest isn’t easy… but it’s usually not impossible.