Why Is SaaS Marketing Different From Traditional Marketing?
The SaaS industry has been growing exponentially these past several years. And it will only continue to grow as more and more businesses come to rely on SaaS solutions.
In fact, end-user spending on public cloud services is projected to reach $482 billion this year.
This comes both as a boon and bane to the SaaS industry. It is a boon because it’s a rich market that is filled with opportunities to make a lot of money.
But it is also a bane because a lot of people would also recognize the opportunity and join in. This means that the competition would only grow fiercer.
But most of the time, what makes a SaaS business get ahead of its competitors is its product, sales, and marketing efforts.
And SaaS marketing can get tricky. After all, it works a lot differently from traditional marketing. A lot of concepts and strategies in the digital marketing of everyday products won’t necessarily work in the SaaS market.
In this article, we will talk about the things that make SaaS marketing unique in comparison to traditional marketing methods.
1. The Distinction Between B2B And B2C SaaS Markets
Even by itself, the SaaS market is very diverse. There is a vast range of niches and industries that it caters to.
But for starters, we can divide them into two categories: the business-to-consumer (B2C) and business-to-business (B2C) markets.
The B2C SaaS Market
From the name itself, the B2C market caters to everyday consumers. The SaaS products in these markets are usually for entertainment, education, and communication.
The B2B SaaS Market
The B2B market, on the other hand, provides software solutions for different business departments. The target customers are usually business owners and decision-makers.
Still, some SaaS products can be useful both for consumers and businesses. Take Zoom and Canva, for example. They can be used for personal use. But they can also serve businesses, especially if they purchase the more advanced paid plans.
2. Behavior And Mindset Of Your Buyers
Another difference between SaaS marketing and traditional marketing is the behavior and mindset of your buyers.
SaaS products are not like your everyday consumer goods. They are very technical in nature. Not all people would understand how they work right away.
That’s why potential buyers usually want to know more about the inner workings of a SaaS solution.
This is especially true for B2B SaaS products. For B2B potential buyers, SaaS solutions are significant investments. They want software that would improve their business and operations. They expect the product to deliver a return on their investment.
Because of this, the buyers would be more meticulous in their decision-making. They would take their time researching the product and its features. Additionally, they would compare it with other similar products in the market.
And even after they have decided to buy, they wouldn’t do so right away. They would still need some convincing before they finally pull out their credit cards and make the purchase.
This is why you need to be very careful in your marketing efforts. You need to be able to address the needs and concerns of your prospective customers. And you need to be able to show them why your product is the best solution for their problem.
3. Long-Term Customers
The SaaS market is also different from traditional markets in the length of customer relationships. In the traditional market, transactions are usually one-time. The relationship ends when the transaction is done.
But in the SaaS market, people usually subscribe to a SaaS product for a long period of time. They would only cancel their subscription if they are not happy with the product or they no longer need it.
Remember that the acronym “SaaS” stands for “software as a service.”
Service is a crucial part of running your SaaS business. You need to keep your customers happy. Retaining them should still fall under the scope of your marketing department.
In fact, focusing on customer retention is more efficient than finding new customers. After all, winning new users for your SaaS product costs more time, effort, and resources than keeping those you have already won.
Not to mention how your customer feedback can affect the growth of your business. If your users are happy and are giving you positive reviews on sites like G2 and Capterra, it may encourage potential customers to buy your product.
On the other hand, if you’re getting negative word-of-mouth from them, that can significantly hinder your growth.
This is why it is very important to focus on customer retention in your marketing efforts.
This is not an easy task. But it is necessary if you want your SaaS business to succeed in the long run.
4. Use Of Free Access
For any SaaS business, the best way to win a customer is to let them experience the value of your product for themselves. This is also called the “a-ha!” moment.
That’s why you may notice that most SaaS providers offer free trials or free plans. This is so that potential customers can use the product and see how it can benefit them.
SaaS businesses have to think of a way to deliver that value as fast as possible, or with as few clicks as possible.
Free trials have to be long enough to bring your user to that “a-ha!” moment. Don’t make it too long, either. That might remove the sense of urgency in exploring your SaaS product through the free trial.
As for free plans, you need to include enough features to deliver that value. But you also need to make sure that your free plan is not too generous.
If you give all your features away in your free plan, your users might not find any reason to switch to a paid plan.
So you need a clever way to sell a paid subscription.
Spotify and Zoom give us great examples for this endeavor.
If you use Spotify, you would know that a free account plays ads almost every 10 minutes. But if you upgrade to a premium account, the ads are gone.
This is actually a common practice for B2C SaaS products. If they can’t get revenue from a paid subscription, they will get it through ads. And when the user has had enough of the ad interruption, they will buy a premium account.
On the other hand, a free Zoom account can have up to 40 minutes per meeting. For a regular person meeting with friends, this would be enough. It’s easy to start another meeting anyway.
But for businesses and educational institutions that need unlimited time during virtual meetings, it may be necessary to purchase a paid plan.
5. Common Marketing Channels
Marketing channels for traditional businesses and SaaS businesses are not the same.
The main marketing channels for a traditional business are TV commercials, radio commercials, print ads, and billboards.
But for a SaaS business, the main marketing channels are more on the digital side. These channels include the following:
- Social Medial
- Paid Ads
As a SaaS business, you need to be where your potential customers are. And for most people, that is on social media.
Social media marketing helps you build brand awareness and foster relationships with your customers and leads. Your social media profile can also act as a storefront and customer support channel.
You should have a presence on all the major social media platforms. Facebook, Twitter, and Instagram. TikTok has also been gaining popularity as a platform for sharing SaaS-related content.
If you’re gunning for a B2B audience, you should also have a solid presence on LinkedIn. After all, the businessmen and professionals are there.
But you also need to go beyond just having a profile. You need to create content that will engage your audience. What’s more, you need to constantly interact with your followers in order to build relationships with them.
You can streamline your social media marketing efforts using SaaS solutions like Hootsuite and Sprout Social. They can help you schedule posts, monitor your social media engagement, and find out what people are talking about.
Email marketing has been one of the most effective channels for reaching your customers and leads.
In fact, email marketing can give you an ROI of 4200%. That’s $42 earned for every dollar you spend on it.
That’s why you need to have a solid email marketing strategy in place.
Your emails should be personalized to each recipient, and they should be relevant to their interests.
Email list segmentation will help you send more relevant messages to your prospects and leads. The more personalized it is, the higher the chances of them interacting with your email. This also raises the chances of you closing them as customers.
Email marketing tools like Mailchimp and AWeber help you craft and schedule your emails ahead of time. They can also help you perform more comprehensive tasks, like automatically personalizing your emails, and setting up trigger automation.
Paid ads are a great way to generate leads and traffic for your SaaS business.
But you need to make sure that you’re targeting the right people with the right ads. Otherwise, you’ll be wasting your money on ads that no one will see or click on.
One of the most effective platforms for online ads is Google Ads.
It enables you to target your ads to specific keywords. And when people look up your chosen keywords on Google, your links would be among the first items on the search engine results pages (SERPs).
You can also use Facebook Ads to target people based on their location, interests, age group, and other factors. This would make your posts visible on their news feeds even if they don’t follow you.
Last but not least, you can also use retargeting ads. These are ads that target people who have already visited your website but did not make a purchase yet.
For example, if someone visits your pricing page but leaves without buying, you can show them a retargeting ad that offers them a discount or a free e-book related to your SaaS product.
6. Common Marketing Strategies
Another big difference between SaaS marketing and traditional marketing is their most effective strategies.
As we discussed earlier, SaaS products are very technical in nature. Users want as much information as they can before making a purchase.
And SaaS marketing strategies usually revolve around those facts. As a result, it thrives on the following marketing strategies:
- Product Marketing
- Content Marketing
- Search Engine Optimization
- Community Marketing
- Lifetime Deals
Product marketing is one of the most important aspects of SaaS marketing. It encompasses your market research, features, benefits, market positioning, and product messaging.
In order to succeed in product marketing, you need to know your target market inside and out. You also need to have a clear understanding of what makes your product different from the competition.
What’s more, your product messaging should be clear and concise, and it should resonate with your target audience.
Product marketing ensures that your positioning and messaging are constant all throughout your sales and marketing efforts. It can help you make sure that you stick to your branding.
Content marketing is all about creating and sharing valuable content with your target audience.
The goal here is to build your topical authority in your niche by providing reliable and relevant information to your potential customers.
This type of marketing is perfect for SaaS businesses because it helps you position yourself as an expert in your field.
And when people see that you’re an authority, they’ll be more likely to trust you and consider your product.
Content marketing itself can be done through several channels and content types. These include blogs, infographics, podcasts, videos, e-books, and more.
Blogs: Blog posts are the most common form of content marketing. Since niches in the SaaS industry are very technical in nature, blog posts tend to be in long-form. They rarely go below 2000 words.
This is especially true if you’re selling a B2B SaaS product. Entrepreneurs and professionals are always looking for ways to improve their businesses and jobs.
Infographics: Infographics are a great way to present complex information in an easy-to-digest format. They are also easy to share on social media.
What’s more, you can mix these infographics with your blog posts to make them more engaging to your readers.
Podcasts: Running a podcast is a great way to engage your audience. They’re also perfect for repurposing content.
For example, you can take the transcripts of your podcast interviews and turn them into blog posts. You can also use them as lead magnets to get more subscribers.
Videos: Videos are a very effective way to communicate your message to your target market. Plus, they tend to be more engaging than text-based content.
What’s more, they are also highly shareable on social media and your landing pages. In fact, having videos on your landing pages can help you increase your conversion rates by up to 86%.
E-Books: E-books are perfect for providing in-depth information about different areas in your niche. They can also be used as lead magnets to collect email addresses from potential customers.
Search Engine Optimization
One of the most effective ways to attract potential SaaS customers is through search engine optimization (SEO).
SEO is the process of optimizing your website and its content so that it appears higher in the SERPs. It works hand in hand with content marketing to make sure that your blog posts are easily visible to your target audience.
When done correctly, SEO can help you get more website visitors, which can eventually lead to more conversions.
Some of the best ways to do SEO for a SaaS company include:
- Adding the right number of keywords and high-quality links to your content
- Having concise and attention-catching meta titles and descriptions
- Getting other content producers to link out to your pages
- Ensuring that your web pages load fast
- Optimizing your website structure and hierarchy
In this group, your users can get peer-to-peer support, learn from each other, and even bring in referrals.
In the SaaS world, this type of marketing is especially important because it helps you create a loyal customer base. This would greatly improve your customer retention.
What’s more, your SaaS community can also be your breeding ground for advocates. These are your customers who will willingly promote your product to their friends and family.
When done correctly, community marketing can be a powerful tool for your SaaS company. It can help you improve customer loyalty, reduce churn rates, and even get more referrals.
When selling a SaaS product, it’s important to remember that you’re not selling a one-time purchase. You’re selling a subscription that could potentially last for years (if you can consistently keep your customers happy).
But sometimes, offering a lifetime deal (LTD) can help you rake in a lot of new customers. An LTD is an offer where they can get a perpetual license of your SaaS product at a discounted price.
These sites already have a well-established audience that places a lot of trust in the products they feature. Of course, that also entails that there may be a rigorous screening process if you want your product to show up on their sites.
Running an LTD campaign can also be an effective way to build brand awareness, especially for SaaS startups.
An online events management software provider called HeySummit can attest to that.
When they first launched their product, its founders ran an LTD campaign on AppSumo. And in just two weeks, it earned a whopping $140,000 in LTD revenue, which further led to an additional $100,000 in annual recurring revenue (ARR).
Cross-promotions are a great way to get more exposure for your SaaS product. You do this by partnering up with another company in your industry and promoting each other’s products to your respective audiences.
This type of marketing can be especially beneficial for SaaS companies because it allows you to tap into other audiences that you wouldn’t normally reach.
For example, you’re selling a customer relationship management (CRM) solution. One of your partners could be a Voice over Internet Protocol (VoIP) provider.
Let’s say you’ve managed to create integrations between the two SaaS products. And that could be a great selling point for both. You can then promote each other’s products to your respective audiences.
Et voila! You’ve just increased your reach significantly.
There are many different ways to execute a cross-promotion campaign. But the most important thing is to make sure that the partnership is a good fit for both companies involved.
Of course, this type of marketing takes a lot of effort and resources to execute correctly. But if done right, the payoff can be huge.
7. Key Performance Indicators (KPI)
One of the most important aspects of marketing is monitoring the KPIs. They tell you how your campaigns are performing. Moreover, they help you identify which marketing efforts work and which need more improvement.
And since SaaS marketing is different from traditional marketing in so many ways, you also need different metrics in order to measure its performance.
Below are some of the most important KPIs that you should track when marketing your SaaS product:
- Activation Rate
- Monthly Recurring Revenue and ARR
- Customer Lifetime Value
- CLV:CAC Ratio
- Churn Rate
- Net Promoter Score
This KPI tells you how many of your users have experienced the value of your product. It is usually being monitored during free trials, free plans, or during the onboarding process.
The activation rate is the percentage of users who have performed a specific action that indicates an activation.
And that action can be flexible. “Activation” can refer to any behavior or event that indicates that your product has already delivered value to your user.
For example, let’s say you’re selling a sales automation SaaS solution that specializes in pipeline customizability. Your benchmark for activation could be the user closing at least one deal using their custom pipeline.
Or if you have a social media management solution, activation could mean getting a certain number of interactions on the user’s post.
Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR)
These two KPIs measure the financial health of your SaaS product. MRR is the amount of revenue that you generate on a monthly basis while ARR is the amount of revenue that you generate on an annual basis.
These metrics are unique to SaaS and other subscription-based business models. They measure recurring revenues instead of one-time profits.
Both of these metrics are important to track because they give you an idea of how well your business is doing. And as your SaaS company grows, it’s essential to keep an eye on these numbers.
Customer Lifetime Value (CLV)
CLV measures the average revenue that you can get from a customer for the whole course of their subscription to your product.
To calculate it, you first need to find your average customer lifespan and average revenue per account (ARPA).
The average customer lifespan is simply the average time a customer sticks to your product. While the ARPA is the average revenue you get from a single customer. In calculating the CLV, we’re going to use the annual ARPA.
You can compute your CLV by multiplying your average customer lifespan with your ARPA.
The CLV:CAC ratio is one of the most important KPIs for a SaaS business. It tells you how efficiently you’re acquiring customers. It’s calculated by dividing your CLV by your customer acquisition cost (CAC).
Now, CAC is your total marketing and sales expense to acquire a single customer. You can calculate it by adding all of your sales and marketing costs then dividing it by the number of customers you got from those efforts.
To get your CLV:CAC ratio, you simply divide the CLV by the CAC.
The ideal ratio for this metric is 3:1. That means you’re earning $3 for every dollar you spend on marketing and sales. So you should aim for a 3:1 ratio or more.
The churn rate is the percentage of customers who discontinue their subscription to your product within a given time period.
It’s usually measured on a monthly or yearly basis. This metric is important because it tells you how healthy your customer base is. And if it’s high, it means that you need to double down on retaining your customers.
Net Promoter Score (NPS)
This is a metric that measures customer loyalty. It’s calculated by asking customers how likely they are to recommend your product to others.
The score is from 0 to 10, with 10 being the most loyal. You would divide respondents into three groups:
- Promoters: These are loyal customers who give scores of 9 or 10. They are happy with your SaaS product and will recommend it to others.
- Passives: With scores of 7 or 8, these users are somewhat satisfied with your product. But they are not too enthusiastic about it either.
- Detractors: These are the people that gave you scores of 6 or lower. They can potentially hurt your brand with negative feedback.
You can get your NPS by subtracting the percentage of detractors from the percentage of promoters.
This metric is important because it tells you how happy your customers are and whether they’re likely to stick around or not. If you have an NPS of 30, that means a lot of your customers are satisfied and can even bring in referrals.
If you have an NPS close to 0 or even less, then you may need to focus more on our customer retention efforts.
SaaS marketing is different from traditional marketing in a lot of ways. From your target market, to your marketing channels and strategies, to your KPIs, there are a lot of things to consider.
But with the right knowledge and tactics, you can make your SaaS product stand out among a sea of competitors. With the right strategies, you can make your SaaS business successful.
For more guides on how to grow your SaaS company, visit our marketing blog here.