CAC Strategy is the Key to Scaling your SaaS Company

aaron bird bizibleStarting a SaaS company and scaling a SaaS company are two very different things.

The same is true for “scaling” a SaaS company in the very early days vs. scaling a SaaS company through the growth phase.

And since every company is different and experiences those “phases” at different times in different ways, you have to be careful with blanket statements about what works and what doesn’t.

Everything is situational, which is why when you read a post where the author says Customer Acquisition Costs (CAC) doesn’t matter, you need to understand the big picture.

Perhaps what you missed was when he said they don’t matter in the early days.

Or maybe you missed the part about how that post was talking specifically about heavily-funded startups with 6-figure Annual Contract Values (ACV) and an Enterprise sales model.

The reality is, every person that writes about SaaS metrics is doing so with certain situations in mind and if you aren’t in the situation the author is talking about, then you may wish to consume that writing with a pinch of reality salt.

Not because what the author said isn’t true, but because it might not be true for your current situation… for your current reality.

Which is why when my friend Aaron Bird, CEO and Founder of Bizible (they’ve raised $10.5M since mid-2011), was talking about how a SaaS company’s Customer Acquisition Costs (CAC) Strategy (and Efficiency) is key to scaling I asked him if he’d share that with the world… and he did.

I have a couple of things to add in the Afterword below, but for now I’ll turn it over to Aaron…

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Let Your Customers Write Your Marketing Copy

sujan-patel-when-i-workI spend a lot of time talking to SaaS companies about how they should identify their Ideal Customers, understand how they operate, know what their Desired Outcome is, listen to what they say, etc. etc.

Whether it’s a focus on acquiring new customers, working to engage prospects already in the pipeline or customers you’ve just acquired… or nurturing and growing your long-time customers, knowing how they operate and the words they use in those operations is critical.

Well, a friend of mine took this idea of “listening to what your customers say” to the extreme by literally getting his customers to write his marketing copy for him. Genius!

His name is Sujan Patel and he’s VP Marketing at When I Work, an HR SaaS product specifically for companies with hourly employees (and the scheduling headaches therein) and I’ll let him share exactly what he did and how it worked out.

Take it away Sujan…

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Exposed! A Top-Secret “Enterprise Pricing” Growth Hack

enterprise-leadWhen it comes to SaaS, you basically have two sales models: high-touch and self-service. Small, bootstrapped SaaS companies often like to go the low-touch, self-service way.

Large, venture-backed startups often like to take the high-touch, Enterprise sales approach.

And sometimes it’s the opposite of that. It depends.

There are just so many different factors that come into play in making the decision about which model to use – not the least of which is who you’re selling to – that it’s simply beyond the scope of this article.

While high-touch Enterprise SaaS vendors could certainly learn a thing or two about sales process optimization from what’s below, this is more aimed at low-touch or self-service SaaS vendors that have a “contact us for Enterprise Pricing” option on their Pricing page.

But why is this necessary if you have a self-service sales model? Well, read on…

I’ve given this advice to my clients over the years and countless times via Clarity, so I thought I’d just share it here once and for all.

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The Only 3 Acceptable Pricing Page Discount Tactics

discountsI get this question from time to time:

“Lincoln, is it okay to offer discounts right on your pricing page?”

Short answer: No.

The longer answer, with some nuanced yesses thrown in,  along with some tactics that you can employ, is below…

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Engaging at Scale: The Secret to Automating Personal Emails

Customer Success bot transparentAbout a year ago I shared my super top-secret way to automate personal emails more effectively – called the “Customer Success bot” method – with the awesome folks on my mailing list.

Since then, I’ve come up with several new uses for this framework that have proven to be incredibly effective ( I’ve shared those below) that go far beyond just the welcome email that started all of this.

Now some people will wonder why I share these things publicly when they’re obviously incredibly valuable – and make no mistake, they are INCREDIBLY valuable – but releasing them publicly won’t diminish that value.

And personally, putting these things out there for the world to see just forces me to get even more creative to stay ahead of the pack.

But first, let me give you a little context…

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5 Growth Hacks to Supercharge your Invite or Referral System

invite-a-friend-or-7When was the last time you referred your friends or invited co-workers into an app after you just signed-up for the free trial?

When was the last time you imported your address book right after you opened an app for the first time?

Right.

So why do you expect your users and customers to behave differently?

Unless you have specific intel indicating they will share your app with everyone immediately after first interacting with you (like, for instance, my Mom is your target audience), then you should probably assume they won’t.

And if you sell to a B2B Audience, you should double-down on that assumption.

Here’s why and how to overcome that…
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The Myth of Unavoidable Churn

The Myth of Unavoidable ChurnWhen it comes to customer churn, there are two kinds: avoidable and unavoidable.

But I guarantee that the amount you label as “unavoidable” is actually much smaller than you think.

I know, but…

“Most of our churn is out of our control, so it’s unavoidable”

“We sell to SMB and in that market churn is inevitable.”

Accepting that churn is inevitable since x% of companies fail every year is like saying why workout, you’re just gonna die anyway.

But the excuses continue…

“We have a low price, so of course we have high churn.”

“We sell to [a certain market segment] so of course churn is high. That’s just how this works.”

“We sell to a very transient market, so of course churn is inevitable”

Unavoidable. Inevitable.

To paraphrase a monologue from this Seinfeld episode:

seinfeld-low-churn-meme“No matter how desperate we are that someday a better customer will emerge, with each notice of cancellation, we know it’s not to be; that for the rest of this sad, wretched pathetic quarter, this is who we sell to, to the bitter end. Inevitably, irrevocably; low churn? No such thing.”

SO MANY SaaS – and other types of companies – make this costly assumption, so let’s dig into why this is a dangerous myth.

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Understanding Your Customer’s Desired Outcome

Desired Outcome - try again-2So… what does Success look like for your customer? That’s the question that’s at the base of my wildly popular “The Secret to Successful Customer Onboarding” article.

BTW, this article is good… but I have another one that goes into more detail on Desired Outcome you should check out, too.

But it’s not actually a very good question. What does “success” look like for your customer? What does that even mean? Unless it’s a hard ROI, that’s a tough question to answer.

So I always found myself moving to different ways of phrasing basically the same question. And when you do that – when you have to say “in other words,…” next time just start with the “other words” and move past the confusion.

So now I ask about your customer’s Desired Outcome… but even that easier-to-understand concept has its nuances. Let me explain…

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The Secret to Successful Customer Onboarding

Brazil flagTambém disponível em Português por Mathias Luz

the-best-way-to-onboard-new-customersCustomer onboarding has come up a lot lately, which is great since having a poor onboarding experience for your customers can pretty much kill your growth… if not your business.

The first in-app experience your customer has with your product sets the tone for your relationship, and if it’s confusing, overwhelming, or otherwise puts up barriers to achieving success (or at least recognizing the value potential in your product), you’re in trouble.

As I say all the time, the seeds of churn are planted early, and those seeds are planted deep if your onboarding experience for new customers or your prospects during a free trial is terrible.

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7 Sanity Checks for Sending Cold Email

Screen Shot 2014-09-22 at 7.06.26 PMEmail Prospecting, the once-secret method (still) used (to great effect) by the hottest companies to get the attention of the biggest enterprises out there – even if all they talk about publicly is inbound marketing, adwords, and social – is no longer a secret.

Thanks to folks like Heather Morgan of SalesFolk, Aaron Ross, author of Predictable Revenue, and Steli Efti from Close.io, the cat’s out of the bag that sending emails to people you’ve never met before in order to get their attention and get your product in front of them doesn’t just work… it is often required and can be super-effective.

This isn’t to say that blogs, social media, AdWords, etc. aren’t useful… they’re ENORMOUSLY useful to accelerate deals, elevate and educate various personas at your Ideal Customers, etc. But it is to say that these methods may not be the way you reach potential customers initially, especially in the early stages of your existence. And in some cases, they may not be how you reach your potential customers ever.

Now, after they know about you, as a result of outbound “cold” email campaigns, or once they’re a customer to drive loyalty, your blog, white papers, webinars, infographics, and marketing website etc. are super-valuable; just sometimes not at first…

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10 Growth Hacking Lessons from Dodgeball

growth-hacking-dodgeballI hit Nick Mehta, CEO of Gainsight, right in the gut.

And then I took a hard shot to the chest by Gainsight’s New Business director.

Working in a startup is rough, lemme tell ya.

As Nick and I stood on the sidelines during this company outing – battered, exhausted and laughing – watching the remaining players trying mercilessly to eliminate each other (and have fun at the same time), Nick turned to me and said:

“You should write a blog post on what Dodgeball can teach us about Growth Hacking.”

So, looking for any excuse to rest – this wasn’t just dodgeball but TRAMPOLINE dodgeball – I came up with a list of 10 lessons (5 Do’s and 5 Don’ts) you can, in fact, take from Dodgeball and apply to Growth Hacking.

Okay, here we go.

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How-to Avoid SaaS Free Trial Abuse

free-trial-botAt the Black Hat conference in Las Vegas, a security research duo showed how they built a cryptocurrency-mining botnet by leveraging cloud platform services – like Amazon Web Services, Heroku, or Google App Engine – using only Free Trials and Freemium accounts [PDF].

Cue the overly-dramatic sky-is-falling music as we mourn the demise of SaaS Free Trials and Freemium (remember, it pays to be clear on the various uses of “Free”).

I know a lot of entrepreneurs, founders, executives, and product marketers at SaaS and Cloud companies will read that Wired article and say to me – since I’ve been quite vocal about not being a fan of requiring a Credit Card to get started on a Free Trial – “See Lincoln… not having a credit card wall opens up our system to abuse!”

But they’re wrong… and here’s why.

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SaaS Free Trial Extension Requests are a Bad Sign

free-trial-expired-extensionI got this question about SaaS Free Trial Extension requests and I thought I’d answer it here, for all to see.

“Lincoln, that was a great guest post by Steli Efti from Close.io on sales mistakes that lead to churn. I was reading Steli’s blog and found a recent post where he says “short trials + liberal extensions” is the way to go. While you haven’t covered this directly (unless I missed it), it struck me as something you’d likely have an opinion on. I’m confused… who’s right?”

I’m right, obviously. [End of Article]

No, actually, I think we’re both right, but my view on this is from a slightly different angle.

I agree that if someone asks for an extension you should probably give it to them.

However, I see the fact that they asked for the extension in the first place as an indicator that there’s a deeper problem, this request is a symptom of that problem, and the request itself as an opportunity to engage and learn what we can do to solve that problem.

Don’t worry; I go into great detail on why I think that, how to treat the symptoms, and how to eliminate the underlying problems.

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The Best SaaS Free Trial Length

best-free-trial-lengthHere’s a secret no one talks about: SaaS Free Trial Length is a Marketing Gimmick.

There isn’t a best SaaS Free Trial length that works for every SaaS company, in every category, for every market. I know, that contradicts my reputation for saying “always do this” or “always do that” but that’s the way it is; the only best Free Trial length is whats best for your current situation.

For instance, I helped a company via Clarity the other day that has a 7-day free trial. In the context of their current situation – offering / market / customer / value prop / speed of value recognition by customers / etc. – a 7-day free trial seemed to make the most sense. Sure, they had 99 problems, but Free Trial length wasn’t one of them.

But there is something I want you to always do … and that’s to think before putting up a Credit Card wall, developing your Pricing Strategy, or coming up with a Free Trial strategy – including choosing the length of the trial.

This article will help you avoid picking a Free Trial length at random, will help you understand why doing that is a bad idea, including why you should understand your customers, the market, expectations, how your value prop and competition will influence your prospects view of the trial length you selected for your product, and much more.

Here we go…

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Ideal Customer Profile Framework

Having a clear definition of your Ideal Customer is one of the most important things you can do for your business.

Your Ideal Customer Profile – ICP – dictates (or should dictate) everything from the features and functionality of your product you build or what makes up your service offering, to the words you use and the emotion you invoke or tap into in your marketing.

I think people forget that you actually get to choose your customers. You get to choose who you want to do business with. So creating an Ideal Customer Profile isn’t limiting… it’s empowering!

In fact, if you don’t choose who you want to do business with, your customers will choose you… and they may very well be less-than-Ideal.

There are obviously lots of ways to come up with your Ideal Customer Profile, lots of methods and templates and canvases… but over time I’ve developed this framework that works well for me.

And I continue to evolve it. When I do, I will update this post. The current version is for Q12017.

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4 Sales Mistakes That Lead To High SaaS Churn

steli-efti-close-ioI’ve said many times that the seeds of churn are planted early. Whether it’s in your marketing – both the things you say but also the types of customers you target with your messaging and outreach – to the things you say and do during the sales process, you could be acquiring customers that already have one foot out the door.

Because this issue is so important and really can’t be talked about enough, when my friend Steli Efti – CEO of Close.io – reached out and offered to share these four sales mistakes that lead to high churn, I was thrilled.

Be sure to check out the Afterword  below Steli’s article where I share some articles and resources that will help you further refine your Ideal Customer and reduce churn.

Okay, without any further ado… here’s Steli…

Four Sales Mistakes That Lead To High Churn for SaaS Companies

Churn is the biggest threat to sustainable SaaS growth. Sales teams often aggressively close deals because of myopic focus on immediate growth. What they fail to recognize are the long-term implications of short term focused selling to the business.

Here’s how to avoid the 4 most common sales mistakes that lead to high churn in SaaS.

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SaaS Free Trial: Requiring a Credit Card is Shortsighted

barbed-wireI got this email asking whether to require a Credit Card to start a SaaS Free Trial or not and what the best Free Trial length is.

So instead of just answering him directly, I decide to use it as the basis for this article.

Here’s the email:

Hey Lincoln, some dude told me to ask for a credit card up front with a free trial instead of the Freemium model I’m currently using. Just as your site says…customers psychologically get used to NOT paying with my freemium model and its a disaster.

However, your articles strongly suggest NOT to ask for the CC upfront for free trials as that dude suggests.

My plan was ask for CC upfront for a 7 day trial. Do you still advise against this plan? Reason I ask is your article is over two years old…so not sure if the market changed etc.

Here’s my response…

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5 Steps to Unstick Your User Onboarding Flow

unstick-your-onboarding-flowThe other day I got an email from a SaaS CEO friend of mine telling me his product team is finally ready to tackle a major problem with their onboarding flow during their Free Trial.

It turns out they have one screen in the flow that is causing them big problems.

And in this case, a “big problem” is that prospects entering their Free Trial would, at some point, hit that screen and leave… never to be heard from again!

Yeah, that’s kind of a big problem.

Now, as you can imagine, this screen happens to be a very important piece of the customer onboarding process, meaning prospects or new customers can’t skip it, and changing it will take significant engineering resources (not just the screen itself, but all the stuff going on behind it).

That’s how screens like this get to be, well, screens like this, right?

This SaaS vendor has basically tackled all the low-hanging fruit around this screen, which means this screen sticks out like a massive sore thumb even more.

So, it’s time to make a change and unstick that stuck onboarding flow.

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22 Ways to Reduce Churn with Growth Hacking

22 ways to Reduce Churn with Growth HackingAs the SaaS industry continues to rapidly mature, more folks are looking at churn in SaaS companies – investors, analysts, executives, consultants, etc. – and more and more methods of measuring churn are going to surface… and that’s awesome.

Of course, the problem is that, while analytics and metrics and new ways of measuring churn are fantastic – and no matter how you slice it, accurately measuring churn is not actually that simple – ultimately it’s what you do with that data that matters.

So… even with all the different ways of measuring churn, how do you actively retain customers?

What methods, tactics, techniques, and ways of thinking will help you keep the customers you already have so you can more efficiently grow your SaaS business?

Enter… Growth Hacking.

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Freemium or Free Trial? There’s a Better Question

Freemium or Free Trial? There’s a Better QuestionI answer this question all the time… should we go Freemium or Free Trial for our SaaS app?

And I get this question from companies of all stages and sizes, including pre-launch Startups, software companies moving to – or adding a product line based around  – the SaaS business model, or for later-stage SaaS companies that are questioning their current trajectory.

I assumed I’d covered this topic so much the answer was obvious… but apparently that’s not the case.

So now I’m going to address it once and for all… or at least I can point people to this post when I’m asked whether Freemium or a Free Trial is the better way to go.

It’s time to ask a better question.

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How to Create an Affiliate Program for your SaaS

How to Create an Affiliate Program for your SaaSThe CEO of a vertical-specific SaaS vendor with a relatively high priced offering emailed me the other day with a question about creating an Affiliate Marketing program to accelerate growth.

I gave him a fairly detailed answer and I thought I’d elaborate on that answer even more and share it with you… enjoy.

“Hey Lincoln, we’re thinking of starting an affiliate marketing program for our SaaS company to help accelerate growth.

From what I’ve read and the examples I’ve seen they’re commonly offered by lower priced SaaS apps, sub $200/mo, but our app is higher priced at $1k, $5k, or $10k/mo.

I’m thinking of offering an affiliate commission of 1 month of Monthly Recurring Revenue (MRR) after month 2 for all converted referrals. And maybe double that for an annual subscription.

I know you’ve talked about Affiliate Marketing for SaaS apps before, but do you know of any successful B2B SaaS affiliate programs with similar subscription prices?”

Below is my significantly-elaborated response…

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SaaS Marketing: 21 Growth Hacks to Test Today

SaaS Marketing Growth HackingBelow are 21 SaaS marketing growth hacks you could test right now.

Of course, these are tactics and while everyone loves tactics, if they don’t make sense within your very well thought-out SaaS marketing strategy, you should probably not implement them, right?

In fact, you should also probably make sure you have a well-thought-out SaaS marketing strategy, too.

Now, some of these “hacks” I’ve used and have seen a big impact… others are just ideas I haven’t implemented yet but might if the occasion arises… and some are just crazy ideas that I think would work if the situation is right.

Guess what? I’m not gonna tell you which ones are which so use your imagination and a good bit of caution.

I’m also not going to show you live examples of what I’ve implemented or share results. You see, I’ve helped my clients with these tactics and they’d like a little bit more time out in front of you, thank you very much.

The goal here is to get you thinking in the right direction, that’s all. Fair enough?
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SaaS Marketing: Are you Lazy or Deliberate?

When it comes to SaaS marketing, we know that Random Effort Yields Random Results… but it gets worse.

The problem I see too often – and the catalyst for this epic post – isn’t Random Marketing, but what I call Lazy Marketing.

And lazy marketing is perhaps a more insidious form of marketing, if for no other reason than the fact that it looks like its working.fast-n-loud

It’s not until you take a step back and examine what’s really going on – the actual results – that you see it is not only not working…

… but it’s killing your business.

It’s time to stop being lazy and get deliberate with your marketing.

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SaaS Marketing: Random Effort Yields Random Results

Never is it more clear that random effort yields random results than when you look at the “marketing” of far too many SaaS companies…. maybe even yours.

Take a look at a SaaS company that’s stagnating or failing to reach their goals, and you almost always find this random hodgepodge of tactics that they “tried” at one time or another.

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