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.