SaaS stands for “Software as a Service,” and is defined as selling access to an app or digital tool that is beneficial to consumers and businesses. When brands sell software, there are two key differences in their business models over traditional companies. First, the client doesn’t physically hold or own the product. Instead, they are paying for access to it. Secondly, the client pays for the product over a period of time, not as a one-off purchase.
These differences also affect how SaaS companies market their wares. Here are a few important factors in SaaS marketing that you should know about, for use with your brand.
Customer lifetime value (CLV) is a key marketing metric.
Customer lifetime value measures how much a customer is worth to a business over time. When a digital marketing agency assembles a promotional strategy, they often look at the CLV of various target audiences, and use this metric to calculate the return on investment (ROI) of their efforts.
To calculate CLV, the digital marketing agency takes the average order value (AOV) and multiplies it by the number of visits per year. Then, they multiply that value by the average number of years that a customer is loyal. For example, if someone visits Olive Garden six times per year and spends $50 each time, then their CLV over five years is $1,500. (Or, in numeric form: 6×50=300, 300×5=1500)
CLV is particularly important to any SaaS marketing agency because customers pay monthly fees, regardless of whether they use the service or not. It’s only when the subscription ends that they stop paying. Netflix is a strong example of this: you pay for the service of streaming T.V. shows and films every month, regardless of how often you use it. However, if you visit a cinema, you only make a one-off payment to see a movie, even though it is essentially the same service.
All SaaS Companies strive to maximize CLV. They want customers to keep subscribing so they can better forecast profits and earn more from subscribers. This means the marketing efforts need to target qualified leads who really need the product, and not short term users who will cancel the service after a month or two.
SaaS marketing heavily relies on value-add propositions.
Many SaaS companies promote their services with free trials. Customers are able to use a few key features without paying, but then need to advance their subscriptions in order to use the whole service, or have unlimited access to the tool. As a consumer, you might have noticed trials like this in “freemium apps,” where you can download the app for free, but then need to pay to unlock important features.
When a company hires a SaaS marketing agency, they work to determine which features are offered for free, and which ones are locked behind paywalls. The agency then develops a marketing strategy around finding qualified leads, who would be interested in trying the product and then paying for it.
In the B2B world, you can often find SaaS businesses at professional conferences. Members of their sales team will walk attendees through free trials and encourage them to sign up, intending to convert them to paying customers in the future. The idea is that a free trial in person makes for easier conversions if the buyer has had a real opportunity to see what they will be paying for.
SaaS brands and marketers reward long-term use.
A third key factor that sets SaaS marketing apart from the traditional, is the business model. Brands want their apps to be used so subscribers don’t cancel after a month or two. However, the data is against them as almost a quarter of people delete an app after one use, while 62% of users will only use an app 11 times before deleting it.
Many SaaS firms offer steep discounts for users who pay for a three-month, six-month, or one-year subscription. This gives the company an immediate return, and reduces the risk to the brand if the customer cancels. In the marketing world, these discounts play a major role in reducing the perceived cost, (and risk,) to users, encouraging them to try out the software.
In many ways, a Saas marketing strategy isn’t that different from a traditional digital marketing plan. However, marketers need to keep the core audience in mind, and understand their behavior, in order to make strategic promotional choices.