What are some signs that your SaaS marketing programs won’t scale well?

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JASON LEMKIN

You are spending too much — in the aggregate.

Let me dig in a bit. Most SaaS companies, once they have a mini-brand, start to get some amount of organic, “free” leads. People hear about you. They come to you. Not a ton, at first, but some. The CPA here is basically $0.

All paid marketing is expensive in SaaS. All of it. You’ll wince and cry. A sponsored webinar for $25,000? A trade show for $50,000? Paid lead services at $50 a lead? Adwords at $5 a click, and $1000 an effective lead?

But if things are going well, on a blended basis at least, it should all work out. Your marketing costs should be < 3–6 months of your first year ACV, averaged across all sources of customers, including free. Ultimately, all the best software companies get the majority of their new customers from word-of-mouth and referrals. You need to invest there, too. But even once you put real $$ there, the CAC will be low.

So my rule from all of this is basically, invest in any marketing program that even returns $1 for $1 spent. Yes, that’s expensive. But if your brand is strong and your customers are happy, and second-order revenue kicks in, that should blend to a decent CAC when you add in the free-ish leads. And if those customers are happy, that $1 will beget $5 and $10 over time. So it’s worth it. More on that here: https://www.saastr.com/its-not-j…

If your marketer can’t even do that — if your total marketing spend / total new customer (paid + free) revenue doesn’t make sense — get rid of him.

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Published on June 28, 2017
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