SaaS Marketing Strategy Advisors

January 2012

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

"Spray & Pray" wastes time, money and reputation

Take a 10-second test. 

Pretend you're a first-time visitor to your company's website.  Find your way to the most common entry page for your site and answer one simple question:

If you can't answer that question in 10 seconds or less, you fail.  That means people are finding their way to your site, but cannot immediately see that whatever you offer is meant for them.

If you sell solutions for lawyers, make it clear, front &  center, that this solution is for lawyers.  If you sell solutions for pet stores, make it clear that your solution is for pet stores.  If it's for procurement managers, financial advisers, school administrators, people who live in Montana, whatever..., say so.

Wait, let me put that more strongly:  It should reach out of the monitor, look the visitor right in the eye, and declare in no uncertain terms, "This is for you!"

Salon Monster, for example, does a good job of this:


This item sits on the top of their home page. If you run a salon or spa that takes reservations, you're in the right place.  If you do something else, you're in the wrong place.

And what about companies that target multiple audiences? They can try to sort out each audience and direct them each down the right path.

Coupa, for example, asks visitors what role they are in.  It then addresses that person's particular concerns.



Why we "spray & pray"

Targeting is much more effective than a broad, undifferentiated approach, where you blast your offering out to anyone who's email address fits some broad criteria. But marketers still 'spray & pray." Why?

For one thing, it's cheap and easy. The marginal cost of adding 1000, 10,000, or 100,000 email addresses to your distribution list is insignificant. That's the secret behind spam.

Another explanation is poor metrics. If marketers are rewarded for "impressions," "visitors," or "contacts," they're more likely to focus on activities that cast a wide net. This, despite the fact that most of the "catch" has no use for the product and will never turn into a paying customer.

Rather than rewarding marketers by "how many people walk in the door" or "visit the web site," measure "qualified opportunities" and "wins."

"Good for everybody" = "Good for no-one in particular"

There's also the fear that marketing to a well-defined audience will scare off some prospects who are excluded from the explicit target. Marketers don't want to rule anybody out.

The truth is, though, there really aren't a lot of enterprise software-as-a-service (SaaS) solutions that can be used by everybody. When someone tells me that "this product can be used by anyone," I'm skeptical.

My advice: Find the people who truly can benefit and focus your marketing efforts on reaching them.
 
If you're going to spend money on sales and marketing - and it's likely it will be your largest single on-going expense - you better spend it wisely.

December 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

Seven Ways to Mess Up SaaS Marketing

November 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

Moderate success was a few column inches and a color screenshot in a trade publication. Big time success was positive coverage in The Wall St. Journal or The New York Times.

October 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

When he first heard the notion of making a movie based on his book, Moneyball, the author Michael Lewis thought it was an awful idea. 

A movie about a bunch of nerds using obscure statistics to make personnel decisions?  Brad Pitt or not, it doesn't really sound like the makings of a box office success.

Not so fast, Mr. Lewis: $57,712,000 says otherwise.  Those are the gross revenues Moneyball has collected in the 3 weeks since it was released.

So how's this for irony?  Much like some of the under-valued baseball players discovered by A's general manager Billy Beane (played by Brad Pitt), it seems there's actually more to this story than one might think.

Besides a story about baseball, Sabermetrics, and competing as an underdog, Moneyball also offers some useful insights for business... even for software-as-a-service (SaaS) companies.  That's the subject of this month's feature article, "Moneyball: Lessons for SaaS."

In case you've not seen the movie Moneyball nor read the book by Michael Lewis, here's a brief summary:

It's the story of Billy Beane, general manager of the perennially under-funded Oakland A's baseball franchise.  Without the financial resources available to other teams, he uses sophisticated statistical analysis to identify under-priced and over-looked talent to build a competitive team.

It's a great read if you like books about baseball.  Even if you don't like baseball, it's a good story well told.  

And there are a few good ideas in there for SaaS companies too.

Use the right metrics

customers or revenues you need to bring in, and work backwards from there. 

This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License

September 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

There are lots of ways to spend money foolishly on sales and marketing.  I once did a dimensional mailer to C-level executives with a bobble-head doll.  Trust me, I've seen a lot of these expensive mistakes up-close and personal.

But the best way to waste money on sales and marketing is to spend it before you're ready.   

Don't spend a dime on marketing until you've carefully thought through a few straightforward answers to a few simple questions: 

What is the product or service you're selling?   

You should be able to explain this in a few seconds.  That's all the time you're likely to get from the people whose attention you need.   

If you can compare your product to something that people are already familiar with, that helps.  For example, "it's like Facebook for business," or "it's like a turbo-charger for your website."   

Who should be buying the product?   

Very few products or services are useful to everybody.  In fact, when I hear "it's made for everybody," I think "it's made for nobody in particular."  When identifying your target customers, be specific, as in "this solution is for K-8 school district administrators."  

Be aware that several people in different roles may be involved in purchasing your product: the CIO, a sales executive, the procurement specialist, and others.  Each may have different concerns, and you need to address each one separately.

Why should they buy it?

What benefits does your product provide the buyer?  No matter how sophisticated the technology, most prospects care most about what a product does, not how it works.  They've got an itch; you need to deliver a scratch.

Why should they buy it from you?   

Clearly explain the advantages of your product or service relative to alternatives.  Remember for software-as-a-service (SaaS) solutions those advantages may include more than superior features.  Prospective customers also care about performance, reliability, security and trust-worthiness.

And don't just focus on why your solution is better than direct competitors, but also why it's better than doing nothing at all.  The competition for Carbonite, for example, isn't just Mozy and other online data back-up services; computer users can also choose to do nothing.

Don't put the cart before the horse

For most SaaS companies, sales and marketing will be your largest on-going expense.  And I work with many companies to help them spend wisely. (Note: avoid bobble-heads.) 

But before you start spending, first do the research and analysis to understand your prospective customers.

And if you've done it in the past, it's often worth doing again.  Revisit the fundamentals, perhaps working with an objective third party, to help you validate or refine your analysis.  

It requires a rigorous, structured approach and it takes time.   

But until you're confident that you know precisely who you're selling to and why they might buy from you, don't spend money on customer acquisition.    

This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License

August 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

The good news about the SaaS subscription model: long-term paying customers.

So far, so good. But there's a catch:

Long-term, paying customers require long-term care and feeding.

In exchange for collecting on-going subscription fees, the SaaS vendor takes on substantial on-going obligations.

Some of those depend on product development and operations. They need to keep the SaaS solution up and running, protect the customer's data, and add new features over time.

Marketing's role in retention

But marketing plays a role too. Those long term customers also expect on-going communications from the SaaS vendor. They want to know how best to use the system, what enhancements are being developed, and what other customers are doing.

And they don't want just one-way communications. Customers want a way to have input into what new features are built, and they want a way to share information with other customers.

This is where marketing comes in. (I warned you that we weren't off the hook.) Marketers need to take a role in building and maintaining communication channels with existing customers.

Talk to existing customers? For lots of marketers, this could be new territory.

In the SaaS world though, existing customers are also prospective customers. 

In fact, existing customers are the least expensive "prospective" customers to acquire.  And by the way, they are the most expensive customers to lose.

This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License

July 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

The message is loud and clear.  "If you're responsible for student, finance, or human resource administration for K-12 school districts, you've come to the right place." 

What about companies that have multiple audiences?  They can try to sort out each audience and direct them each down the right path.

Concur, for example, asks on its home page whether visitors are a "small business" or "medium & large business."  Then it allows each of these buyers follow their own path, with messages and offers targeted specifically to them. 

Coupa takes a slightly different approach and asks visitors to identify themselves by job function. A different set of features, benefits and benefits are presented for each job function  

Why "one size fits all" persists 

So if targeting specific buyers is so much more effective, why does the "one size fits all" approach persist?   

For one thing, it's cheaper and easier.  If you're trying to reach prospects via email marketing, for example, the marginal cost of adding 1000, 10,000, or 100,000 email addresses to your distribution list is insignificant. That's the secret behind spam.

Another explanation is poor metrics. If marketers are rewarded primarily for volume, as in "impressions," "visitors," or "contacts," they're more likely to focus on activities that cast a wide net. This, despite the fact that most of the "catch" has no use for the product and will never turn into a paying customer.  

There's also the fear that marketing to a well-defined, more qualified audience will scare off some prospects who are excluded from the explicit target.  Marketers don't want to rule anybody out.

The fact is, very few SaaS solutions are truly appropriate for "everybody."  And when prospects have a choice of working with a solution that's "generic" or "one size fits all" vs. a solution that's designed specially for them, you know which one they're more likely to choose. 

This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License

May 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

How to make free trials really work

1. "Free" may not be your prospective customers' top concern.  Prospects may, in fact, be more interested in the "trial" than in the 30 or 60 days' free access.   
2. A free trial is unlikely to succeed by itself.  It requires marketing resources to build visibility and convert trialers into paying customers.

This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License

April 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

How NOT to calculate a SaaS marketing budget

I hear this question often from software-as-a-service (SaaS) providers: "How much should we spend on marketing?"

If these marketers have experience working in the traditional, on-premise licensed software world, they're usually familiar with this standard metric:

Marketing spend as a percentage of annual revenue.

This metric is often used to allocate and track marketing budgets for licensed software companies, and they typically spend somewhere in the neighborhood of 5 percent of annual revenues on marketing.

Unfortunately, in most cases neither that metric nor that benchmark percentage are very useful for SaaS providers.

Out with old metric; in with the new 

SaaS marketers are usually better off with two metrics more appropriate to the unique SaaS business model:  

1.  Marketing spend as a percentage of  

the lifetime value of the customer.

This measure better accounts for the fact that SaaS revenues extend over the life of the subscription, and they aren't recognized in a large up-front license fee. (I've written extensively on this topic and the impact on marketing. See, for example, "Three deadly SaaS marketing mistakes.")

2.  Recurring revenue as a percentage

of customer acquisition costs

This calculation measures the efficiency of the sales and marketing efforts and the time required for a positive return on that investment.  (See Bessemer Venture Partners, Chaotic Flow, and others for more on calculating these metrics.)   

The hazards of using old math 

But what if you choose to stick with the old standard: marketing as a percentage of annual revenue? What are the consequences of using the wrong metrics and benchmarks?  

A few bad outcomes are possible:

• Under-funding: A business fixated on measuring marketing as a percentage of annual revenue is likely to under-fund marketing and choke off the fuel for customer acquisition and growth.  Successful SaaS companies often spend 30 percent or more on sales and marketing as a percentage of annual revenues. 

• Over-pricing: To bump up annual revenues to better cover customer acquisition expenses, the company may over-price their solution relative to the value perceived by the customer.   

• Over-promising: A business plan that shows artificially low spending on marketing relative to annual revenues may be attractive to investors on paper, but disappointing in reality. 

• Under-funding: A plan that expects an unrealistically rapid return on marketing spend is likely to be under-funded and unable to sustain marketing activity over an extended period of time.

• Inadequate attention to renewals: A SaaS company focused on annual revenues vs. lifetime revenues may be ignoring existing customers and securing renewals in favor of attracting new customers.

• Swinging for the fences: A focus on high short-term returns may lead companies toward magic bullet, quick-fix marketing solutions and spending a burst of money on programs that will likely flop.

Bottom line: If you measure the wrong thing, you'll probably do the wrong thing. 

March 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

Beware!  SaaS Marketing Hazards Ahead

Marketing software-as-a-service (SaaS) applications can be deceptive.  On the surface, it looks a lot like marketing any other technology solution.  You're building awareness, generating leads and supporting sales.  You're using similar tactics as well:  SEO, social media campaigns, events, email, or whatever else works.

But don't be fooled.  Though the goals and tactics may be similar, the strategy is different.   Not recognizing these strategic differences - in audiences, messages, and processes - can easily trip you up.

I'll point out a few of these hazards that you'll want to avoid.

Different Audiences

Attend to existing customers.    First, a confession.  When I marketed on-premise applications, I paid attention to existing customers only once a year... at the annual customer conference.  These folks had paid their licensing fee already;  marketing's job was to focus on new customers.

In the SaaS model, this is a recipe for disaster.  Marketing to existing customers and renewing their subscriptions is essential.  It costs a lot to win a customer; you can't afford to do it twice.

Educate procurement professionals.   Put yourself in the position of the software procurement professionals.  Over many years, they've developed their skills in assessing on-premise application contracts. 

But then we drop a SaaS contract on their desk that's loaded with unfamiliar terms like "activation," "subscriptions," and "renewals."  The result:  the sales process comes to a skidding halt. 

If Marketing can educate these procurement professionals, you'll see fewer red-lined versions of the contract bouncing back and forth, and a faster sales process.

Different Messages

SaaS is a promise, not a product.  When customers buy a licensed on-premise product,  what they've bought is what they get.  They'll enjoy the benefit of whatever functionality is in the product on the day they purchase it.   Upgrades and enhancements are extra.

Not so with SaaS.  Customers are buying an on-going stream of services to be delivered over the lifetime of the subscription. They're entering into a long term relationship with the SaaS provider, trusting that they'll reliably receive an increasingly valuable service over an extended period. 

SaaS marketers need to earn that trust from prospective customers. You should show that you've consistently delivered valuable enhancements in the past, and that you have a realistic roadmap for delivering useful enhancements in the future.

Wrong Processes

Avoid burn-out.  Remembering my own experience with licensed on-premise applications, we introduced a new version every 18- 24 months.  We girded ourselves for a major launch - press & analyst briefings, events, introduction campaigns, etc. - and then caught our breath.

With a SaaS application, there's usually not much time to catch your breath.   New features are sometimes pushed out quarterly or monthly.  I've even heard of enhancements delivered daily! 

In this faster-moving environment, the old product introduction process fails.  You'll be forever struggling to keep up, and exhausted besides.

Spend carefully.  The traditional on-premise model with its large, up-front license fees, gave us marketers some room to cover over ineffective programs.    

With SaaS, there's less room for error.  All the costs of acquiring a customer are paid up-front, while the revenues come in over the life of the subscription. SaaS marketers need to rigorously measure what programs are working and what's not, and make adjustments quickly.   If a dollar spent on marketing is bringing in 70 cents of customer revenue, it's time for a change... and fast.

February 2011

Practical Advice on SaaS Marketing


Navigating the Challenges of Marketing
Software-as-a-Service Solutions to Enterprises

How to waste big money on marketing 

Have you ever wrestled with weighty marketing decisions:  which keywords to buy in a pay-per-click campaign, where to run your pop-up web banners, or whether to email to prospects on Tuesday at 9 AM or Saturday at 6 PM?

Yeah, me too. 

There's nothing like a multi-page spreadsheet to dispel the notion that marketing is all about clever ad copy and pretty designs.  Analytics is a vital part of the job, though not very glamorous. 

That's especially true in software-as-a-service (SaaS) companies, where every nickel & dime needs to be spent efficiently.  There's not a lot of room for waste in this business model.

But while you're paying attention to every nickel & dime, don't lose sight of the tens & twenties.  Don't get so focused on the small items that you neglect more important things.

Here's where the really big money gets wasted:

Marketing that targets the wrong messages

to the wrong people.

What, Who, & Why Better

1. What problem does your product solve?
2. Who has that problem?
3. Why is your solution better than alternatives? (Remember that "alternatives" include "doing nothing.")  

Who?:  This "Practical Advice on SaaS Marketing" newsletter is for professionals marketing software-as-a-service solutions to enterprises.

What?:  It helps them recognize and solve marketing problems that are unique to SaaS companies, makes their marketing efforts more productive and cost-efficient, and keeps them from making costly mistakes.

Why better?:  The newsletter focuses specifically on the unique challenges of marketing SaaS solutions to enterprises, is based on 25 years' of first-hand experience marketing technology solutions, offers actionable recommendations, and is free.

• When I needed a customer reference or success story
• During the annual customer conference

For the most part, I and the rest of the marketing team focused on attracting new customers.  

That "Take the Money and Run" approach can be disastrous for software-as-a-service (SaaS) providers, whose business model relies on renewals.   

Let me present a few specific techniques on how to lose existing customers that may look uncomfortably familiar to you.  

Ignore them
 

Once you've won a customer, consider your marketing job complete.  Focus on the prospects, not the ones who are already sending in a check every month. Leave them out of the loop on product and service enhancements, and ignore their suggestions for improvements.  Just remember to turn on the charm a few weeks before the end of the subscription.

A corollary to ignoring existing customers: Oversell them

Pitch your customers on renewing and upgrading with every single interaction. That includes unresolved customer support issues. There's nothing an exasperated customer, who's struggling to get the solution to work, wants to hear about more than a discount... if they renew their service for another 3 years.

Hide from them

If your service goes down, your communications to customers should go down as well.  Keep them guessing about your system's status, and let them rely on other uninformed customers for information.  Shrug off their concerns and don't even consider an apology.

Surprise them

Add new features and functions without warning. Better yet, remove certain features without warning. Make major changes to the user interface. These are especially effective for applications used only occasionally, such as annual performance review solutions.

OK, now I'll let you go back to the traditional new years' self-improvement resolutions.  Pardon the interruption.

• Targeting the wrong audience
• Delivering the wrong message
• Implementing through an inefficient process. 

SaaS Marketing Strategy Advisors, publishers of this newsletter, help marketing professionals recognize the unique perils of marketing SaaS solutions, and we help companies steer around them.  We've helped companies better understand their audience, develop compelling messages, and put in place cost-effective processes that are appropriate for the SaaS business model.

Call or email me to learn more about how we can help you. 

As always, I welcome your feedback.

Regards,

Peter

Peter Cohen
Managing Partner
SaaS Marketing Strategy Advisors
peter.cohen@saasmarketingstrategy.com
781-801-3397

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Agile Marketing

Who knew that software developers were such athletes? My code-writing friends are all talking about "scrums," "sprints" and "extreme programming."

Though I'm sure some of these folks are spending time in the gym, I've learned that these terms actually refer to the agile development methodologies many are using to build software-as-a-service (SaaS) solutions. Agile development is "intended to allow for rapid delivery of high-quality software, and a business approach that aligns development with customer needs and company goals."




Agile Marketing

We SaaS marketers should get on this fitness kick, too. We should follow our development colleagues with our own version of a lean & mean methodology. Call it "agile marketing."

Agile marketing refers to a process for building visibility, generating leads and supporting sales that's faster and more flexible than traditional marketing processes. It is intended to deliver more effective marketing, closely align with agile development processes, and better support a company's overall business model.

Faster

In the traditional on-premise world in which applications are developed via the "waterfall" method, new versions typically come to market every 18 - 24 months. The marketing team falls into this same rhythm, gearing up for a big launch every 18-24 months. After one of these grand launches - gala unveiling event, PR blitz, new collateral, multimedia ad campaign, etc. - the marketing folks recuperate for a couple of months... and then gear up for the next big launch.

This "marathon" pace doesn't suit most SaaS applications, and certainly not those built according to an agile development process. Instead of launching a massive new release every couple of years, marketing needs to gear up for launches every couple of months. These are more like a constant series of sprints than a marathon. It requires a faster, more agile process to keep up.

More flexible:  Besides more speed, agile marketing requires more flexibility. SaaS marketers need to be eager to try new things, fearlessly measure results, be willing to pursue what works and abandon what doesn't. There's no room for dogma here.

Marketing folks ask me all the time, "What marketing programs work best?" My honest, though sometimes infuriating answer: "It depends."

What works for one company in one market with one particular solution might not work for another company in another market with a different solution. Be skeptical about "best practices."

Drew Houston of Dropbox and Adam Smith of Xobni have shared some of their experiences trying, failing, and trying something else, while building their businesses. (Presentations on their experiences are available on David Skok's For Entrepreneurs site.) Certain kinds of press outreach worked for them; others didn't. Adwords worked for one, but not the other. And certain social media campaigns were very effective, though more traditional email campaigns generated positive results as well. Their advice would make for a good tag-line for the Agile Marketing tee-shirt: "Learn early, learn often."

Also be aware that what works today may not work tomorrow. I remember marketers' fleeting love affair with "dimensional mailers." These promotions involved mailing (as in U.S. Postal mailing) odd-sized boxes to well-targeted executives. The goal was to "bust through the clutter" of over-stuffed mail boxes.

As ridiculous as cluttered U.S.P.S. mailboxes sounds today, the current infatuation with "social media marketing" may look pathetically quaint someday, too. The fact is, there's no marketing magic bullet; or if there is, it keeps changing.

SaaS solutions built with an agile development process require a faster, more flexible marketing process as well. It's time for marketers to get agile.

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