Software-as-a-Service (SaaS) is one of the most potentially profitable niches around today, sought after due to its inherent scalability as well as its relative ease of approach. With a good idea, solid execution, and enough time, theoretically any SaaS product can keep you profitable for the long term.
However, there’s a specific threshold for SaaS that needs to be achieved before you can start raking in the profits; you need enough paying customers to compensate for your initial costs, and a sustainability model that will keep you productive for years to come. Most of your job here boils down to effective marketing, but SaaS companies face unique challenges that companies in other niches don’t have to worry about (or at least not as much).
What’s ironic is that the handful of factors that make SaaS such a lucrative space for startups are the same factors that make these types of companies difficult to market. Take a look at the average SaaS company’s annual growth over the past decade:
(Image Source: TechCrunch)
Why is this growth rate so high?
Throughout this guide, I’ll be introducing and explaining some of the biggest marketing challenges SaaS brands face. These are:
Feel free to explore each of them in turn, or skip to one you feel particularly challenged by in your own competitive environment.
Differentiation is about making yourself stand out from the oversaturated SaaS market. Consumers have dozens of options in virtually every available niche, from saving time to organizing online files. There’s a chance you’re emerging in a novel market, one that’s never been tested before, but even so, eventually you’ll face the rise of new competition, and you’ll have to defend yourself.
This is the first marketing challenge because it’s usually the first hurdle you’ll face when launching a campaign: how do you get yourself noticed?
Your first job is to create a brand that stands out. Don’t rely on the same clichés and discourse that your competitors have, or you’ll blend in. Every SaaS brand likes to define itself as an “innovator” or as “committed to customer service.” Repeating these values is going to make you seem like a self-parody, so dig deep here—what really makes your brand stand out?
There are a few different ways to do this, but first you need to decide on your brand standards. That means a lot more than just deciding what your logo looks like or what colors you’ll use throughout the app. What’s your brand’s personality like (and we’ll dig a bit deeper into this later)? What characteristics do you exhibit? What emotions do you wish to evoke? Get creative here, and bear your target demographics in mind.
From there, it’s a matter of expressing these differentiated brand factors in your marketing and advertising materials. Take a look at how Workday does this in their storytelling ad, which shows the stories of people using Workday:
By the end of this video, you get a clear sense of not only the Workday product, but the company’s values and ideals. It makes them stand out in a crowded market.
An alternative route to differentiation is a simpler one that requires less creativity. Instead of trying to create an identity that’s distinguished from your competitors, you’ll find some specific quality in your competitors and work to outdo it in your own work.
For example, let’s say you offer a service very similar to your competitors, but you can offer it for $5 less per month. Or let’s say you can offer a similar service for the same price, but with a dedicated account representative for any business who signs up.
These are powerful differentiating factors that might make the difference between someone choosing you or your competitor. Your job should be to emphasize these qualities as much as possible in your marketing strategy. For example, you might include comparison ads that compare your service to the next leading competitor, with the prices highlighted at the bottom. Or you might create a new tagline that emphasizes your commitment to service through dedicated account managers. This is your way to stand out, so use it whenever you get the chance, and if you have multiple differentiating factors that one-up your competitors, even better.
Let’s assume that you have a strong brand, but you’re finding it difficult to distinguish yourself from your competitors. It happens. Fortunately, there’s more than one path to differentiation. This one may require a slight adjustment to your product in general, but it could open you up to much more lucrative opportunities.
Think of your target demographics. Yes, you have a product similar to those of your competitors, but does that mean you have to share the same audience as those competitors? Absolutely not. If you do your research, you’ll find that there are probably at least a handful of niche demographics who might be interested in your product—if you position it correctly.
Consider how note-taking app Clear markets itself to students (and young people in general). Evernote is a dominant SaaS player in the world of note-taking apps, but Clear has carved a path for itself by marketing to a different demographic altogether.
(Image Source: Clear)
I don’t have the space to get into the specifics of how to choose images, words, and subjects that resonate with your target audience of choice, but know that if you angle your brand and content properly, your messages will resound with your chosen target audience.
The final path to differentiation I’ll mention is “thought leadership,” which is kind of a broad subject. The idea here is to turn yourself into a leading authority in your space. Start publishing valuable content, making bold claims about the future of the industry and offering insights that no one else can offer. Get yourself published on all the leading publications in your industry, and start showcasing the personal brands that comprise your leadership.
As you build your authority this way, you’ll gain a reputation for being a novel thinker, and customers will start recognizing your brand as one that truly stands out. The only downside to this approach is that it takes a while to build this momentum; you can’t just flip on a switch and expect to be taken seriously as a thought leader. But in the meantime, you’ll earn tons of new traffic and higher customer loyalty.
Standing out will get you in front of more people, but that won’t necessarily make those people convert to paying customers. Though most consumer decisions are driven by a blend of both emotion and logic, most SaaS purchases end up on the logical side of the spectrum. There are several reasons for this. For example, since SaaS products aren’t tangible, they don’t give consumers the semi-“high” feeling of acquisition. Since they’re usually a subscription rate, they aren’t associated with an instant gratification feeling. And of course, most of them are B2B-oriented, so they require some kind of bottom line benefit to be purchasable.
It’s hard to pin down an objective value to an intangible service like this, so your job as a marketer is to calculate and emphasize this value as much as possible.
Your best bet is with measurable factors. Anytime you can assign numbers to your abstract ideas, you’ll instantly forge a route to a logical decision. For example, if you’re selling software that purportedly increases productivity for $30 a month, imagine the difference between billing it as a way to “increase productivity” versus a way to “save 15 hours a month.” The latter gives potential customers something to grasp onto; some quick math lets them realize that they’re basically paying $2 per hour of “saved time,” at least according to your research.
There’s no shortage of companies who leverage this tactic, including some of the biggest names in the industry:
(Image Source: KissMetrics)
Once you have the numbers, it’s easy to propagate them throughout your campaign, but how do you get those numbers in the first place? This is the key challenge. Once your company has grown large enough to start collecting this data accurately over wide scales, you won’t be as desperate for the information. On the other hand, when you really need it, you won’t have the customer base or resources to gather it accurately.
Until you have real data about how people are using your app, you’ll have to resort to third-party metrics. For example, instead of citing the fact that the average user saves “15 hours a month,” you could cite a general statistic that the average American worker loses “60 hours a month” in overall productivity. These numbers won’t provide users a one-to-one valuation of your app, but will get them thinking about the concrete value associated with your app’s area of expertise.
Of course, there are also immeasurable factors associated with the value of your product, and you’d do well to emphasize these, too. For example, how can you quantify the value of a quality customer service experience? How can you quantify a customer’s sense of security when backing up their data to your cloud? The short answer is, you can’t, but you can still emphasize these immeasurable, intangible factors in your marketing campaign.
One of the best ways to do this is through storytelling; instead of flashing a number in front of a prospective customer, guide them in a narrative that illustrates who your brand is and what your product does. Take a look at how Concur does this with customer testimonials:
(Image Source: Concur)
As a general rule, the subtler your approach is here, the better. There’s a big difference between saying outright, “we’re really good at making our customers happy,” and simply telling a story about a time your company went above and beyond to make sure a customer got the level of service they deserved. Let your prospective customers draw their own conclusions and assign their own values here.
Many entrepreneurs are drawn to SaaS models because they don’t require much in the way of human resources. The app itself will do most of the work, so all you need is a development team, some marketing creatives, and a handful of customer service reps to step in when your resources and technical documents aren’t enough to help prospective customers through their issues. The process is driven almost exclusively by technology.
There’s a critical problem with this in your marketing campaign; people far prefer personal, human experiences to cold, corporate, technological ones. If you want to be successful as a SaaS marketer, you need to find a way to humanize your brand and make yourself approachable to a wider portion of the population. As you might imagine, there are several ways to do this, but they all revolve around making people feel comfortable with your brand.
The first path to approachability hearkens back to your branding, which I’ve already covered to some degree in the section on “differentiation.” But what’s most important here is the tone of voice you use to communicate with your customers—it can make the difference between a customer wanting to engage with you, and a prospect never giving you a second look.
Obviously, you want to make sure your brand voice is different from those of competing companies (and SaaS brands in general). However, there are a few critical qualities that constitute an effective, approachable brand voice:
Take a look at how MailChimp skillfully handles a mispronunciation of their brand name with a humble, humorous response:
(Image Source: BOSContent)
Your commitment to customer service is also going to help you seem more approachable. After reading this, you may be thinking, “customer service? I thought this was about marketing.” It is. But there are three ways to make your customer service strategy double as a marketing opportunity:
The bottom line for each of these approaches is giving your customers the best possible service, and making sure both your current and prospective customers are around to see it. This will increase people’s perceptions of your brand’s customer commitment, and will make them feel more comfortable approaching you in general.
It’s imperative to listen to (and accept) feedback as a SaaS provider. Again, this isn’t a marketing strategy per say, but it can be leveraged as a marketing opportunity. For example, whenever you take a customer suggestion and implement it, post a press release about it and make it very obvious that you’re doing this to improve based on customer expectations.
You can also publicize your openness toward feedback with a move like this one from Inbound:
(Image Source: Inbound)
When people know you’re not only willing, but eager, to hear and respond to customer feedback, they’ll see you as a more down-to-earth, friendlier company.
The biggest reason for SaaS company failure isn’t an inability to differentiate, or a lack of approachability, and it’s usually not even an inability to attract new customers—it’s an inability to keep customers around. Customer churn, the departure of previously subscribing customers, is the single biggest reason why customers leave.
(Image Source: BlueNose)
As you can see, usage is the biggest factor for customer churn. This is partially dependent on the quality and effectiveness of your app, but it also depends on getting your customers to use the app regularly, keep your brand top-of-mind, and think more favorably of your app in general. Through marketing, you can keep your customers more interested and more engaged in your brand, retaining them as paying subscribers for the longest possible time.
One of your primary goals is encouraging users to use your product regularly. Get them to use it every day for a period of a few weeks, and they’ll likely be hooked. The best way to achieve this regular usage is through some kind of loyalty program. For example, you might give customers some reward for logging in regularly, or you might offer a once-daily piece of information or value that naturally encourages people to check in often.
You can also use email marketing to send people reminders, or social media to keep your app top-of-mind enough to encourage users to keep coming back. Regular tips, tricks, and “hacks” of your product can make long-time customers see your app in a new light, and think of your app as always evolving and offering something new.
Your SaaS brand needs a content marketing strategy, plain and simple. It doubles as a customer acquisition strategy and a customer retention strategy; through SEO, social syndication, and offsite presence, you’ll get a decent stream of traffic, but what we’re really interested in here is keeping customers around.
If you give users new information, helpful tips, new opinions, and ideas that help them in their own businesses, they’ll think more highly of your brand, and will be more likely to stick with you for the long haul. HubSpot has one of the best content marketing strategies out there, and you can bet it’s helped them preserve their ridiculous customer retention rate:
(Image Source: Hubspot)
It also pays to have some kind of exclusive content, available only to your paying subscribers. This might include a webinar series, a free eBook (or several), or any other high-profile content that only your subscribers will receive. If you publicize it, this will do three things for your brand:
It’s all about giving your customers value and showing them their importance.
Things aren’t always going to go well. Your software will have outages, it will break, and it will have flaws you don’t realize until customers are already experiencing them. If you try to sweep these problems under the rug, or ignore them entirely, your users are going to become resentful.
It’s far better to be transparent and proactive in these situations, and many major SaaS brands have learned this lesson. Take Buffer, for instance, which has implemented a policy of transparency in many areas of its business:
(Image Source: Buffer)
Transparency shows that you’re willing to admit you’re not perfect, and gives customers the sense that they know the “whole story” with your products. If they feel like they’re being kept in the dark, they’ll feel distrustful of you, or taken advantage of, and they’ll be more liable to leave.
Similarly, proactivity helps you get ahead of the mistakes before they start negatively affecting you. Think of it this way: assume someone has hit your mailbox with their car. Which first impression would make you angrier—a man at your door owning up to the mistake, or your demolished mailbox with no driver in sight? Get in front of your mistakes and slip-ups whenever you can. Your customers will be grateful.
Technology changes quickly, and customers are demanding. They expect to have the best at any given time, and that means you have to adapt consistently and frequently if you want to keep up with their expectations. Any improvements—from new features and functions to simple design tweaks—will likely be lauded by your current user base. True, some of these features may be rejected, but you’ll still get credit for trying something new. Take a look at Facebook as an example—they post new updates all the time, some of which are angrily rejected and taken down, but users are still loyal because the app isn’t afraid to adapt with the times.
Last but not least, there’s the problem of momentum. When you first build and launch your SaaS product, your biggest hurdle is going to be building a marketing pace that can scale as quickly as you need. Once you hit a certain threshold of visibility and reputation, it will be easier to keep your strategies running strong—you’ll have more user data, more experience, and a stronger foundation to work with. Hitting that threshold is the tricky part.
When you begin, you’ll have almost nothing to work with—no users, no reputation, no data. Since users, reputation, and data are the critical points you need to build a working marketing strategy, this poses a massive problem.
There are three steps to addressing this:
No matter what type of SaaS company you have, you need to scale if you want to survive.
(Image Source: Chaotic Flow)
Unfortunately, scaling isn’t as simple as flipping a switch, and it isn’t going to happen on its own. Here are the main ways you can do it:
With consistent effort and a motivation to grow, there should be nothing stopping you from achieving the levels of visibility and reputation that you want to achieve for your business.
The SaaS niche offers some major business development advantages, but these are accompanied by unique challenges that every SaaS marketer faces. If you can make your brand stand out, prove your value to prospective subscribers, personify your brand into a more approachable form, retain your customers for as long as possible, and overcome the initial momentum hurdles, you’ll be well on your way to a long-term sustainable customer base and a profitable model. The better you know your audience, the more likely you are to succeed in every area, so back your decisions with research, and remain committed to your ultimate goals.