SaaS vs. Product Marketing - Why you need to think outside the box

All articles | Marketing
Published Apr 12, 2017 | Written by Keith Errington
If you are a business that produces software, it is highly likely you have moved, or are considering moving, from selling an off the shelf product to delivering your product online - a method commonly called 'Software as a Service' (SaaS). But has your marketing strategy adapted?

There are several significant differences between the marketing strategy for selling boxed software than for selling SaaS. In this post, we are going to look at those key factors and explain why you need to think ‘outside the box'.

Revenue Model

With boxed product software, the sale is usually a one-off fixed amount, giving you a very easy way to look at the cost per sale and judge your marketing efforts accordingly. You also receive that revenue in one-hit, straightaway.

With SaaS, the revenue model is completely different. Revenue from a sale is received in relatively small amounts over an extended period of time. You might not make money on a new customer for a year or even longer. They might cancel, upgrade or downgrade at any time. So, working out the cost per sale is a lot more complex, making judging the appropriate level of marketing spend difficult.

Measuring Success

The key to making informed judgements about marketing strategy and tactics (and indeed, the business as a whole), is measurement. Making sure you have a robust and reliable system of measuring key metrics is essential. 

For SaaS, the important metrics should be Customer Acquisition Costs (CAC), Customer Lifetime Value (CLTV), Committed Monthly Recurring Revenue (CMRR), Churn and inevitably, Cash Flow. If you were marketing boxed products you should have heard of most of these metrics, but two may be new to you:

  • Churn rate is simply the number of lost customers over a set period,   usually expressed as a percentage of total customers.
  • Committed Monthly Recurring Revenue (CMRR), measures the revenue that you are likely to be receiving in a set period from existing customers and projected new customers. Churn is often compared to CMRR to produce a percentage rate.

Shift in Buyer Behaviour

The unpredictable nature and timeline of a SaaS sale means to remain profitable the cost per lead needs to be lower than with a traditional boxed software product. Traditional methods of marketing such as trade shows, print advertising and spending time with individual customers are expensive means of generating leads. Combine that with the general shift in marketing towards digital and the fact that buyer behaviour has changed, with most prospects doing their own research online, you will appreciate the need to take a fresh look at your marketing strategy.

Could inbound marketing offer a solution?

Adopting an inbound marketing approach could be the way forward for your SaaS company. Inbound enables you to develop an effective, targeted marketing strategy that will allow you to reach the right people, in the right way, at the right time; people that will benefit from investing in your services for the foreseeable future. 

SaaS is about service, not products. And this implies a special focus on your potential customer's issues rather than on the product's features. What are the problems that your prospects are facing? And how can you help? All the messages you put out, and the content you publish must reflect this approach.

To understand your customer's issues, it follows that you must understand your customers; which is why defining buyer personas is fundamental to a successful inbound marketing plan.

As a service business, customer support, training, education and quality control all become crucial; not only to retain existing customers but to attract and gain new ones.

Importance of Content

Publishing relevant, helpful content is the cornerstone of an inbound marketing strategy. Recruiting the services of a good content writer will set you apart from your competitors. It will also create a sustained flow of remarkable content, which will cultivate relationships, build trust, and keep your SaaS company top of mind with potential customers until they ready to speak with your sales team about your solution.

By creating the right mix of informative and educative content, rich in well-researched keywords, around the fears, interests and aspirations of your buyer personas, you will ensure you are in front of that potential buyer when they are researching their problem. With most of that research taking place in Google, if you're not on the first page of search results, you won't get found.

Sales Focus

The marketing of a product-based business is directed entirely at making the sale – once that's done, then most of the job of marketing is done. However, with a SaaS business, marketing becomes an on-going programme where existing customers are just as important – if not more so – than new customers. 

Studies show that it costs ten times more to attract a new customer than to keep one. You want their continued business, you may want them to buy into additional services, and more than anything else, you want them to be satisfied and happy customers so that they can spread the word for you.

Inbound marketing enables you to continue to delight your customers, they become ambassadors for your business and are an extension of your sales and marketing team. In this digital, social-media-connected age, we know that potential buyers trust their peers and colleague's opinions far more than a supplier's marketing materials or sales people.

When your prospects ask questions on industry forums, groups and social, your sales team also need to be there, being helpful and answering them. All this reaffirms the need to adopt inbound marketing as the way to gain and support customers.

Moving from selling software products in a box to Software as a Service needs a fundamental rethink of your business and marketing strategy. You literally have to think ‘outside the box' and switch your efforts to supporting clients and publishing content.

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Published by Keith Errington April 12, 2017
Keith Errington