Software as a service (SaaS) is the platform for many new B2B products but why is SaaS important for all technology marketing organizations and why is SaaS marketing different?
Ask any B2B business marketer of sales person and they will say that having a strong customer orientation is an absolute necessity in today’s competitive marketplace. Most companies work hard to maximize customer satisfaction, since referrals and recommendations play such a key part in winning new business. Yet when it comes to generating new business how many companies focus on making their marketing and sales processes customer oriented? Several studies have looked at B2B sales performance and best practices over the past few years. Some asked buyers what they want from the sales process and others what they dislike about it. The results show that B2B buyers:
HubSpot currently has over 10,000 customers and reported sales of over $80M. They are a fast growing company, but their prospects didn't always look that good. Their focus on customer oriented metrics was a key to their growth. At the beginning of 2011, HubSpot unit economics needed fixing if they wanted to grow. They were losing customers too quickly to support their growth. The monthly churn rate was 3.5%, which meant their average customer left after 28 months. This had a significant negative impact on the average customer life time value and as a result, their ability to grow the company. HubSpot wanted to see a ratio of Life-Time-Value/Customer Acquisition Cost (LTV:CAC) of 3 or higher before they felt comfortable expanding. Their ratio in early 2011 was 1.7. Without fixing their churn and lifetime value problem, their growth plan was in jeopardy (see table).
Why are life-time-value and customer churn rates key metrics for cloud based software?
There are numerous articles and whitepapers that explore why the gap between Marketing and Sales exists and how differing versions of the truth — about what to sell and to whom to sell it — form the crux of the problem. Authors recognize that both “truth” versions are valid, although they’re seen from different perspectives, and conclude that finding a single shared version is the best way forward.
Today’s marketing environment is increasingly crowded, noisy, and commoditized. To stand above the crowd, create a customer centric buyer’s journey starting with insights that help your target consumer succeed in their business. Thought leadership and business value, although important are not enough. A recent CEB study* found that Thought leadership, representing “a smart or expert perspective” has a slight positive impact on buyer purchase probability. In contrast just being easy to understand, containing interesting facts or anecdotes and being quick to find actually had a somewhat negative impact on purchase probability. If you put this in the framework of the buyer’s journey, thought leadership is useful as the buyer(s) are realizing that they have a problem and performing research. It can help raise the urgency of the problem in their mind and identify the need for a solution. However, thought leadership gets you in the buyer's mind to their consideration, but without clear business value, it is hard to get to their short list.
Last Monday on 60 Minutes Jeff Bezos, CEO of Amazon, announced that the company is experimenting with drones as a way to deliver packages to its customers within 30 minutes of an order being placed. While the technology is interesting, he indicated that it would be “years” before it could be deployed commercially. His larger point was not that Amazon is investigating in alternatives to truck deliveries or even that Amazon sees logistics as an important area of investment. His point was that every company is vulnerable to attack by competitors with different approaches, different business models or simply different ideas. If you are not experimenting with new, particularly marketing, ideas your business could be the next casualty.
Even in a customer centric organization, working with your sales counterparts to create an effective marketing lead stream can be frustrating. Many companies we work with have set up a marketing lead stream, only to find that the expected orders didn’t materialize. This may be because sales doesn’t follow up on the leads, the leads are of poor quality, or sales just isn’t persistent enough to get through. Sometimes it feels as if sales doesn’t see any value in what marketing does.
A CEO of large technology company recently spoke about why they didn't make their numbers last quarter.
Recent survey results* suggest that buyers of more complex solutions do want to engage with vendor’s sales reps early in the purchase process. The bottom line is that the more complex the solution, the less likely buyers are to find all of the information they need on line and from their peers. To encourage early engagement, both sales and marketing must offer valuable and relevant customer-centric information that will help buyers reduce their business risks and deliver better results.
Changes in the SaaS or cloud software business model compel vendors to adopt a customer-centric strategy with significant implications for marketing and sales.
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