Rule #21 of my personal marketing manifesto is “Assume nothing.” So let’s start with a couple definitions:
The most frustrating part of SaaS marketing is that there are so many damn things that you could do — SEO, social media, advertising, communities, side projects, emails, webinars, events, etc. — the list goes on and on.
SaaS marketing is the most sophisticated type of marketing that marketers have ever faced. Intangible products, subscription billing, free trials, integration ecosystems, are just a few of the complexities marketers face in SaaS. The SaaS business model in and of itself has been a groundbreaking way of doing business, emerging and rising to popularity only in the last decade.
Is SaaS a conventional business? Absolutely not. And yet founders and marketers are still marketing their SaaS like the ecommerce brands and legacy software companies of the early 2000s.
To better understand why SaaS marketing is different than other kinds of marketing, we must take a step back so that we can more fundamentally understand how the SaaS business is different than other types of businesses.
Patrick MacKenzie has written extensively on the SaaS business model, but I believe there are two main reasons why SaaS is a completely new animal:
First, we must understand how a SaaS company makes money. Monthly Recurring Revenue (MRR) is the most attractive part of a SaaS for both investors and entrepreneurs alike because it paints a picture of predictable, easy money. While recurring revenue does amazing things for the business and cash flow, it also presents an interesting predicament for marketers.
In a traditional software model a business may sell a one-time software license for Product X at $120. Therefore, profit is equal to revenue, minus the cost of goods sold, minus the cost to acquire the customer in marketing spend. All cost of goods sold and cost to acquire the customer are regained immediately at the sale. If a business spends $40 to acquire the customer, that cost is regained immediately out of the profit made at the sale.
With SaaS, a business may sell a monthly subscription for Product X at $10 per month. The same equation still applies here with profit being equal to revenue, minus the cost of goods sold, minus the cost to acquire the customer in marketing spend.
However, unlike the traditional software model, the cost of goods sold and the cost to acquire the customer are not regained immediately. They’re often regained months later. If a business spends $40 to acquire the customer, and that cost is not regained until 4 months later, then a profit isn’t made until 5 months later. This presents a serious cash flow crisis when acquiring new customers because the business needs cash to subsidize the time it needs until it can make a profit from the customer it just acquired.
The SaaS model essentially forces the business to operate with a large enough pile of cash (to hedge the negative cash flow until a customer can be profitable for the business) OR to keep their customer acquisition cost low enough to be immediately profitable with every customer.
SaaS is ever-evolving. There are no more traditional product launches. The product that you buy is changing and evolving every day. So, your customers are buying your product today, tomorrow, and a year from now.
SaaS companies today can create different versions of their products and price and package them in different ways. SaaS products are often split up into different tiers with various capabilities and features for each tier. There is no other type of product in which several variations of the same product can be sold alongside one another.
One of the biggest differences in SaaS products is that they are exclusively software. For 99% of the world’s existence, products have existed in two different forms: hardware and service. Physical products and services have been the only two types of products until software came along. Software is an intangible product. The closest the customer will ever get to physically interacting with the actual software product is simply through (or by means of) their keyboard and mouse.
Selling an intangible product brings with it a whole new set of challenges for marketers. No longer are products about what what you can feel or see someone do for you.
SaaS is completely reliant on the benefit that they deliver, rather than material value or labor.
With the nuances of cash flow and product complexity, you can now understand how marketing SaaS products is completely different than anything else. Recurring revenue presents a new challenge for acquiring and retaining customers and the nature of intangible, ever-evolving products forces marketers to communicate in an entirely new way.
Today, if you went to a founder or marketer of a SaaS company and asked them why they do marketing the way that they do, they’d probably give you an answer similar to, “That’s what everyone else is doing” or “This is just the way it’s always been done.”
It reminds me of the classic game of telephone. A group of people sit in a circle and one person whispers a phrase to the person next to them. That person then repeats the phrase to the person next to them, and the pattern continues until it gets back to the original person who started it.
By the end, the phrase is often completely different from the original, and the group laughs about how and where it got skewed in the process.
Marketing has followed a similar fate. One innovative company decides to start marketing to their customers with a particular strategy or tactic and finds great success. Another company gets wind of that company’s success and tries to copy that company’s strategies and tactics to get equal success. The next company gets wind, the pattern continues, and pretty soon every company is trying to execute on certain strategies and tactics with no real idea why.
Companies choose marketing strategies and tactics because of convention, because it’s just what is generally done and believed to work.
See, no one wants to be the first company and take the risk of investing in a new unconventional strategy or tactic. It’s against our DNA to take more risk.
So they opt for the easier option. The “safer” option. The conventional option.
But great companies are never built on conventional wisdom. Great companies are built on innovation, on challenging the status quo, and with unconventional strategies and tactics.
I’ll save us both time by not mulling over all the cliche examples of innovative companies — Apple, Netflix, Airbnb, Patagonia, etc.
But the fact remains that these great companies recognized a shift in the market and capitalized on it.
David Cancel, CEO of Drift and one of my role models, said back in 2016, “I think marketing has kind of lost it’s way a little bit. We’ve lost the importance of a great story and truly connecting with people. We live in this world where it’s all about content, content and more content. And SEO. And ranking for this keyword and that keyword. And algorithms and conversion rate optimization. Pieces of that stuff are still important to marketing, but overall, I think we’ve lost our way. Marketing today has become more about gaming the system and get rich quick schemes.”
Shallow content, SEO, keywords, algorithms, CRO. These are just a few examples of marketing telephone games that have strayed from their original intent.
None of these things are inherently bad, but they’re missing the grand scheme of things — the core of what marketing really is.
See, there’s a shift in the market, and conventional marketing practices are losing their efficacy.
Customers are more educated, independent, and resourceful than ever before. They’re not ignorant to the hoops marketers make them jump through. They’re not stupid.
They’re real people, not just leads in a database.
And they’re tired of the conventional marketing tactics.
Conventional marketing wisdom tells you to analyze what your competitors are doing, figure out how to use the marketing budget to best meet company goals and metrics, and hack some marketing automation along the way to capture leads and show progress.
Conventional marketing is in the best interest of the company.
Conventional, company-first marketing strategies and tactics include:
But here’s the problem, the customer doesn’t care about your company. Competitive analysis, budgets, metrics, hacks, and automations are all company problems — not customer problems.
They don’t care about your KPIs. They don’t like filling out forms. They don’t care about scalable communication. They don’t care about your shallow blog posts. They don’t care about your funnel. They don’t care about your features. They don’t care about your event sponsorships. They don’t care about your plans. And they don’t care about your ads!
The customer does not care about your marketing.
Unconventional marketing is in the best interest of the customer — not the company.
Unconventional, customer-driven marketing strategies and tactics include:
The customer cares about their experience with you. They want your best content. They want conversation. They want help. They want to know how the product benefits them. They want to experience the value of the product before they give you their credit card.
The customer cares about being helped.
For the majority of founders and early stage employees, marketing is not their forte. Maybe it’s product development, sales, or fundraising, but it’s rarely marketing.
So when it “comes time” to spread the word about their new product that’s going to “revolutionize” how people work and “disrupt” the market, founders will go through the list and check the boxes: write the blog post, reach out to the tech journalists, post to product hunt, etc. And that’s the end of it.
This also happens at venture funded startups. Founders raise a tall pile of money and then hire a small marketing team. They ask the marketing team to do x, and y, and make sure that we get x results by y time. So the marketing team follows orders and does their best to make it work.
It’s all focused on the company, not the customer.
See, many people see marketing as a plug-and-play function. It doesn’t matter what or why they’re doing it, it just matters that they’re doing something. So marketers and founders alike go to the whiteboard and write a long list of things they need for their program and then check the boxes as they’re complete.
Sadly, founders think “I need marketing” and then go hire the marketing team. But that’s the end of it. The box is checked.
So the marketer fields the requests and does their best to meet expectations:
This is what I call Checkbox Marketing, because it’s a state of doing things just for the sake of doing things. It’s purely conventional, because it’s just the way things have been done or are being done in the market.
They put up Facebook Ads because the founder asks why they don’t have Facebook Ads. Founders and marketers create a Snapchat for the company because their competitor just created a Snapchat.
Checkbox Marketing (and conventional marketing as a whole) is a state of survivalism. And survivalism gets you nowhere.
To try to get ahead of the requests and create more long-term sustainability, founders and marketers default to plans and automations.
In the marketer’s head, a plan will help them be better organized and give the company confidence in what they’re doing.
It’s fine and dandy to have a plan for the next year, but is the plan in the best interest of the company or the customer?
In the marketer’s head, automations will make it easier for them to function and make sure everything gets done that’s supposed to. Automation, to a degree, is great. The problem with this approach is when you try to automate things that shouldn’t be automated.
Automation is alluring because it gives you comfort that everything is “scalable.” Personal relationships and conversations are not scalable by design. You can only have so many relationships and so many conversations.
But what are we so afraid of? Too many emails? Too much work? Too much time? Too many real relationships with potential customers?
I applaud Drift CEO, David Cancel, and VP of Marketing, Dave Gerhardt, for removing all gated content from their site and starting the #noforms movement.
David’s customer-driven approach is partly what has inspired me to write about customer-driven marketing.
Here are some key ingredients to achieving customer-driven marketing:
Ask your customers what would be helpful, study what they read, find the gaps, improve on what’s already popular.
Allow yourself or your team to make decisions based on qualitative data. Designate clear ownership and accountability. Ownership is not shared, it is given.
Work in public from the very beginning. Ask for help. Communicate goals, expectations, roadblocks, and ideas.
Ship early and ship fast. Work in iterations. Test and optimize based on qualitative and quantitative customer feedback.
Put the customer first in all that you do, and there’s no way you can do bad marketing.
Now that you have a brief understanding of why conventional marketing is broken and the need for unconventional marketing, let’s dig deeper into the inherent need for unconventional marketing in the next chapter.