How to Grow SaaS Sales Without Increasing Spending – 3 Most Common Problems Of Over 55 SaaS Companies
Do you also catch yourself late at night reading one post after another about a topic that really interests you, clicking from website to website and consuming all the information?
To me, this happens way too often. However, I realized that a lot of the information about startups and SaaS sales is elaborate enough to spark interest, but not elaborate enough to gain something tangible you can start immediately executing.
After solving demand generation and sales problems of almost 60 SaaS companies through App Marketing Minds, I started to see some patterns in what works and what doesn’t, and where organizations make the biggest mistakes.
In this post I will outline the biggest problems surrounding slow or no growth of companies and how to prevent the “we’ve tried it all and it’s not working” problem – therefore companies that can’t figure out the right sales process, or whose sales are plateauing or dying.
I will discuss problems surrounding your sales processes that are likely to cause unnecessarily high CAC, low user sign-up rates, and high churn.
More importantly, how to maximize existing resources in order to engineer your processes grow without overspending on new approaches.
While we hear about fantastical valuations and funding rounds, where too much cash is a problem, for such organizations there are dozens of smaller players going through very rough times. Especially because the SaaS business model is based on recovering CAC and earning profits for each user down the line through recurring fees, being resourceful and innovative in sales can go a long way.
Contents
Problem 1: Your sales funnel is not really designed for your users
Problem 2: Lack of understanding of the who and why behind SaaS churn
Problem 3: Impatience and neglected testing that leads to missed quota
Problem 1: Your sales funnel is not really designed for your users
I am certain that you, just like the majority of businesses, did your initial research phase thoroughly.
You defined you Ideal Customer Persona (ICP) and drilled down you personae so you clearly understand their needs and wants, goals, pain points, fears.
You also talk to your users on a consistent basis to get feedback to continuously understand how they interact with your product to receive the value they pay for. This allows you to align your marketing messages to speak their language and offer a product they are excited about.
However this is not enough in today’s competitive SaaS landscape.
I’d like to make a distinction between understanding what users want to hear and actually applying this knowledge at the right time in the sales cycle. Therefore the problem often doesn’t rest in doing the research, but rather in executing the tactics correctly at the right time of the sales process.
I made the assumption that you know your users really well, that you understand them and their questions and concerns. If not – you need to address this first.
Let’s discuss the actual problems we come across.
Many businesses don’t understand that their users (who often fragment into various groups) will have different set of questions and problems as they move along the sales funnel. Instead of applying the right language and trying to answer their questions globally, the right buyer questions need to be addressed at the right time of the buying process.
After reading some great resourced but together by David Skok (VC, Matrix Partners) on how to map buyer journeys, we started to build on this concept to really drill down on each persona to orchestrate a high-performing sales funnel, mapped to specific buyer questions of that stage.
This is how most businesses see the sales process, it’s important to remember that this is the vendor’s perspective.
The journey can look like this, where:
- Visitors land on your website
- Read about your solution
- Start a free trial / book a demo
- Purchase
The first problem arises when companies try to do everything at once across all stages.
Visitors who just landed on your site – most likely a blog post, are unlikely to be ready to purchase. Yet too many SaaS sales strategies focus on selling even when the visitors are not completely sure what your product does.
Similarly, your re-engagement paths should not focus on building brand awareness, but focus on value perception and sales.
Differentiate the content and language used according to the appropriate stage and align messaging with your visitors’ journey.
Remembering how this messaging framework fits onto the sales process is crucial as me move forward.
The second problem arises once we realize that users simultaneously operate on a second decision making path. Their perception of their buyer journey differs from vendors’.
Think about how you go from a problem to purchasing a solution. The steps are likely to be:
- ”Oh wow, this is annoying! I wish there is a solution for this!”
- You start searching for solutions
- After you find several vendors that seem to scratch your itch, you decide which vendors to evaluate further
- Free trials are started or demos booked
- After weighing up the solutions you derive to a decision whether the value you received is greater than the monthly commitment the vendor is charging
As you can see, there is a great danger of misalignment between what vendors want and how they communicate they want (sales) and what users need to know to make a purchase.
We can address this misalignment in two steps.
1. Map your sales funnel to the buyer journey
Vendors’ role is to adequately display value so the visitor-brand engagement ends in a purchase. Therefore vendors’ communication and perception of how their sales funnel should look must align to what users need to receive in order to progress to the next stage and purchase.
Misalignment occurs when vendors don’t provide the necessary information at the right stage.
Focus on what information your users require at each stage to create alignment. Deep understanding of your ICP and thorough research is the only way to achieve this.
Once we understand what information users require at each stage, we can then proactively work on answering their concerns and move them along their purchasing journey.
As the image above demonstrates, we’ll address two broad and ubiquitous concerns.
1) How does this provider compare against other solutions on the market? Do the features provide what I need?
2) Is the price justified?
Knowing our ICP really well will allow for detailed breakdown of questions and concerns. It’s important to address all of these fully.
Let’s think about applying this methodology to a real business – a SaaS landing page builder for example.
Competitive features matrix
- Clean UI
- Many integrations available
- Wide range of customization
Demonstrate ROI
- Pricing of solution vs graphic designer or developer
- Pricing of solution vs developer designer for landing page
- Pricing of solution vs time to build a static landing page yourself
- Pricing of solution vs developer for custom integrations (e.g. difficulty of integrating email marketing provider)
2. Address the buyer decision making paths of different buyer personas
It’s likely that your product doesn’t appeal to only one extremely defined group of users. Maybe there are subsets of your primary user base, or maybe you offer different pricing tiers and solutions altogether – depending on number of seats, custom requirements or depth of usage.
There will therefore need to be several paths for different customer segments.
Whether you attracted your traffic organically to a blog post, marketing on 3rd party platforms (Linkedin, Quora, Medium) or via paid traffic, it’s important to realize that different segments will have different problems and may require different solution / use case once they arrive to your site.
To fully maximize your content marketing resources, you need to re-purpose and distribute your content in a systematic manner. To learn how to do it you can download our internal tool from here.
While operating within the same framework, adjusting the individual items of the path can be achieved through different resources and content, personalization based on user segment, high vs low touch sales, or different sales tactics (provocative, consultative, transactional, or solution based sales)
Problem 2: Lack of understanding of the who and why behind SaaS churn
The SaaS world is full of important metrics which need to be tracked.
For example, you’re probably tracking already…
- Visitors
- Sign-ups
- Traffic to free trial conversions
- Lead:close ratio
- Churn
- CAC
- CLTV
- NPS
- MRR
..and the list goes on and on.
However, the extent to which businesses collect and analyze their data differs significantly. Not uncovering important patterns from data that impact the bottom line will hurt businesses in 2018 more than ever before.
For many, the challenge comes from not knowing how to identify insights from the data. Hence not seeking much utility in collecting it in the first place.
From my experience, the average business (especially in its early stage) is focused on top-of-funnel metrics and conversions. How to get cheap and qualified traffic, how to convert the traffic, or how to scale this process. Of course, understandably, these and many other metrics are absolutely necessary.
What goes often unnoticed is a well-designed onboarding process that focuses on both, churn reduction and data analysis too.
Reducing churn by engaging users with the correct information, making ICP adjustments and even leveraging users’ network to get more customers is drastically cheaper than acquiring a completely new user.
I started to implement a modified version of a clever churn-reducing method used by Typeform (presented in a great and very insightful talk by VP of Customer Success at Typeform David Apple).
To reduce churn, firstly we identify who is churning and why, and how to mitigate it. There are four areas we’ll look at:
- What is churn in your business
- Churn drivers
- Segmentation
- Improvements
The following sections are components needed for drilling down into your audience based on metrics that you’re unlikely to be collecting and analyzing at this stage. However, if you’re interested in optimizing your free trial and increase your free trial to sales conversions, I highly recommend to read our SaaS onboarding playbook.
What is SaaS churn?
You need to be crystal clear about what churn means specifically for your business.
We developed expertise for certain industries at App Marketing Minds, however, it rarely happens that two clients have the exact same product and business model. Therefore the product and market dynamics will differ from business to business.
To illustrate the point, whether your product is a mobile app (game), a marketplace or b2b SaaS, the definition of churn will vary drastically.
We could identify churn as the loss of a customer – they became unsatisfied with your solution, or their need was satisfied. However, it’s not always this simple.
Here are just some examples of how the definition will vary and that you need to be very clear about how your users use your product.
- Cart abandonment plugin for Shopify (ecommerce) – this product will work on the “set it and forget it” model, therefore churn can be identified as deactivation and then subsequent uninstall
- Landing page builder – infrequent sign-ins or less/no new landing pages being built, or complete deactivation?
- Form builder such as Typeform – in some cases users have one-off need, or infrequent need to build information collecting forms. For example, form for a monthly or annual company event. If this user stops their subscription, just to reactive in 6 or 12 months, is that churn?
- Market places – similarly to the example above, if an HR marketplace platform (such as Upwork) loses a user that had one-off hiring need for a long-term project, is that a churn, despite the goal the purpose of the goal has been fulfilled and goal of the user met?
- Social media or entertainment apps – users are expected to be using the product daily, therefore few days of inactivity can be considered as churn
- Online directories – should a business listed on Squarspace that goes out of business be considered as a churned customer, even if there isn’t anything Squarespace can do to keep them in business?
Clearly understanding what identifies as churn in your case is vitally important to measure and analyse the correct data.
All the examples above are likely to be considered as churn, but they will have different implications and meaning for each business. You need to start categorizing churns in relation to your business model to distinguish between different user behaviours.
Churn drivers
Once we identify whether the business model is subjected also to the “other churn”, we want to identify why and what are the causes. In the case of Typeform, many of their churned customers were despite churning happy – they simply solved their need by using Typeform.
Similarly, while I worked on a project with a background checks provider, many customers churned simply because their hiring demands didn’t require new candidates, therefore there wasn’t a need for frequent background checks.
Once you identify churned customers, it’s important not only to categorize types of churn but also to ask quantitative (NPS) and also qualitative questions to really understand the motivation behind their actions.
Segmentation
The objective of this stage is to meaningfully segment users to get more fragmented churn data. In contrast to lead generation, where you are most likely to segment based on company size, use case or depth of usage, here we’d start with looking at the retention curve to understand in what time frame do users churn.
We can then start segmenting users into categories based on the churn timeframe.
Once we segment users based on retention, we can start looking into important metrics such as:
- What percentage of your users fall into each category?
- Is the percentage breakdown of users in each category consistent over time?
- How much revenue does each segment bring?
- What is the ROI for each segment? Based on the segment which has the greatest ROI, you can start focusing on attracting this customer segment more over others. Below is a visual representation of plotting different retention curves in relation to customer segments
- How does the total number of accounts in each segment compare to ROI they generate? (example, segment 3 and 4 could have similar amount of total users, but ROI could differ)
To drill further into each segment, you need to start looking at characteristics of customers in each segment to understand who they are.
Knowing the representation of different customers among these segments will allow for more detailed targeting and refined messaging.
The segmentation will depend greatly on your business and what you consider relevant. We could however in each segment consider the following:
- Company size (e.g. 0-5 employees, up to 10 employees, up to 50, over 100)
- Industry
- Use case
- Geography
- Traffic source
- Number of sales touches
- Behaviour during onboarding (e.g. engagement)
Application of this methodology is extremely useful for aligning your marketing with the right message to the right audience.
What percentage breakdown of these characteristics corresponds to our segments, and more specifically the most profitable segment?
Continuing with the landing page building SaaS from above, if you identified that the greatest CLTV and ROI segment consists mostly of business that to a large degree share these characteristics:
- Have up to 50 employees
- Are marketing agencies
- Based in the US
- Acquired through Linkedin Ads
- Use your product to build pages for their clients inexpensively and quickly
- Average 3 contacts with the customer success team
…would you make some changes to attract this specific type of customer? I believe so.
Not only that, given that you know this type of customer will lead to greater ROI down the line, you can be confident about spending more to acquire them.
On the other hand, cutting down on acquiring low ROI or unprofitable customers will have significant impact on your marketing performance and allow you to allocate budget on high ROI segments.
Problem 3: Impatience and neglected testing that leads to missed quota
What I mean by patience? I am referring to refraining from frantic switching from one approach to another as soon as some setbacks arise.
Secondly, I am talking about aimless continuing with unprofitable acquisition approaches just because the budget (for now) allows it.
While I make this point, I want to acknowledge that I will speak mostly to early stage businesses that struggle with funding – that is, there isn’t any. To those founders that have a vision, little to no entrepreneurial or sales experience and some hard earned cash to turn their vision into reality. These are the businesses in the Micro SaaS (1-2 people) and Bootstrapped category, and everything in between.
A common characteristic of these businesses is that they are extremely resourceful, risk averse, and keen to weigh up every advertising check that is sent off to the market.
The founders must wear different hats to keep moving forward, and usually approach outside help to boost their sales after depleting personal network and getting their fingers burned a little.
Deciding when is the right time to completely reshape your demand generation strategy after encountering setbacks such weak sales performance is in these circumstances difficult. And smaller the budget, the harder it gets.
This is particularly important for bootstrapped and underfunded businesses where a string of suboptimal marketing campaigns can be detrimental.
The problem stems from an extreme scarcity of resources that often boils down to these two thinking processes in face of under-performing sales attempts:
- We’ve been running this campaign already for two weeks, and still no results? Let’s try something completely different!
- We’ve been running this campaign for 10 weeks, spent 80% of our budget and no real results? We need to continue and hope it will turn around – we don’t know what to else try but we need sales now!
These extreme examples are not that far from reality of many organizations.
So how to approach this situation? Not meeting sales goals tends to be a multivariate issue which tends to be overwhelming.
Let’s break down the problem/solution into three categories that can lead to growth without spending extra resources:
- Determine your product-channel fit
- Focus on your primary channel and don’t diversify too early
- Keep testing when things work and also when things don’t work
Product-channel fit in SaaS
We can loosely define product-channel fit as the compatibility between your product and your chosen channel to acquire customers the most direct, quick and cheap way.
An overwhelming number of entrepreneurs have the attitude of “we built this amazing product, how do we sell it?” One indicator of a product-channel fit issue. Product-channel fit should be considered before launching any sales initiatives, in fact, it should be considered while you build your product.
Your product need to be built with users in mind, as the market (people) will quickly indicate if your product is addressing their needs through sales (product-market fit). Similarly, your product needs to be built with a primary channel in mind. The demand generation part of your business during development can’t be an afterthought.
I took the framework which Briand Belfour described in his $100M+ Growth series and narrowed my focus on market, channel and product alignment (fit) when working with clients that require rapid sales improvement.
Given we operate in a sales capacity, where our role to market and sell the existing solution, we work with the assumption that the model elements (e.g. correct pricing or monetization method) are achieved.
Consider your ICP’s characteristics and the problems you’re solving as you build your product. Based on this, ensure that your product has characteristics that will fit the right acquisition channel for the audience with a clearly outlined and understood why.
This will be your primary acquisition channel.
Let’s consider an example: an app in the entertainment niche (music), utilizing social groups and connections between users to share their favourite music, operating on a freemium model with paid upgrades, targeting millennials.
The freemium model relies on high number of sign-ups and subsequent in-app conversions. However, a problem with this model is that paid campaigns (such as Facebook, Google ads) may become costly very quickly if the in-app conversions are low.
Building this product with the right channel in mind could focus on leveraging the product’s network effects and focus on virality.
This can be achieved through encouraging sharing the app with user’s network on social media through gamification, access to premium features or creating a sense of cause which will be achieved through sharing (e.g. everyone deserved ad-free music experience).
Secondly, given that on average 24% of users abandon an app after the first use – the time to first value needs to be extremely quick.
Credit: Localytics
Users need to immediately realise what value they receive from the first and continuous use. Clean and simple UI, just as quick comprehension of usage will add to first-time engagement and stickiness.
Achieving channel-product fit is therefore an issue that needs to be tackled before a single advertising dollar is spent. If you haven’t considered it when building your product, review how your product, ICP and primary acquisition channels align. You may realize that an entirely different approach is more suitable. Maybe you’re just climbing the wrong hill
Narrow your demand generation focus
Once you establish the primary acquisition channel, build a well thought-out demand generation strategy and don’t diversity for the sake of diversifying.
Are you trying to get good at Facebook ads on limited funds without prior experience when your product is not suitable for it? Or maybe trying to pay high agency fees without any guarantee it will work? Recipe for disaster.
Diversifying is not bad, but it should be way ahead in the future once your primary channel is working and bringing in healthy ROI.
As Peter Thiel comments in his book Zero To One about distribution channels: “If you try for several but don’t nail one, you’re finished. Distribution follows the power law.”
Simply put, the power law describes a phenomenon where a small number of items (in this case channels) is clustered and will account for majority of results (sales).
The relationship between new channels and results will be therefore nonlinear – doubling the number of channels will not result in doubling of revenue.
Additionally, in case where multiple channels perform equally but not well, spending resources to identify and fixing problems of several channels at the same time will lead to minimal results.
Focus on establishing and optimizing the primary channel will yield the best results.
Many entrepreneurs underestimate the effort that is required for driving solid growth out of one acquisition channels. Your one article per week and attempts to run Facebook ads and Google ads at the same is competing with a three person full-time content creation team, and separate two Facebook and Adwords teams.
It’s always important to pick your battles, especially when running low on funds.
Once you start seeing results from one channel, refrain from trying something new. It’s time to scale. This can be done by doubling down on what already works.
- Does cold calling work for you? Call more
- Does cold emailing work for you? Send more emails
- Social media ads? Increase the budget, increase geography, test more ads
Make testing a priority
I encourage data collection, analysis and testing all stages. Given you identified the channel you want to focus on and have a demand generation plan in place, testing should be a standard process incorporated into your sales machine.
Changing one aspect of your sales funnel is unlikely to lead to astronomical improvements. Instead of relying on one massive change or a completely new methodology, start with the low hanging fruit.
As an example, let’s look at the following sales process below.
In this example “follow-up engagement” refers to follow-up process on leads that were qualified but didn’t purchase after the demo.
Instead of simply saying “let’s improve sales”, start breaking down the sales funnel into its basic components of each stage and map performance metrics.
It’s important to have the correct benchmarks as we keep improving the process. Consider historic data or industry average performance to have a reference point.
Next, identify the most important and high impact aspect which needs to improve immediately – in this case it could be the prospect:demo conversions.
As we’re looking to improve sales on a tight budget, the mindset here is to optimize the process for increased sales, without increasing spending.
The current demos booked (15%) could be improved by improving the components of:
- Cold email campaigns that trigger initial responses that lead to a demo
- Personalization (more specific information in emails vs baseline personalization)
- Number of follow-ups (increase follow-ups vs baseline number of follow-ups)
- Demo reminders to keep engagement in the build up to demo
- Reminder format (old format of automatic email vs automatic email with a brief professional video including a personal invitation from the sales rep)
After setting up experiments for one stage, prioritize improvements of other components based on its current performance and potential impact.
We’ll look at follow-up engagement and follow-up sales in the example below.
Improving the performance of each stage can be done by A/B testing different approaches, focusing on what works and eliminating what underperforms.
It’s important to be selective with the elements of your experiments. While testing is good, spreading yourself too thin and focusing on too many aspects at once can have the opposite effect.
If you applied all three strategies (product-channel fit, narrow focus on one channel, testing) to your demand generation strategy and you’re still not meeting your goals, it may the right time to revisit your product-channel fit and identify which alternative channels will be the right fit for your product and your audience.
Will you make the same sales mistakes?
I addressed solutions to three problems that are hurting sales and marketing efforts of many SaaS businesses we come across.
You may not like it, but competition in the SaaS world is growing and unlikely to stop.
Today, there’s more than 8, 500 martech companies alone in comparison to 500 only ten years ago. In fact, every new SaaS company will on average face 9.7 competitors at the time of launching.
As Peter Drucker said: “The business enterprise has two basic functions: marketing and innovation”.
Here I demonstrated my take on making your marketing and sales more efficient using three real-life solutions we apply while working with our clients at App Marketing Minds.
We are able to gain an edge over competition by utilizing existing resources and applying new methodology to create more profitable outcomes.
Just over a half of companies engaged in mobile-related business activities (including mobile apps and others) measure their return on investment (ROI) and user engagement, and only 40% measure the amount of leads.
