Sunday, July 6, 2014

SaaS Marketing is Not a Numbers Game

"If we just dump enough names in the top of the funnel, some paying customers are bound to come
out at the bottom of the funnel!"

Wrong.

This approach to customer acquisition - sucking in as many suspects as possible - is costly and inefficient.  In other words, it's a very bad fit for software-as-a-service (SaaS) companies.

For one thing, collecting all those names isn't free.  Adword campaigns, website optimization, list purchases, or any other tactics you might use to attract possible leads cost money.

And then cultivating those contacts - qualifying and nurturing them into legitimate opportunities - costs even more money. 

Working on bad leads actually costs money; it doesn't make money.  (See "When Lead Generation is a Bad Thing.")

Low yield doesn't work for SaaS

This "strategy" - pull in as many names as possible and then hope that at least a small percentage of them eventually convert to paying customers - creates a tremendous strain on the SaaS business model.

On the expense side of the equation, it means substantial sales and marketing costs that are incurred up front.

On the revenue side, it means small and uncertain income collected over a period of time.

Relative to expenses, revenues are too low and too slow.

Timing vs. quantity
 
The goal is not to get as many names into the top of the funnel as possible. 

Instead, companies should be trying to get the right names into the funnel and move them through it as quickly as possible.

SaaS success requires turning "suspects" into paying customers as quickly and efficiently as possible.  The goal is to shorten the conversion cycle.

SaaS customer acquisition is actually a timing game, not a numbers game.