How SaaS Has Invigorated Marketing

Digital marketing in the tech industry will never be the same. The growth of SaaS companies has highlighted issues with the traditional sales funnel and initiated a shift in approach.   

The shift is from a customer-acquisition approach to a product-first approach. 

Marketing has historically operated in reaction to the behavior of customers. However, this old style of lead generation simply isn’t working for SaaS firms, start-ups, or companies undergoing a digital transformation. While the product-first approach has immediate implications for marketing managers working in tech, it has the potential to impact the entire digital marketing landscape. 

So, what are some of the changes to digital marketing instigated by SaaS?

A New Approach to Customer Acquisition

In order to understand the scale of changes, it’s important to understand where the old-system fell short. 

There is an excellent article on the drawbacks of the customer acquisition model, and the benefits of the product-first approach with SaaS companies, written by Nick Bonfiglio and Mickey Alon. In the article, the authors lay out the stages of the customer acquisition model, which looks like this:

Stage 1: Awareness

Stage 2: Visit

Stage 3: Lead Generation

Stage 4: Sign-Up

Stage 5: Sale

So Where Does This System Fall Short?

·       Forms and sign-up sheets as preliminary contact. In the traditional system, a prospective buyer has to fill out a lead form or request a demo before they get access. Marketing managers consider these people as qualified leads, ones they can target with more emails about products.

·       Outside-product indicators. It’s commonly assumed by marketing managers that someone who downloads a FAQ sheet or opens an email is automatically a qualified lead. But do these activities indicate a real interest to purchase? No. Marketers usually operate with a conversion rate varying between 0.5-3% depending on context, which, by any standard, is not a great ROI.

Indeed, marketers are becoming frustrated with the customer-acquisition model. As mentioned above, the ROI is super low. Consider how much work it takes to generate 10,000 subscribers, turn 100 of them into ‘qualified leads’, and then 1 of them into a customer. That’s a 1% conversion rate, which actually is not bad for a lot of businesses. But so much time and energy is consumed in the process. 

Clearly something must not be working. The lesson? Customers want to try the product before they buy. No more sign-ups and forms, just a month-long demo.  This attitude lines with research conducted by Forrester that indicates 68% of people prefer searching on their own rather than being initiated to purchase. 

The SaaS Solution: A Self-Directed Journey

A few successful SaaS companies recognized this shift in customer demands and adapted. Check out Slack, ZOOM, and Dropbox for good examples of SaaS start-ups that leveraged their marketing approach to get strong VC funding. 

It’s relatively simple shift in marketing approach: give the product to customers early on in the sales funnel, and let them make a decision. Once the software becomes a vital part of their workflow, it is quite likely they will purchase the product once the demo is over. 

The new product-first approach looks something like this:

Stage 1: Awareness

Stage 2: Visit

Stage 3: Free Trial

Stage 4: Lead

Stage 5: Sale

So, What Are Some of the Benefits to the Product-First Approach?

·       Clear data about what customers actually want. No more time looking through thousands of clicks and impressions to see who might be more interested. It is crystal clear who likes the product based on how much they use it. This can help the IT team augment the product going forward. 

·       Shift away from data collection to curating an experience. The marketing approach can move from analysis of data to improving the quality of experience. That’s a pretty valuable transition for a lot of tech companies that suffer from shortcomings in branding.

Rounding It All Up

SaaS companies have invigorated a marketing industry that was wallowing under reams of data without generating excellent results. The customer-driven approach is an accurate reflection of consumer demand, and thus should prove to be far more effective than the acquisition model. Companies not only provide something tangible to their customers early in the relationship – they also gain an ability to scale up without breaking the bank. 

ABOUT THE AUTHOR:

Jim Barnish is founder and CEO of StartUp Solutions, a boutique consulting firm helping entrepreneurs/startups build scalable and fundable (VC-ready) solutions, methodologies and business processes. Jim's 10+ years of experience as a strategic change leader in global and integrated operations, sales, and marketing uniquely qualifies him to the lead the firm. Over the course of Jim’s career, he has successfully worked with companies undergoing accelerated business development, process improvement, change management and operational transformation initiatives.