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Management consulting. Product. Strategy.

  • Writer's pictureYoel Frischoff

SaaS Marketing Made Easy

Updated: Oct 12, 2021

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Problem Solving Falls Short

Some SaaS entrepreneurs first focus on solving a business problem, then executing it with a software tool, which they are eventually to put on the cloud. Industrious entrepreneurs will have already built a PoC - Proof of Concept - and push it to a few early adaptors, to see if indeed the product works as advertised, if customers' needs are satisfied.

This, essentially, is the engineer's approach: Solve their problem, and thou shalt be saved... But is it enough? Does it also solve for customer acquisition? Will you succeed in exposing prospective users to your product, so you can run them through your sales funnel until they are enlisted as paying customers?

Hardly. Some SaaS entrepreneurs are stuck right there: They have a great machine on their hands, yet not enough customers coming through the gates, this resulting in slow growth.

To a certain extent, the SaaS machine they built solves other business' problem, though not their own, which is closing new customers.

Moreover, oftentimes you will hear from entrepreneurs that the sales process - from lead generation through validation, nurturing and closing - will be delegated to a future hypothetical marketing operation, which would be mounted sometime, "when we get the funds".

Will they get those funds?... And can you do better?


SaaS - Automated Value Delivery

Depicted above, a schematic diagram of a SaaS operation: A collection of functions run on a cluster of servers, to be accessed by a variety of clients over the internet.

Users log in, view and manipulate remotely stored and cached data, with computations held somewhere - either on the client device, on the provider's server farm, or maybe by a 3rd party.

This has become the standard way in which SaaS products deliver value to their users - be those service provides, end users, advertisers.

What we don't see in this diagram, is the funnel feeding new prospective customers to this machine.


Customer Acquisition Funnel

Depicted below, see the classic acquisition funnel:

Acquisition funnel

The above acquisition funnel applies to digital products. It describes the customer journey, from first exposure to your product, through learning about its benefits and usage, planning for purchase, and eventually making it.

Accounting for the expenses you have to invest to draw target audience to your product reveals your customer acquisition cost (CAC). Add in your expected net revenue and life time expectancy, and your Customer Life Time Value would emerge.

The growth model, fed back from generated revenue, while showing scalability, will allow you to plan total revenue and eventually your contribution margins.

The digital world enables on-line marketing, where targeting, reach-out are done via internet. In recent years, we have seen the rise of several strategies, from cold calls, email marketing, through content, social network marketing - manual and automated, all in order to nurture leads so that they become users.

Some of these strategies require investments in tools, infrastructure, personnel, and managerial attention. Such investment require cash and time.

Can early stage SaaS entrepreneurs lay the ground for such efforts early on? Are there corners to be cut? And what would be your benefits, as an early stage entrepreneur?


Shortcomings of Guerrilla Tactics

Now let's discuss an investor reviewing two early stage SaaS companies. The first is brimming with promise, with a great target market, well defined user personae, clear use cases. The second may or may not have all those. However, it does have something else: A steady flow of incoming users.

This may prove to be a decisive difference, for the second company established its ability to draw customers, quantify what is the initial customer acquisition cost, and even establish the Customer Live Cycle Value - a key parameter for SaaS future growth and success.

Oftentimes, early customer acquisition is based on guerrilla tactics, where entrepreneurs physically, personally, talk to businesses and consumers they would like to enlist as customers.

This is great for initial user feedback, for validation of the technology.

However, until significant numbers of users are accumulated, one cannot really test for traction, usage patterns, engagement, or network and viral effects.

Further, it does not show how the venture would scale, both on organic or acquired leads. This is the case for B2C ventures, where their strength lies in large numbers, as it is with B2B products, where their challenge begins with long sales cycles.

Investors, aware of this problem, require significant traction even from early stage startups - exactly for these reasons: They need market, as well as technology, validation.

Can you build an automated funnel, right off the start? Can you establish the market and growth validations your investors expect?