Why are you paying for marketing?

Most months I take only a cursory glance at each of my recurring bills: phone, internet, cable, electricity. If the charge looks to be about the same as I paid the previous month, I pay it.

But for the first bill of the year, I make it a practice to look more carefully. Under this annual scrutiny, I saw that my January land-line phone bill included a $6.99 charge for "inside wire maintenance." It's insurance that covers me should hungry squirrels nibble on the phone wires inside my walls. Yes, I know I'm paying $84 a year for something that's very unlikely, but that's not my point.

At the time we moved to this phone service provider about 15 years ago, I made a conscious choice to purchase "inside wire maintenance." And once per year when I scrutinize the bill, I ask myself again, "Why am I paying for this service ?," and I make a conscious choice to renew.

From time to time, you should ask yourself this same question about your marketing programs: "Why am I paying for this?"

Software-as-a-service (SaaS) providers are spending a lot on marketing. Why? What are they getting for their money? What should they expect?

Let me suggest a few answers:

1. Marketing helps revenues. Effective marketing should have a positive impact on winning new business or keeping existing business. In fact, if marketing isn't driving revenue, either directly or indirectly, don't pay for it.
2. Marketing tells your story. Good marketing people can clearly explain what your company makes and why people should pay you for it. This story - your value proposition - is different from explaining how your product works.
3. Marketing helps you win positive recognition and generates trust. People buying SaaS solutions in particular need to trust you. With a SaaS solution, customers are not just buying a product; they're buying a promise, a promise that you'll deliver services over the life of the subscription.
4. Marketing accelerates the sales process. Effective sales enablement tools - a web site, presentations, collateral, on-line demos, case studies, etc. - move prospects toward a purchase. And they should do it more cost-effectively than, say, a direct sales force working without marketing support.

By the way, the voluptuous redhead pictured here is Calliope, the Greek muse of Epic Poetry, a darned good storyteller in her day. That was before they called them "marketers."

Ideas that work... and don't cost much

A few months ago, when discussing which marketing activities work and which don't, I confessed "I do not know."

Let me clarify. Actually I do have a few ideas. I'm not sure if they'll work for every software-as-a-service (SaaS) company, but they're at least worth thinking about. Importantly, they're relatively inexpensive to try.

I was prompted to think about these low-cost ideas by a very thoughtful post from David Skok of Matrix Partners, entitled "Startup Killer: The Cost of Customer Acquisition." He points out that most young SaaS companies haven't given nearly enough thought to customer acquisition costs. With a wonderfully simple diagram, he illustrates what happens when those customer acquisition costs (CAC) are wildly out-of-line with the long-term value (LTV) derived from the customer.


Source: David Skok, "for Entrepeneurs" blog

I don't remember much about levers and fulcrums from my high school physics course, but even I can figure out that the Customer Acquisition Costs on the left need to come down. Here's where I'll offer a few ideas.

• Use blogs, email newsletters and other online media to build visibility. If you offer valuable content (read "not overtly promotional"), prospects who are actively looking for solutions will find you. And many of these online media provide a low-cost delivery mechanism for your content. (I don't pay a dime to deliver this blog!) It takes time, but not much money.
  
• Put all your material online. Print only in small batches and only when absolutely necessary. Save trees and save money.
• Demo your product online. It will make it easy for prospects to see how it works and eliminate some of the need for expensive one-on-one demos. You can build these online demos yourself with tools like Camtasia or work with an outside firm for a more professional look.
• Do local events. Sometimes in-person marketing events can be effective, especially to reach enterprises. It's also a welcome break from the 100% web world. But eschew the big, expensive shows and focus instead on local, targeted gatherings. CCNG, for example, hosts local events for contact center managers.
• Support an online community of customers. Provide a place to share best practices, show tips & tricks, and build loyalty. You'll offload some of your support needs, develop a pool of enthusiastic references, and ease the renewal process.

You'll still need to spend time and money to develop compelling content. Clearly explaining "what your company makes and why people should pay you for it" is a necessary investment. But you can take advantage of inexpensive ways to deliver it.

Besides offering these low-cost tactics, I'll also take this opportunity to reiterate the key prerequisites for any marketing program:

• Set appropriate goals. A sure way to waste money on customer acquisition is to generate more leads than you can handle.
• Measure the cost-effectiveness of every individual program and make adjustments as needed.
• Understand your pipeline. You need to know where deals are getting stuck, so you can make smart choices about where to apply resources.

So SaaS providers be warned: customer acquisition will be expensive. Even well-established vendors spend 30% or more of their annual subscription revenues on sales and marketing. The good news is that if you're careful, you can get a lot for your money.

Make it Easy to Deploy

"Some Assembly Required." Three terrifying words for the "screwdriver-challenged." To those moms and dads who may have just lived through the experience, I'm sorry for reviving ugly memories.

What's scary about bikes, dollhouses and the Wii is scary for software-as-a-service (SaaS) solutions, too. The folks subscribing to SaaS solutions do so, in part, to avoid hassles. That includes not just hardware hassles and upgrade hassles, but implementation and deployment hassles, too.

SaaS providers should consider ways to minimize that implementation hassle for their customers. I recently talked to a company selling a SaaS solution to help non-profits manage fund-raising. They've put in place a standard implementation program that they offer along with their subscription. Under the program, a project manager walks the customer through a standard set-up process - migrating donor information, graphic design, automated email set-up, etc. - and holds their hands through the first few months of usage.

The company reports that these implementation services have been received well by customers and removed barriers to selling. It works especially well for organizations that don't have a dedicated resource to manage the system. That lack of a dedicated resource is likely the same reason these organizations were attracted to a SaaS solution in the first place.

This issue refers back to one of my "SaaS Marketing Essentials: Do's and Don'ts," namely "sell the entire service," not just the features, narrowly defined. Besides adding lots of functions, make the solution easy to buy, easy to deploy, and easy to renew. And tout those "easy's" as part of the total value proposition.

By the way, I have no idea what you should do with the handful of nuts, bolts, and washers leftover after assembling that bicycle, but I'd suggest your child wear a helmet and avoid steep hills.