Selling software-as-a-service (SaaS) provides immense opportunities yet requires fundamentally different strategies versus traditional software. In this comprehensive 2800+ word guide, we’ll unpack everything you need to know to grow a successful SaaS business in today’s market.
You’ll learn:
- What makes SaaS marketing uniquely challenging
- Types of SaaS business models and pricing strategies
- Key metrics investors and founders track
- Customer journey stages and how to market to them
- Tactics for user acquisition and reducing churn
- Emerging trends to incorporate into your plans
Let’s start with what makes SaaS so different…
What Makes Marketing SaaS So Challenging?
Selling software-as-a-service poses very different demands than classic software:
- You sell digital access on an ongoing subscription basis rather than one-time licenses. This completely shifts finances to recurring revenue and lifetime values.
- Your software is intangible without physical media. So demonstrations and trials are vital in showing value.
- Ongoing costs of cloud hosting and supporting users creates tighter margins requiring volume.
- With no upfront payments, slower sales cycles mean greater need for inbound nurturing.
Research from industry analyst G2 backs this up. The typical SaaS conversion rate sits at just 5% compared to 50% for conventional software. Plus SaaS sales cycles average 3 months, 4X lengthier than before.
The good news? When done right, SaaS also enables recurring revenues from loyal users worth 10X times that of perpetual licenses. For example, leading provider HubSpot saw its customer base grow 40% YoY generating $900M in revenue.
Now let’s explore various business models SaaS companies employ today…
Popular SaaS Business and Pricing Models
While the fundamentals stay the same – delivering software by subscription – creative pricing approaches abound:
Freemium Plans
Offering free access to core software with limits then charging for added capacity or features. For example:
- Dropbox – 2GB free storage expands to 2TB+ for $9.99/month
- Canva – Basic design tools free, full editing features from $12.99/month
- Mailchimp – Up to 2000 subscribers free, unlimited from $9.99/month
The key is aligning free features to make non-paying usage sustainable next to premium offerings. Avoid too many restrictions causing excessive support costs or limitations undermining shareability.
Tiered/Packaged Plans
Bundling features & capabilities into Good-Better-Best packages suitable for different customer segments. Helps users compare easily. Samples:
- Zoho – Offers standardized bundles for marketing, sales, support etc. software
- Slack – “Free”, “Standard”, “Plus”, and “Enterprise Grid” tiers
Balance simplicity for buyers with flexibility addressing diverse needs in tiering. Make top plans aspirational.
Per User Pricing
Charging based on number of user seats needing access rather than plain product capabilities. Especially popular in collaborative tools. Case studies:
- Salesforce – Costs grow linearly from $25/month per user
- DocuSign – Range from $10 for individuals to $40+ per user enterprise deals
Volume discounts incent larger organizations while keeping small firms affordable.
Consumption Models
Usage based pricing calculating volumes processed through the software then billing accordingly. Used for cloud services:
- Twilio – Charges per call, message, support ticket etc
- Snowflake – Bills data storage, computing time per SQL query
Aligns costs closely to customer behaviors. Can optimize configurations not needing every feature.
Now let‘s move on to measuring SaaS success…
Key SaaS Metrics and Benchmarks
Unlike old-school software, SaaS businesses rely heavily on subscription analytics because:
- Monthly recurring revenue streams make modeling easier
- Digital delivery provides abundant user data
Leading indicators to track include:
MRR (Monthly Recurring Revenue) – Steady growth shows product market fit and momentum
Churn Rate – Lower than 5% churn exceptional, under 10% solid goal
LTV:CAC – 3:1+ demonstrates efficient spend acquiring customers
Net Dollar Retention – Over 100% means add-on revenue from current user base
Benchmarks from SaaS thought leader David Skok also recommend:
- >$7500+ ARPU (average revenue per user) for healthy unit economics
- 7+ Month Payback Periods on CAC before profitability
- 12+ Month Average Customer Lifetimes before churn
Now let‘s shift from measuring internal metrics to strategically reaching customers themselves.
Mapping The Target Customer Journey
Despite robust platforms, SaaS success ultimately relies on positioning to match buyer needs. Rather than mass blasting, smart marketers personalize messaging for different segments.
Buyer Personas help humanize target users, guiding content to their worldview. Common profiles might include:
- Technical Buyers – Hands-on practitioners like developers, IT ops, engineers etc
- Economic Buyers – Executives focused on company budget impact
- User Buyers – Non technical teams using tools day-to-day
Next, map common Customer Journey Stages that personas navigate including:
- Awareness – Learning about unfamiliar problems
- Consideration – Researching potential solutions
- Decision – Actually comparing and selecting a vendor
- Expansion – Growing usage and spend
Now touchpoints must align to needs at each phase…
SaaS User Acquisition Strategies
With detailed buyer knowledge, orchestrating campaigns guides prospects from stranger to satisfied user:
Paid Acquisition Strategies
Paid ads offer direct response across major platforms:
Search Ads like Google AdWords bids on industry keywords, targeting users investigating problems:
- Land them on focused landing pages clearly presenting your value proposition then…
- Move visitors straight into demos, free trials etc. to experience benefits
Social Ads put your brand in front of audiences likely needing solutions – either cold traffic or past site visitors for remarketing.
Cross platform retargeting cookies track web visitors then displays ads across their other browsing channels later, keeping your brand top of mind.
Organic Growth Strategies
SEO and outbound content counterbalances paid routes to scale further:
Search optimization earns organic rankings delivering qualified visitors from Google queries. Craft educational content around user questions and pain points.
Lead nurturing campaigns move subscribers down sales funnel through value-first email content shares. Send guidebooks, tip sheets, webinars etc. rather than pure sales pitches.
Social selling engages professional networks like LinkedIn directly with useful media. Position your team as problem solving thought leaders.
Now it‘s time to convert trials to loyal customers…
SaaS Customer Success Best Practices
With users onboarding your software, make sure they stick around for the long run.
Education-driven onboarding sets habits through walkthroughs, in-app messages highlighting unused features or new applications.
Ongoing training resources like documentation, email drips, and community forums give self-serve support scaling customer success without excessive staff.
Loyalty programs incentivize referrals and expanded usage with rewards. Eg a free month subscription for user referrals that convert.
Customer health scoring combines subscription activity data, survey responses, and usage metrics to predict churn risks allowing outreach to improve satisfaction before losses instead of post-mortem.
Research by SuperOffice found proactive retention tactics could boost customer lifetime value by 25-95% over baselines along with supporting expansion revenue and referrals.
Now let‘s glimpse into the future…
Emerging SaaS Marketing Trends
While getting the basics right matters now, evolving innovations transform results for early adopters. Smart SaaS marketers have their eyes on:
Video Marketing – Users increasingly prefer educational video content over purely text-based assets. Short onboarding walkthroughs, personalized demo recordings, webinars etc. build connections.
Conversational Interfaces – Chatbots and messaging-based interactions allow faster customer support without excess staffing. Plus they can proactively notify users of issues like payment failures.
Hyper Personalization – Segment users and tailor messaging based on personas and behavior analytics vs one-size-fits-all. Predict their needs.
Vertical Expertise – Rather than generic solutions, build highly focused products specifically for healthcare, real estate, ecommerce etc. industries.
Now over to you! Does this help explain SaaS marketing approaches? How are you tackling these opportunities and challenges today? Let me know in the comments!
