Today, the SaaS (Software-as-a-service) industry is a burgeoning, thriving realm that has seen an explosive growth in the B2B markets. And with good reason. The characteristics that define the SaaS industry, in fact, lend themselves to its success;
- Shorter Sales Cycles: Since a SaaS is ever-evolving with constant updates and changes, the sales cycle is remarkably shorter than traditional B2B sales cycles.
- Long-term customers: The Customer Lifetime Value (CLV) is longer than traditional software products: in fact, it is estimated that 80% of a SaaS’s revenue will come from the company’s existing customer-base.
- Low barrier for entry: With technologies advancing at exponential rates, there is no dearth for new solutions and new approaches to the challenges that businesses need to overcome.
So, given characteristics that are so conducive to explosive growth and high revenue streams, why do many SaaS startups fail to take off or fizzle out after a brief spell?
How to Make B2B SaaS a Success?
Of course, if you look at the three characteristics we’ve listed and flip the script, some of those reasons become apparent:
- The shorter sales cycle can result in a higher CAC (Cost of Customer Acquisition) through a lack of effective acquisition and lead-qualifying tactics.
- The low barrier for entry results in intense competition and lack of brand awareness and authority.
- With revenue streams largely dependent on higher customer retention, lack of effective customer onboarding and upselling tactics can seriously impact business.
With that being said, the growth of a SaaS business is contingent upon a number of factors; each of which require careful consideration and execution.
Here are 12 factors that should be considered key aspects in a B2B SaaS growth strategy:
The Non-Negotiable Factors
1. SMART Goals
Any business – no matter the type – needs goals and objectives. In general parlance, the two terms are used interchangeably. However, when it comes to business, goals can be defined as broad statements of a business’ desired outcome or achievement, while an objective is a more specific definition or step that is taken towards achieving those goals.
So, how does one determine and finalize business goals?
- Specific: For instance, if you say your goal is business growth, it can mean any number of things depending on who you ask. To some it could mean increase in sales revenue, and to others, it could mean increased customer acquisition.
- Measurable: Success should be quantifiable. Period. Your success should be defined through measurable metrics and clearly set SaaS KPIs.
- Attainable: A good business aims for the sky, but remains firmly grounded in reality. Setting impossibly high goals or incredibly low goals can have equally demoralizing effects on a company.
- Relevant: Many SaaS companies often fail here because they focus on metrics or indicators that don’t really define success: for instance, in SaaS, tracking the number of free-trial users per month isn’t really an indication of success; on the other hand, tracking the number of active conversions from free to paid users is.
- Timely: A goal with no time-limits cannot be measured and lacks specificity, and will also be unattainable.
2. Buyer Personas
Buyer personas are the foundation of the inbound marketing methodology. Given the nature of the SaaS model, there are a number of touchpoints with the customer throughout the cycle: right from marketing, sales and even, post-sales. Therefore, SaaS marketers have the opportunity to create much more detailed and accurate personas. The criteria and information used to create these personas include:
- The demographics under which they fall such as their geographical location, their age, education and experience.
- The primary industry to which they belong, since most SaaS solutions are often built to service a particular niche or vertical.
- Their role and designation within the company: are they influencers, advocates or decision-makers?
Each of their actions is driven by entirely different factors, and your marketing and sales efforts need to address them.
3. Content Mapping
The SaaS buyer’s journey is short: there are no long drawn-out processes.
As Peter Cohen puts it, “Customers find it (your product), they see it, they like it, they buy it. Done.”
And at every stage of their journey from “find it” to “buy it”, they consume content that helps inform their assessment and ultimately, their decision to try the product. A SaaS content strategy needs to be closely mapped to every stage of the buyer’s journey.
- Awareness Stage where the focus is on recognizing and identifying their problems and learning how to resolve them. Your content here should seek to educate and inform, NOT SELL.
- Consideration Stage where they have identified possible solutions, and are considering the various providers. Position yourself as the best possible solution to their challenges.
- Decision Stage where they have narrowed their choice down to a couple of brands and are ready to sign up for a free trial.
- Adoption Stage where they make the transition from free-trial to paid users. Your content here should supplement their experience with your product, helping them achieve their desired outcome through meaningful activity.
Your ultimate mission is to fulfill the customer intent.
4. Marketing-Sales Alignment
Marketing-sales alignment is probably the essential, yet challenging, aspect of a well-defined B2B SaaS marketing strategy. Despite the fact that they share common goals – increased revenue, customer satisfaction and increased profits – sales and marketing teams often fail to work together. Achieving this alignment will ensure:
- Better lead qualification
- Increased revenue
- Increased ROI
- Low churn and higher retention rates
The Crucial Factors of Success
5. Product-Market Fit
Product-market fit is defined as the point where your solution and the specific needs of your target market align perfectly. This means, you’ve successfully identified the market that will not only sustain your business, but also help it grow over time.
The nature of the SaaS model is especially conducive to achieving product-market fit since the relationship between marketer and consumer is a lot more frequent and direct. You can achieve product- market fit by:
- Encouraging and soliciting customer feedback at every development iteration to improve your product.
- Integrating customer feedback channels within your product like new feature requests, bug report forms, and feature rating systems.
To ensure that your marketing efforts pay off with increased user acquisition and conversions, you need to be focused on the right audience. The more focused your audience, the more qualified will your leads, and segmentation is the process of splitting your audience into focused groups that are generally characterized by a common set of properties such as behaviors, demographics, geography, and industry.
This segmentation allows you to:
- Create messaging tailored to the specific needs of your audience
- Identify the most profitable customers
- Increase customer profitability
- Identify the most profitable marketing channels
- Reduce churn by improving nurturing and onboarding tactics.
Onboarding refers to the set of tactics used to acclimatize your customer to your product during their first-use, and eventually, help them achieve their desired outcome, and thereby, customer success. Proper on-boarding tactics will:
- Help your customer achieve initial success with your product
- Establish a value-based relationship between customer and brand outside the confines of the sales and marketing interactions.
8. Customer Retention
The true success of a SaaS business is not defined by how many users are using it, but by how many customers love using it so much that they keep coming back for more: either through a subrcription renewal or an upgrade.
Since the majority of a SaaS business’ revenue comes from its existing customer base, customer success teams need to formulate winning strategies to keep the existing customer base engaged and satisfied, even to the point where they become advocates of the business among their peers and acquaintances. Retention tactics primarily focus on:
- Upselling tactics, where the user is encouraged to upgrade their payments for a high-value iteration of your product
- Advocacy tactics to encourage users to promote your product on various channels and bring in referral traffic
The Necessary Factors
9. Business Model
Your business model defines the context and the boundaries within which your company will operate. In short: it’s your business’ blueprint. Your goals and your product-market fit also fall under your business model’s definition.
- Setting the parameters and metrics that define the objectives of profitability, growth and cash-flow
- Determining your strategic/competitive advantage, which refers to establishing the factors that can influence your success over competitors with a similar product, such as your product’s core features, branding and value proposition
- Determining the optimal pricing structure
- Identifying the right statistical and data mining strategies to predict your business’s future performance
10. SaaS Metrics
There’s no dodging this fact: tracking metrics should be a key consideration in building your growth strategy. A number of SaaS businesses, however, get overwhelmed by the sheer number of metrics that they potentially need to track and often fail to recognize they only really need to focus on a few key metrics to derive the necessary insightsthat will inform future business decisions.
- Monthly Recurring Revenue
- Churn Rate
- Cost per Customer Acquisition
- Average Revenue per Customer
- Customer Lifetime Value
11. Growth Strategy
The SaaS model is predictable due to the recurring revenue model, and usually begins with a rapid growth curve characterized by initial customer acquisition rates.
However, over time, this curve can slow down considerably, the bigger the company grows, and will then be influenced largely by the churn rate, eventually resulting in a growth ceiling that can be hard to break out of without the right growth strategies.
B2B SaaS marketing strategies are primarily set to achieve three major objectives:
- Increase customer acquisition
- Maximize customer lifetime value
- Increase product’s virality
Chaotic-flow has an excellent article on the strategies that can be used to achieve each of these objectives.
12. Cost Control
The last, but in no way the least, consideration in B2B Marketing for SaaS is setting the limits and parameters for your budget spend. This means deciding how much you need to invest into your marketing and sales efforts. There are a number of ways you can plan your marketing and sales investment, but the following two benchmarks have been largely suggested:
One method suggests framing your marketing budget as a percentage of your annual recurring revenue (ARR) goal.
The other method assumes a 1:1 ratio between every dollar spent on a single customer acquisition to every $1 dollar of recurring revenue earned over that customer’s lifetime. However, depending on the company’s size and success rate, SaaS marketing and sales spends are bound to vary widely. These two benchmarks are good places to start.
Starting and growing a SaaS business is no cakewalk, granted. However, with a combination of tried and tested strategies you can set yourself up for success in the SaaS arena.