What Is SaaS Marketing? - The Full Guide
SaaS marketing is a type of marketing that's designed to promote software-as-a-service products. Any kind of SaaS business including subscription-based service, web-based software, and hosted software application can benefit from this marketing strategy.
Since SaaS companies sell intangible products, SaaS marketing strategies such as free trials and product demos enable businesses to let their client test the product before purchasing it.
So, how is SaaS marketing different from any other kind of digital marketing, and why do you need specific marketing strategies to market SaaS products? This guide answers those questions and more.
How Is SaaS Marketing Different From Digital Marketing?
SaaS marketing is different from digital marketing. Digital marketing uses online channels to sell a product and repeats that sales cycle to attract a new client. In contrast, SaaS marketing focuses on building strong customer relations with each customer by selling the same service each month, which ultimately helps generate recurring revenue.
SaaS marketing is different because you're not making a one-off sale. In this model, you need specific marketing skills to create lifetime value for your customer. For instance, if you're marketing your product through a subscription-based model, you will need to show your customers that your SaaS product is worth the monthly payment. It also means that you need to keep your product up to date and offer regular incentives to stay ahead of your competition.
In a nutshell, SaaS marketing requires a different mindset and approach to attract, sell, and retain your customer.
SaaS Marketing Strategies
From what we've discussed, it's clear that SaaS products are marketed to specific clients who are willing to sign up for the long haul. To sell the product, the SaaS marketing strategy mainly constitutes three steps, and each of these steps requires a different marketing approach.
Here are the three stages:
- The first step is finding customers who will pay you every month for your service. You can use a variety of marketing and sales strategies to get these leads.
- The next step is to market your product to those customers so that they have enough information to make a purchase decision. The marketing is done both off-site and on-site. Off-site marketing entices the potential client to visit the website, whereas, on-site marketing methods try to close the deal when the customer is reviewing your product online.
- Retaining your existing customers is the final step. At the time, you can cross-sell by giving your existing customers specific discounts that may entice them to upgrade their accounts.
As you may have guessed, successful SaaS providers use different marketing strategies at every sales funnel stage. This guide will discuss the three segments in detail, but before starting the marketing initiative, there are two important things to verify.
First, you must ensure that your platform has sufficient information for the visitors to understand what makes your product unique. Remember that most SaaS customers look at different suppliers and products before making their selection. Therefore, your website should clearly state your unique selling proposition. This is the only way to seal the deal as quickly as possible.
Secondly, your website should be optimized for conversions and easy to navigate. No matter where your customer finds themselves on your website, you must keep them interested by using different types of CTAs, or calls to action. These CTAs can incorporate free trials, a subscription to the newsletter, or a request to follow your service on social media. It's the only way you can get back to potential customers even if they didn't subscribe to your service.
Once you have these elements in control, you're ready to go full steam ahead
Now, here's information about finding customers who will pay you every month for your service — the first step.
How to Get Leads for Your SaaS Business
The first step is lead generation. SaaS leads are not your usual leads. Instead, your prospective clients are people who are actively looking for your service, people who may decide to switch after reading about your product, and people who are not satisfied with their existing provider. You need a different strategy to access each group.
Among the three, finding the first type of client is fairly easy. You can use traditional marketing methods to find leads that match the ideal buyer persona. Placing ads on internet forums and using inbound marketing such as giving free trials is one way to attract them.
The second group is people who are using a similar service to yours. You want them to switch because these individuals are already giving cash to your competitor every month. In addition, they already have the technical know-how about the service you offer. If you can find them, the onboarding process is much easier, and upselling them should be a breeze.
When marketing to the second group, stay away from buying third-party leads to target them through email marketing. Due to overwhelming spam and multiple marketers using such lists, your message will most likely end in the trash. Instead, write blogs and engaging content to grab their attention. If your product is high-quality, you will see a steady stream of people switching services and coming your way.
The third and often ignored group is targeting disgruntled customers who are not satisfied with their existing service. Unlike the other group of customers, this is a hard nut to crack. These customers are not convinced easily because they had their share of bad luck and poor customer service.
For that reason, you need to gain their trust. And, there is no better way to revive trust than using influencer marketing. These influencers can talk about your service and address specific sales pain points using their websites, social media channels, webinars, and podcasts. Eventually, you will get fresh, enthusiastic, and eager leads who have already made up their mind.
Now that you have a basic idea about SaaS leads, here's a review of some of the best strategies to market your service.
How to Market SaaS Products
Most SaaS marketing strategies are done off-site. However, you can also structure your website content to promote your product to website visitors. Here are the top five marketing tips that use at least one of the methods:
Use Pay-Per-Click Advertising: If you can write a good ad copy, use PPC ads to laser-target your customer profile. According to a recent study, almost half of the clients that click on a mobile PPC ad call the advertiser. If this seems a bit exaggerated, there is also no denying the fact that paid ads convert much better than organic results. Therefore, it's a no-brainer to use PPC if you have the budget to pay for targeted ads.
Use a Transparent Pricing Structure: When marketing SaaS products, use a transparent pricing strategy that is consistent across the board. Also, avoid marketing gimmicks because customers don't like seeing two different versions of the price.
Similarly, you should not advertise a monthly price based on 12 months of subscription. These days, everyone picks up this gimmick, and it can negatively impact your reputation. If possible, put your monthly and yearly prices side by side for a clear perspective.
Use Search Engine Optimization: If you don't have the marketing budget to do PPC or you don't feel comfortable with pay-per-click ads, hire a SaaS marketing agency to do the SEO. While you may not get immediate results, it will definitely help you target your ideal customer and receive consistent traffic in the long run, free of cost.
Give Product Trials: Everyone loves free trials; don't you? If possible, give website visitors the option to test your product. While there are no specific rules dictating the length of such freebies, keep them short. In most cases, one or two weeks is enough for most people to try it.
Similarly, the free trial (freemium) must ask for a credit card. It shows that you're not selling a cheap product, and you also want the other party to take you seriously. In any case, send a reminder to everyone who is using a free trial to cancel the service so that they're not charged. As a courtesy, your product marketing team should ask them if they want to extend the trial for another week. The positive gesture will go a long way in building your reputation and brand awareness.
Use Three- or Four-Tiered Pricing: Your pricing tier structure and related subscription details should be short and to the point.
Under most circumstances, three subscription tiers should do nicely. If required, you may add a fourth tier for high-end and b2b SaaS businesses. Some business models also use a freemium plan.
For best results, only place the most important features in the pricing table, and let website visitors surf your website to seek additional benefits.
How to Sell Your SaaS Service
From the perspective of a SaaS platform, selling strategies are mainly used once the customer is actively surfing your website. Sometimes, you can use both marketing and selling strategies simultaneously; however, it's not the norm.
Here are some neat tricks to sell your service and improve your conversion rate:
Use a Landing Page: A landing page offers website visitors all the vital information on one page. It’s designed to dictate the pace of customers by keeping a balance between what they want to learn and what you want to tell them. Not everyone can write the content of a landing page. To make this content marketing strategy work, you will need to hire a good copywriter who knows how to sell a product by tweaking the product's description.
Create a Comparison Table: The comparison table serves a dual purpose. First, it tells visitors that you’re better than your competition. Secondly, it prevents customers from visiting your competition, which you don't want. If you think that your product is better than your competition, compare your service and theirs side-by-side.
Before creating a table, make sure that you’re publishing accurate figures about your competition. To do this, carefully evaluate a competitor’s website and keep relevant stats updated. To prevent unwanted scrutiny, it’s also a good idea to publish the date of the last observation. It will protect you if any updates go unnoticed since the last observation. Another good business practice is to put a disclaimer under the chart.
Use Video Demonstrations: Video demonstrations can be used as an alternative to a free trial. You can use such videos to highlight your product, the user interface, and other important platform functions.
Your landing page is a good place to put a couple of these videos; however, demonstration videos should be super-short, less than three minutes, so that your visitors can stay focused on the actual message. Since videos often behave inconsistently on different browsers and mobile platforms, it's also recommended to use captions on your video. Captions let viewers understand the video content despite a clunky interface.
Keep Your Sign-Up Forms Short: If you've succeeded in convincing your targeted audience to sign up for your service, a lengthy sign-up form is the last straw that can easily put them off. This is why your marketing team should make every effort to streamline the sign-up process.
A good starting point is to ask for only the most vital information because you will have plenty of time to get other credentials at a later stage. Also, make sure to get the subscriber's email address, so you can retarget them using ads and webinars if required.
Use Live Chat: Of all the sales features, customer service always stands out. Traditionally, phone support was the preferred method. Now, live chat has replaced it to become the most cost-effective and manageable customer service asset.
Numerous case studies from B2B SaaS marketing companies also show that the majority of customers still expect an immediate response to their inquiries. Under such conditions, live chat is very effective because it solves most problems within 42 seconds. The only downside to the chat is the scripted response used by some companies, which is often extremely annoying and out of context. In this case, it's better to publish FAQs instead of irritating your prospect.
How to Measure SaaS Marketing
SaaS performance metrics are vital signs that tell you how successful you are in acquiring customers and retaining existing clients. There are a lot of different key performance indicators; however, this guide will only focus on the top five because they're enough to establish the success or failure of SaaS marketing campaigns. Here is the list:
Churn: Customer churn indicates the number of customers who cancel your subscription in a given period. It's usually calculated every month. A good rule of thumb is to keep your churn rate less than 5%.
Churn is calculated by dividing the number of customers who've canceled their subscription this month by the total customer count at the beginning of the month.
Churn rate = (Total number of customers who've canceled this month / total subscribers at the beginning of the month) x 100
- Monthly Recurring Revenue
Monthly Recurring Revenue: MRR is the revenue that the SaaS company generates in a given period. It is calculated by taking the number of total accounts for the month multiplied by their rate in dollars per account.
MRR = Total number of accounts for the month x rate in dollars per account
It’s important to note that MRR is calculated differently than ARR (annual recurring revenue.)
- Customer Lifetime Value
Customer Lifetime Value: CLV determines the total amount of money that your SaaS business is expected to receive during the lifetime of a customer. The easiest way to calculate this is to multiply the average revenue by the length of the contract, ARPA. Another formula to generate CLV is:
CLV = (1/churn rate) x ARPA
- Customer Retention
Customer Retention: Also known as net revenue retention, NRR looks at the revenue streams from the existing customer base. To calculate NRR, you also require stats on MRR and churn.
Once you have the MRR figure and churn rate, use the following formula to calculate customer retention:
NRR = ([(MRR + expansion revenue) - revenue lost from downgrades and churn]/ MRR) x 100
In this equation, the expansion revenue is the revenue from upgrades and cross-sell. It's important to understand that a positive NRR is always greater than 100%. Anything less than 100% means that you have lost revenue from current customers for that particular month.
- Customer Acquisition Cost
Customer Acquisition Cost: CAC is the total sales and marketing cost required to acquire the customer. You can calculate it by adding the sales and marketing expenses and then dividing the result by the number of new customers in that period.
CAC = total cost of sales and marketing / total number of new customers
As mentioned, these are not the only key performance metrics, but they are surely the most important.
FAQ: Frequently Asked Questions
There is no doubt that creating a SaaS marketing plan is challenging. While it's impossible to cover everything in this guide, here are the three important questions that almost everyone asks:
What Are the Best SaaS Marketing Channels?
There is no one-size-fits-all approach in the SaaS industry. The best SaaS marketing campaign is all about your vision and business goals. For instance, many companies use account-based marketing to focus on a small group of targeted customers. These companies usually deploy agile marketing channels that change according to their business needs and sales cycle. In contrast, others use PPC and event marketing for lead generation, which has the potential to offer immediate results.
Similarly, you may be better off using content marketing, email marketing, and search engine optimization to target a broader range of clients and get a steady supply of loyal customers. While this may take time, it's more cost-effective in the long run. On the other end of the spectrum, some companies continue to use traditional marketing efforts such as referrals, testimonials, and CRM marketing automation to target a wider audience.
What Are the Different Components of SaaS Marketing?
To achieve long-term success, you need to fine-tune five components of SaaS marketing:
- Attracting Leads
- Nurturing Leads
- Retaining Customers
- Enhancing Revenue
- Tracking Performance
The job starts with attracting leads. Giving free trials and newsletter subscriptions are two examples of generating qualified leads. Once you have got the lead, you can use different marketing tactics to nurture those qualified leads. We have already listed some of the best marketing strategies you may use to help improve the conversion rate.
To retain your target audience, you can use promotional content and discounted coupons to keep everyone happy. Next, cross-sell and upsell your current customers to enhance revenue. Finally, track SaaS marketing success using the five key metrics: churn rate, monthly recurring revenue, customer lifetime value, customer retention, and customer acquisition cost.
How Much Money Should You Expect to Spend Per Month on Effective SaaS Growth Marketing?
There is no definite answer to the question, but most well-established software companies spend 15% to 25% of their revenue on marketing and brand awareness. While the final revenue depends on many factors, it's a good idea to target anywhere between 10% and 15% MRR, monthly revenue rate, in the first six months. As for startups, research shows that most successful SaaS companies spend between 80% and 120% of their annual revenue on marketing during the first three years.
So, there you have it — the most important steps in SaaS marketing. Before embarking on this wonderful journey, remember that you're not selling a product as much as you are a service.
It means that the entire software is tightly coupled including the team that works on providing the service. You need everyone to be on the same page. Everyone, including customer support, bloggers, software developers, copywriters, and decision-makers, must understand key concepts that hold the SaaS together.
This is why showcasing your company culture and values is yet another powerful SaaS marketing technique that you can use to attract and retain paying customers. These values matter because they humanize your brand.
Ultimately, it doesn't matter how good your product is. Generally speaking, no one cares about that unless you start telling everyone what's in it for them. Only then, you will truly offer "software-as-a-service."