4 minute read / Mar 18, 2015 /
The 5 Marketing Channels of Great SaaS Companies
Leads are the lifeblood of every SaaS company. As a SaaS startup grows, the limiting factor of the business quickly becomes demand generation. Can the marketing team generate enough leads for the inside sales team to attain their monthly quota? The Marketing team’s mandate is to generate these leads in a cost-effective way and develop a portfolio of lead-generation mechanisms. Ideally, these generate inbound leads, who often convert at 2-3x the rate of outbound leads. Below are the five marketing channels I’ve observed at SaaS companies.
Channels - In the world of licensed enterprise software, software companies pay channel partners called Value Added Resellers (VARs) and Independent Software Vendors (ISVs) to sell, install and customize software. This notion doesn’t really exist with SaaS companies, because except for the most complex and customizable products like Salesforce, most SaaS software is much simpler. Very little integration is required because these products tend to stand alone, and customization and integration if needed are handled by internal engineering teams.
But SaaS companies still do have channels available to them in the form of app stores from Salesforce, Intuit, Google and the Apple and Android mobile app stores.
More importantly, Xero has demonstrated that service providers, accountants in this case can be amazingly efficient channels. The typical accountant using Xero refers between 6-31 customers to Xero depending on the geography (see slide 16). Xero convinces accountancies to adopt the platform and the accountants bring on their client base, creating huge leverage to grow efficiently.
User Actions - Dropbox’s refer a friend program is the canonical example of a user action to generate new leads and customers. Many companies have adopted these ideas including Evernote, DigitalOcean, EventBrite and Elance. When crafted and deployed well, user actions and referrals are very efficient and effective ways of generating new potential customers. [But, referral marketing] (http://go.extole.com/rs/extolehttps://res.cloudinary.com/dzawgnnlr/image/upload/q_auto/f_auto/w_auto/Extole_2014_Referral_Guide.pdf) has to be managed well because the fraud risk and consequent revenue cannibalization for the business can be material.
Content Marketing - The newest of the marketing channels and still the least well understood channel, content marketing has blossomed because the software buying process has changed. Buyers want to educate themselves before engaging with a salesperson. Content marketing takes many forms: blogs, white papers, social media engagement, eBooks, videos and so on. Unlike the other forms of marketing listed here, content marketing is the only channel with compounding and long term returns.
Because of its cost advantages, the only real costs are the salaries of the staff to create the content and the team to build/manage the syndication, testing and optimization tools, and occasional paid promotion of content, content marketing can be incredibly efficient. In addition, it can provide massive scale. Hubspot, which attracts more than 1M visitors to their blog each month, epitomizes this strategy. Last, the right kinds of content can generate leads for years, unlike the fleeting clicks of a paid marketing campaign.
Advertising - AdWords, LinkedIn, Facebook ads. Internet/mobile paid customer acquisition varies in effectiveness by the type of product. The simpler and more consumer-like the product, the more likely paid ads are to immediately trigger a download or a signup. Paid ads are sometimes used to drive potential buyers to white papers and other content, but this can get pretty expensive really quickly.
For example, to buy 100 clicks per day on AdWords, I would need to spend $470 daily, according to the Keyword Planner, or about $14k per month. If 10% of those who click fill out a lead form, and 50% of those leads are valid, and 15% of the leads convert to paying customers, then the marketing cost of customer acquisition is $626 (excluding the time and commission costs of the inside sales team member who closed the account). At those estimated rates, only BI products with annual price points of about $1k or more can justify the investment.
Some advertising, like billboards on Highway 101, develop brand awareness, which is important in the long term, but isn’t a material driver of leads in short term.
Events - In addition to attending major trade shows like Dreamforce, many SaaS companies have created their own events. In the customer success segment, Gainsight runs Pulse and Totango hosts Customer Success Summit. Events like these are a great way to reinforce a company’s brand message, engage the company’s external champions and retain key customers. But they can be expensive. For a 200-300 person event, budgets are typically in the $250k-$500k gross cost range, which can be offset by sponsorships. Given these costs, it’s often hard to back into a reasonable cost of customer acquisition from a dedicated event. So they must serve multiple goals. Smaller, more frequent events like Looker’s Look and Tell can also be effective customer engagement, education and closing tools.
Great SaaS marketing organizations combine these different marketing channels and test them frequently. Having more than one marketing channel provides the marketing department several levers to pull when needing to accelerate lead volumes for the sales team.
Have you been using any other novel marketing channels to grow your lead base? Let me know on Twitter.