Software Marketing Strategy for a Services-Oriented World

The Software Business Advisor is a free monthly newsletter aimed at helping business software vendors make sense of the changing software industry. It provides tips, techniques and tools to assist in software business planning, software sales, and software marketing.

If you like this newsletter, please do a colleague and me a big favor and forward it on.

If someone else forwarded this to you and if you like what you read, please subscribe by visiting The Software Business Advisor newsletter subscription page.

Included in this issue:

1. Software as a Service (SaaS) Business Planning
2. What's Different About SaaS Marketing?
3. Results of our Poll: How is the Economic Recession Affecting Software Marketing Plans for 2009?

Software as a Service (SaaS) is gaining adoption by businesses and consumers alike. With the global recession, the SaaS value proposition of low upfront investment and a small monthly fee is easy on tight customer budgets. In this issue, we focus on business planning and marketing for SaaS.

1. SaaS Business Planning

For example, the health of a traditional software business is measured in bookings: how many new customers (or upgrades) do you bring in each quarter? However, bookings alone can be misleading in a SaaS business. How valuable is a quarter of heavy bookings (new subscriptions) if those same customers cancel the next quarter? And what good is a $50/year contract if it cost you $200 in marketing to generate and close that lead?

The best SaaS business/marketing metrics are not bookings, but instead these five measurables (as originally defined by Bessemer Venture Partners):

1. CMRR (Committed Monthly Recurring Revenue)
2. Churn (% of customers who cancel each year)
3. Cash Flow
4. CAC (Customer Acquisition Cost)
5. CLTV (Customer Lifetime Value)

To learn more about SaaS business planning, check out our software business planning advice and resources here. There is also a template SaaS business plan package available here, which you can use to get started on your business and marketing plan.

2. What's Different About SaaS Marketing?

Having a SaaS marketing plan is key to getting good ROI from your marketing and keeping customer acquisition costs low. You can get a SaaS marketing plan as part of our SaaS Business Planning Package here.

1. It’s a Services Business, not a Product Business

   First, it comes down to a fundamental sales/marketing difference between SaaS and a licensed software product: you’re marketing a service as a complete solution and not a product. That means marketing is about solving a customer pain point, and the benefits of your service to the customer… It’s not about marketing a list of product features. That difference is reflected in all areas of your business, not just sales and marketing positioning.

2. Think Pull versus Push Marketing

   Since you’re selling a solution, you want your service to come up first when/where a potential customer is looking for that solution. That means being on the first page on Google when they search for that need, being responsive and answering questions in user groups and on forums, participating in social networks, etc.

3. Keep Customer Acquisition Costs Low

   Selling SaaS is all about keep customer acquisition costs low. Even if a prospect turns into a sale, you don’t know how long they will be a subscriber (or what their ultimate lifetime value will be). So you no longer have the luxury of the traditional marketing “push”: meeting with customers FTF, sending out expensive direct mail, having a big booth at the annual tradeshow, etc.

4. Continue Marketing to Existing Customers

   With SaaS, marketing is not only about driving leads into the sales funnel. A prospect that turns into a sale is only a customer for one subscription period if they don’t see the ongoing value of your service… and you’re not likely to make a profit from that. You must proactively market to existing customer to keep them using the service: newsletters, how-to tips, requests for feedback, etc.

For more tips and helpful advice on marketing your software or SaaS offering, take a look at our software marketing plan resources here.

3. Results of our Poll: Software Marketing in a Recession

You can see the full results and analysis of the marketing in a recession poll here. Here's a brief summary:

• More than half of respondents found themselves with a decreased marketing budget.
• Of those companies with a decreased marketing budget, about half reported spending more time on internet and new media marketing to save costs. This is consistent with another survey done recently by Softletter on SaaS marketing trends, where they found increased spending on webinars, blogs, PPC campaigns and search engine marketing.
• About one third of respondents said that they were increasing their marketing budget to try to gain market share and/or maintain sales.