Is Your SaaS Go-to-Market Strategy Tsunami-Proof?

Right now, there is a tsunami that’s coming to wipe out thousands of SaaS companies. In this article, I’ll walk you through the three tidal waves coming ashore and show you how to avoid their potentially disastrous consequences. The Three Tidal Waves Coming for Your SaaS Business Tidal Wave 1: Buyers now prefer to self-educate. […]

The post Is Your SaaS Go-to-Market Strategy Tsunami-Proof? appeared first on CXL.

Right now, there is a tsunami that’s coming to wipe out thousands of SaaS companies.

In this article, I’ll walk you through the three tidal waves coming ashore and show you how to avoid their potentially disastrous consequences.

The Three Tidal Waves Coming for Your SaaS Business

Tidal Wave 1: Buyers now prefer to self-educate.

This isn’t limited to the B2C space. Three out of every four B2B buyers would rather self-educate than learn about a product from a sales representative, according to Forrester.

Let me ask you two questions:

  1. Would you like to see and use a software product before buying it?
  2. Or would you prefer to go through a lengthy sales process to see if it’s a good fit?

If you’re like most people, you’ll opt for trying out the product on your own. This doesn’t apply just to small and mid-size businesses. As Aptrinsic notes, “Enterprise buyers also expect to try and evaluate software in an easy, frictionless way.”

Trying out a product through a free trial or freemium model is less hassle and can help you decide quickly on a product. Do you agree?

Tidal Wave 2: Startups are more expensive to grow.

In one sense, this is counterintuitive: It has never been cheaper to build a SaaS company. (HackerNoon even goes so far as to claim that you can now build a SaaS product with $0.)

However, because of this low barrier to entry, there’s no shortage of competition. As a result, argues Andrew Chen, it’s becoming more expensive to acquire customers. Just take a look at these three channels:

  • Facebook: 171% Increase in Cost per Thousand Impressions, or CPM (2017)
  • Twitter: 20% Increase in CPM (Q4 2017)
  • LinkedIn: 44% Increase in CPM (Q2 2017)

There are other channels, of course, but these numbers give us a hint that, well, marketing isn’t getting any cheaper. According to ProfitWell, customer acquisition costs (CAC) have increased by over 55% in the last 5 years:

chart increase customer acquistion

At the same time, customer willingness to pay for features has dropped by 30% during that same period:

chart decrease customer willingness pay

So, on one hand, we have rising costs; on the other, we have a lower willingness to pay. You don’t have to be a financial whiz to understand that this means your expenses go up while your profitability goes down.

If you have high churn in your SaaS business, this tidal wave may be lethal. Wouldn’t you agree?

Tidal Wave 3: Product experiences have become an essential part of the buying process.

If you’ve used Slack or Dropbox, you’ve witnessed this first-hand—you didn’t read a lengthy whitepaper on the benefits of strong internal communication or cloud-based file sharing. You wanted to see the damn product in action!

Wouldn’t you agree?

If you’ve been agreeing with everything that I’ve said so far, you’ll also agree that these tidal waves aren’t stopping anytime soon. They’re here to stay. Consumers (like us) demand it.

Now, your SaaS platform might be able to weather one of these tidal waves, but do you really want to take a chance on surviving all three?

To put your SaaS in the best position to win, you need to pick a go-to-market strategy that will place your SaaS on high ground.

man standing on a mountaintop

Put Your SaaS Go-to-Market Strategy on High Ground

First off, what is a go-to-market strategy? A go-to-market (GtM) strategy is an action plan that specifies how a company will reach target customers and achieve a competitive advantage.

Before we dive into which SaaS GtM strategies might work best for your business, you need to take four elements into account:

  1. Battle environment (i.e. market conditions) and competitive positioning
  2. Target or enemy (i.e. ideal customer)
  3. Weapon of choice (i.e. product offering and pricing)
  4. Tactical plan (i.e. customer acquisition process and channels)

Knowing each of these elements will help you choose a GtM strategy that will acquire, retain, and grow your customers in the most capital-efficient way.

Other strategies, in contrast, are ripe for disruption and put you at risk.

Is your SaaS Go-To-Market Strategy at Risk?

Two classic SaaS GtM strategies are at risk of being disrupted: the sales-led and marketing-led GtM strategies.

1. The sales-led GtM strategy

Tidal Waves Safety Zone
Tidal Wave 1 – Self-Educate
Tidal Wave 2 – Rising Acquisition Costs
Tidal Wave 3 – Product Experience

What is a sales-led go-to-market strategy?

A sales-led go-to-market strategy is a growth engine that leverages a sales team to reach their target customers. Essentially, if you want to make a sale, the whole process starts and ends with your sales team.

  • Pros: Ability to close high Lifetime Value (LTV) customers. Perfect for hyper-niche solutions.
  • Cons: Expensive customer acquisition cost (CAC) and hard to scale.

A big downside of the high-touch sales model is that the CAC is out of control, and the sales cycles are extremely long. As you can see in the graph below, high-touch sales is a leading indicator of CAC.

customer acquisition cost vs sales complexity
A high-touch sales process can balloon customer acquisition costs. (Image source)

To make sure the high-touch sales model remains profitable, the LTV naturally has to be high enough to recoup the cost of acquiring each new customer.

To reach that LTV, most sales-led businesses have to charge their customers a hefty premium. That premium price isn’t because the solution is more valuable but because the customer acquisition model is more expensive.

lifetime value and customer acquisition cost
A sales-led strategy passes costs to consumers that have no connection to product value. (Image source)

If you currently use a sales-led GtM, a competitor with a more efficient customer acquisition model can deliver a more affordable price tag and steal your market share. To put yourself on higher ground, the next best SaaS GtM is a marketing-led GtM.

2. The marketing-led GtM strategy

Tidal Waves Safety Zone
Tidal Wave 1 – Self-Educate
Tidal Wave 2 – Rising Acquisition Costs
Tidal Wave 3 – Product Experience

What is a marketing-led go-to-market strategy? A marketing-led go-to-market strategy is a growth engine that leverages a marketing team as a key lever to drive demand for a product.

The marketing team is responsible for driving Marketing Qualified Leads (MQLs) while the sales team works to further qualify these leads as Sales Qualified Leads (SQLs).

  • Pros: Lower CAC than a sales-led GtM strategy.
  • Cons: 98% of marketing qualified leads don’t result in sales.

Marketing-led GtM is much more efficient than the traditional sales-led GtM; however, when it comes to customer acquisition, it has a big leak. According to SiriusDecisions, 98% of marketing-qualified leads never result in closed business.

One of the reasons this conversion rate is famously awful is that the MQL model has hidden flaws:

  1. It encourages marketers to gate content to hit their MQL goals.
  2. It focuses on content consumption as a leading indicator of intent.
  3. The entire process rewards creating friction in the buying process.

As a result, there is often a disconnect between marketing and sales. Should we really be surprised though? Does downloading a whitepaper mean you’re ready to buy?

Absolutely not.

That said, the marketing-led GtM strategy isn’t the worst option, but there’s still lots of room for improvement. If you want to create a SaaS business that can weather a tsunami, you may want to consider adopting a product-led go-to-market strategy.

Why SaaS businesses are adopting product-led go-to-market strategies

The future of growth belongs to product-driven companies. At HubSpot, we realized this a few years ago, which is why we disrupted our own business model before anyone else could. – Kieran Flanagan, HubSpot

Over the last five years, countless SaaS businesses have switched from a traditional sales or marketing-led GtM strategy to a product-led GtM strategy.

These are just a few great stories of notable companies that have made the switch.

What is a product-led go-to-market strategy? A product-led go-to-market strategy relies on product features and usage as the primary drivers of customer acquisition, retention, and expansion.

Tidal Waves Safety Zone
Tidal Wave 1 – Self-Educate
Tidal Wave 2 – Rising Acquisition Costs
Tidal Wave 3 – Product Experience

This is the strategy that many well-known SaaS companies have adopted successfully, including Grammarly, Slack, and Dropbox.

Gokul Rajaram of Square, another example, summarizes the rationale: “Truly great software businesses are self-service first.”

  • Pros: A significantly lower CAC, wider top of funnel, and rapid global scale. Works great with a large total addressable market.
  • Cons: Hard to implement correctly.

Product-led SaaS businesses have an unfair advantage and enjoy access to a dominant growth engine and significantly lower CAC.

Dominant growth engine

Free software gives you the option to scale faster than your competitors in two powerful ways:

  1. Wider top of funnel: A free trial or freemium model opens up your funnel to people who are earlier on in their customer journey. This is powerful because—instead of prospects filling out your competitor’s demo requests—they’re evaluating your product.
  2. Rapid global scale: While your competitors are busy hiring new sales reps for each region under the sun, you can focus on improving your onboarding so that you can service more customers around the world in a fraction of the time.

A significantly lower CAC

Free software also builds a moat around your business in three ways:

    1. Fast sales cycles: By having your prospects onboard themselves in your product, you can significantly reduce your prospect’s time-to-value and sales cycle. Once people experience value in your product, the next logical thing to do is upgrade. The quicker your users can accomplish a key outcome in your product, the quicker you can convert your free trial users into paying customers.
    2. High revenue-per-employee (RPE): Software was always built to scale well, but with a self-service approach, you’re able to do more with fewer people on your team. Less hand-holding means higher profit margins per customer.
    3. Better user experience: Since your product is built for people to onboard themselves, the overall support requests are often minimized while the user experience benefits.

As you can see, using a product-led GtM strategy gives you an unfair advantage in your market. But it doesn’t stop there.

According to OpenView Ventures, product-led SaaS businesses are valued more than 30% higher than the public-market SaaS Index Fund.

Conclusion

This is not for everyone. One thing I hope you’re not inferring from this article is that you need to be a self-service business.  If you don’t know what you’re doing, adopting a product-led GtM strategy might kill your business instead of helping it.

Many ambitious entrepreneurs have tried and failed. Rob Walling, the CEO of Drip, offers a warning: “Freemium is like a Samurai sword: unless you’re a master at using it, you can cut your arm off.”

Part of the reason many SaaS businesses fail at transitioning from a traditional GtM strategy to a product-led one is that there’s no battle-tested playbook. You need to figure out whether a free trial or freemium model will work for your business.

To help make this process easier, I recently worked with the brilliant CXL team to create an entire course on product-led SaaS growth. The course can help you:

  • Put together a successful product-led growth strategy that will get quick wins under your belt before the course is even finished.
  • Avoid painful bottlenecks when it comes to acquiring and activating free-trial and freemium users.
  • Help more people experience the core value of your product and (actually) want to upgrade.

Now, I’m curious. Is your SaaS go-to-market strategy tsunami-proof?

The post Is Your SaaS Go-to-Market Strategy Tsunami-Proof? appeared first on CXL.

9 Common Things that Stunt Business Growth (and What to Do about Them)

A major benefit of working in a digital-growth consultancy is that you see businesses across all industries and lifecycle stages try to grow their companies. I see good actions that really help a company grow but also common elements that hinder growth. In this article, I’ll give you insight into nine of the most common […]

The post 9 Common Things that Stunt Business Growth (and What to Do about Them) appeared first on CXL.

A major benefit of working in a digital-growth consultancy is that you see businesses across all industries and lifecycle stages try to grow their companies. I see good actions that really help a company grow but also common elements that hinder growth.

In this article, I’ll give you insight into nine of the most common things I see holding back business growth—and how we’ve helped clients solve these issues.

Before we get to that though, I asked my LinkedIn connections about the #1 thing holding back their companies. I was blown away by the number of things they suggested and how varied they were.

duncan jones linkedin
View the post and the answers.

It’s clear from the 80+ answers that many things hold companies back, so consider these nine a starting point in your quest to improve your business. (As I’m a marketer, these focus on a marketing approach.)

Okay, let’s get into it.

Growth killer #1: Silos

The first major issue that companies have—especially older, more established companies—is silos. They can be everywhere—between departments, such as the marketing and sales department, or within departments. For example, in the marketing department, the content and email teams may be siloed.

business silo chart

Silos also exist between external partners, such as agencies and consultancies. Silos hold back growth because they fail to maximize the ROI from the work people are doing across silos.

company agency silo chart

For example, if you’re spending money to generate leads but your sales team isn’t informing the marketing team of common questions, you’ve lost a big opportunity to improve lead quality and share information that could improve the marketing team’s work.

Or, if the content team is producing awesome content but not distributing it across email and social channels, you’re once again missing an opportunity to maximize the ROI.

Silos between external partners are also very common and can duplicate work, generate a lot of unnecessary back and forth, and waste an opportunity to maximize the value of one agency through another.

So, what can companies do about it?

The best way to break down silos within companies is to establish dedicated growth teams—something even Facebook did when they hit a growth plateau early in their journey.

growth team organization venn diagram

The growth team should be made up of people across the company from all departments and seniority levels. Their task? To break down the barriers between departments and work as one unit to grow the company using any means possible.

By including all departments, you get insights from across the business, and you also bring in an influential member of each team to help get things done within their own team—much easier than trying to do so with an “outsider” from another department.

As for breaking down silos with external partners, I recommend condensing the number of agencies you’re using down to one, if possible. If not, remember these are professionals that you’re paying, so put a framework in place that enables them to work together and maximizes the value of their efforts.

A few things I would suggest:

  1. Align and link their goals.
  2. Create a fair tracking and attribution framework.
  3. Set clear responsibilities across partners.
  4. Combine all major meetings, with each partner represented.
  5. Open up communication between agencies on platforms such as Slack so they know what the other is doing and can look for ways to collaborate.

chart to remove business silos

It may take time, but if you remove any silos in your company—even partially—you’ll improve business growth.

Growth killer #2: Different goals and metrics

The second thing that holds companies back: departments and vendors trying to grow a huge array of different goals and metrics:

  • The SEO team may want to improve rankings and search engine traffic;
  • The email agency may be looking to increase subscribers; and
  • The sales team may focus on closing sales.

Each team and person will prioritize, spend their budget, and allocate their time trying to grow these metrics, but their metrics may not translate into business growth.

competing business metrics chart

So, what can companies do about it?

The best way to solve this issue and grow your company rapidly is to simplify all your goals down to one trackable metric, which—if you grow month-on-month—will have the biggest impact on your business growth.

At Web Profits, we call this your “one trackable metric,” while Sean Ellis—who invented the term “growth hacking”—calls it the “North Star.” It doesn’t really matter what you call it; it just has to align closely with your overall business growth.

find north star illustration

Once you’ve identified the metric, never lose sign of it. Get your whole company excited about it and make sure it’s reported on regularly. Ensure teams are aligned and rewarded for growing this metric month-on-month. That way, each time your team is faced with a decision on their outputs, they can ask, “Will this grow our ‘one trackable metric’?”

Over time, refine your North Star to ensure its growth matches your business. If you’re a superannuation company, for example, you may initially align everyone to grow “signups” but later realize that few signups fund their accounts, so the metric may change to “funded signups.” Then, over time, it may change again to “funded signups with balances over $100,000,” and so on.

how to create north star metric

Once your metric is in place, you’ll find that the team will start prioritizing their work, their time, and their budget based on the impact on this metric, which will really move the needle for your business growth.

Growth killer #3: Not knowing the numbers

employees business estimates

Many businesses we talk to simply don’t know their numbers. Whether it’s their lead-to-sale close rate, their lifetime value, or any other important number, knowing each makes a huge difference for business growth. If you don’t know your numbers, you won’t know if you’re making the right decision or not.

A good example is if you set your lifetime value too low, or don’t know what it is at all. You’ll optimize your marketing campaigns for that low lifetime value and end up switching off campaigns that were actually making a profit, reducing sales and growth.

And if your competitors have calculated lifetime value accurately, they’ll have more marketing budget to work with per sale and, therefore, outbid you and steal market share.

lifetime value calculation comparison

So, what can companies do about it?

First, ensure you can trust the data you’re getting across the business. Make sure you’re tracking everything correctly and pulling the right data from the right systems, and look for any holes. If the data is correct, spend time working out all the numbers that matter to you.

Some of these formulas and methods are complex—you can calculate lifetime value, for example, in multiple ways and with some very long formulas. But you don’t have to be perfect first time. Refine these numbers over time to make them more accurate as you gather more data and insights.

Despite the complexity, knowing your numbers is well worth your time and will help long-term business growth.

Growth killer #4: One-off marketing

Among the bigger companies we serve, many want to grow rapidly month-on-month and ask internal marketing teams to focus 100% of their time on one-off marketing campaigns. This negatively impacts growth.

One-off marketing campaigns are things like promoting a sale, running a themed campaign for a month, writing content about an event—essentially any marketing effort that lasts for a limited period of time.

one-off marketing examples

Focusing entirely on one-off marketing hurts growth because it forces teams to scramble to get campaigns designed, developed, and launched, only to earn a return on that investment for a short period of time.

As soon as the campaign is done, they’re onto the next one, reinvesting more time and money to generate a limited return. That level of investment isn’t scalable over time, and you’re essentially only as good as your last offer—which may or may not work.

one-off versus evergreen marketing
Evergreen marketing (bottom) provides long-term benefits compared to one-off marketing (top).

So, what can companies do about it?

To grow faster, teams should focus more of their time and effort on always-on, evergreen marketing—marketing that is unaffected by time and won’t expire. If someone sees a current campaign two years from now, it should still be relevant and have the same effect.

The “evergreen” label can apply to content, to a marketing funnel that shows different ads, or even a never-ending competition with a new winner each month.

No matter the campaign, making it evergreen means that the team invests their time, energy, and money into its setup and push live once. Over time, every hour and dollar you invest will layer on more and more assets that repay you for years to come.

evergreen marketing benefits chart

To be clear, even with these benefits, I’m not suggesting that 100% of your marketing should be evergreen. Ecommerce stores should still run sales. You should still run branding campaigns and put out time-based content.

What I’m suggesting is that companies that want to grow do more evergreen marketing than they’re currently doing, which will increase ROI from every dollar and ounce of effort you put into your campaigns.

Growth killer #5: Not enough automation

Automation—it’s been a business buzzword for years, but most companies still do tons of things manually that could be automated easily:

  • Data migration from one platform to another;
  • Copy-and-paste report creation; and
  • Retention of agency services for manual work that could be automated.

These manual tasks stunt growth because they take time—a valuable, limited resource. When your team works on manual tasks, you’re essentially losing time that could be spent on higher-value items such as creative, strategy, research, and planning.

articles need for marketing automation

So, what can companies do about it?

Take automation off your plate and empower your staff to automate as much as they can. Give them budgets to find software and resources to build tools and invest in training—for things like good old-fashioned Excel Macros, which your team probably still isn’t using.

After they’ve automated the big things they do every day, look for other elements of your business that automation could make more efficient, such as turning paper-based processes digital.

If you have manual, low-value processes that can’t be automated, empower your team to outsource this work overseas or to lower-cost areas.

ways to automate marketing

Investing in automation will save a significant amount of staff time, which can refocus on things that are more likely to make a big difference to business growth. You’ll also get the added benefit of employee satisfaction as you take manual, repetitive, and low-value tasks off employees’ plates.

Growth killer #6: Concentrating on the top of the marketing funnel

Marketing teams generally concentrate their effort on the top of the marketing funnel: blogging, Facebook and Google ads, and emails to subscribers.

top of funnel marketing

In contrast, companies ignore a huge part of the post-purchase funnel that doesn’t require expensive advertising, and it’s definitely hampering their growth.

So, what can companies do about it?

It’s simple—spend a good portion of your time marketing to your customers.

This could be retention efforts to keep them happy so you earn more repeat sales and increase lifetime value. Or, it could be the development of referral programs to incentivize current customers to promote your product or service. You could also solicit testimonials or encourage happy clients to place reviews on third-party websites.

benefits marketing customers bottom of funnel

By spending more time on the bottom of the marketing funnel, you’ll generate additional revenue for every new customer you bring in without extra advertising costs. This will grow the lifetime value of your customers, which will allow you to spend more at the top of your funnel to bring in new customers—building market share and growing your business faster.

Growth Killer #7: Setting ad-spend budgets in stone

I’ve worked with many companies that set their advertising budgets in stone at the start of the year, even breaking down budgets by channel for each month. (And they stick to them.) That rigidity can limit growth significantly.

marketing budget spreadsheet

The problem with setting budgets in stone is that you’re relying on your forecasts to be right—right about which channels will perform best, right about the maximum you can spend profitably on each channel, and right about which month you’ll need to ramp up or ramp down your spend based on when the target market is most active.

So, what can companies do about it?

Rather than setting budgets per channel or at all, companies that want to grow need to set advertising budgets based on profitability.

At a certain cost-per-sale or profit-per-conversion, companies should have an unlimited budget—every dollar they spend on advertising will increase their profit. This gives marketing teams the freedom to find profitable channels, scale them up until they can’t spend another dollar profitably, look for new channels, and repeat.

If you can’t accept an “unlimited budget” mindset, at least allow your team to optimize your total advertising budget across all channels, fluidly shifting resources based on performance and opportunity.

marketing budget continuum for growth

Of course, there are implications like cash flow that can’t be ignored, but as long as you track the right metrics, you don’t have to set your budgets in stone—and you’ll grow faster.

Growth killer #8: Moving more slowly than competitors

Speed is a big one, and it’s holding back most companies from growing to their full potential. “Speed” includes how quickly you make business decisions; how quickly you get new initiatives live; and how quickly you test things, learn from them, and test again. Slowness seems ingrained in some business cultures, and it can be hard to change, but it definitely stunts growth and is worth improving.

The faster you implement, test, find winning ideas, and scale them up, the faster your business will grow. That’s across marketing, sales, staff productivity—everywhere.

Take two competitors. If they’re the same in every aspect—product, price, brand, and team—then the only variable that will determine which grows fastest is speed. The faster company will roll out business improvements first, and those winning improvements will make a big difference for their business growth.

benefits of speed in business

So, what can companies do about it?

It’s hard to change your business culture if you do things slowly, but it’s possible. Start by looking at your recruitment. Consider hiring people from non-traditional backgrounds, such as entrepreneurs, who think differently and look for faster, better ways of doing things.

Or, test interviewees by giving them a task they’ve never done before to see how fast they can teach themselves—and how quickly they can get a solution back to you.

Look at your management team as well. Ensure that managers aren’t micro-managing but instead empowering their teams to make decisions to get things done quickly. Clear roadblocks that cause delays, such as compliance, and look for ways to speed up common tasks by creating processes and finding new tools and software.

For slow, reluctant teams, show them small wins from moving fast and the effect it has on the business. Set KPIs that align with business growth. Monitor the number of things they implement each month and work with them to improve that number.

how to make your business faster

Growth killer #9: Not prioritizing correctly

People love ticking things off their to-do list—whether or not it’s the highest priority item.

Not prioritizing correctly holds back growth because the things that really grow a business are usually the hardest, and, without prioritizing them, those initiatives get rolled out slowly—after lower-priority, easier tasks your team is happy to tick off. That mentality will stunt your growth.

prioritizing business tasks checklist

So, what can companies do about it?

Give your team the tools they need to determine where to spend their time. We use the ICE prioritization method. It ensures that the ideas that will have the biggest impact are higher on people’s tasks lists and, therefore, rolled out sooner.

ice prioritization method example spreadsheet

To implement the ICE prioritization method, ask every team to score the things they’re working on out of 10 for the following factors:

  • Impact: The possible impact the idea could have on the metric you’re trying to grow month-on-month, if the idea works.
  • Confidence: How confident you are that the idea will succeed based on past experience.
  • Ease of Implementation: How much work and how long it will take to get this task done (i.e. Does it require a lot of development time, or can it be done in a day?)

By scoring items based on growing your most important metric, you ensure that all teams across the company work on the highest priority items first—and the business will grow faster because of it.

Conclusion

Nine things commonly hold back business growth:

  1. Silos
  2. Different goals and metrics
  3. Not knowing the numbers
  4. One-off marketing
  5. Not enough automation
  6. Concentrating on the top of the marketing funnel
  7. Setting ad budgets in stone
  8. Moving more slowly than competitors
  9. Not prioritizing correctly

If you can solve even one of these things, I’m confident it will accelerate your business growth.

Plenty of other things can hold back business growth, too. If you have some to add to the list, please let me know in the comments.

The post 9 Common Things that Stunt Business Growth (and What to Do about Them) appeared first on CXL.