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This is an excerpt from my forthcoming SaaS Marketing Handbook -TM
Like any business model that has made billions for executives and shareholders, SaaS has its own mythology. Stories heard in the boardrooms of SaaS titans have been passed down to aspiring SaaS CEOs. Ambitious CMOs who want a piece of the SaaS game often burnish their conversation stats. Which is to say, be wary of SaaS war stories. Make sure to separate history from lore. Here are four common SaaS marketing myths dispelled. Read these first lest you be burned.
Myth I – It’s cheap
Reality – People are the most expensive components of the marketing mix, and it takes more people and more work to acquire customers in a SaaS model. The amount of content required, frequency of changes made to your websites and microsites, and the collection and analysis of data all take significant manpower and expense. Just look at the IPO registration filings of young SaaS companies and you will see just how much it costs. In fact, it can be several times the typical marketing spend of an enterprise software company. Thomasz Tomguz, a venture capitalist with Redpoint, has an excellent analysis of sales and marketing spend of 34 public SaaS companies. In their first three years, these public SaaS companies spend between 80 to 120 percent of their revenue in sales and marketing!
Myth II – It’s fast
Reality – You can get started quickly without a large upfront investment, but getting good takes a long time. SaaS marketing is a game of continued refinement and measurement. As I discuss in my Roadmap to SaaS Marketing Maturity, each phase of development can take several quarters.
Myth III – Automation makes it easy
Reality – Yes, there are amazing tools that are very affordable, and sometimes free. But everyone else is using those tools too. You still need to get the basics right: a good product, a good offer, a solid understanding of your buyer and their needs, and good execution. This is hard work. Also, all of the A/B testing and experimenting is, in my opinion, more work than marketing teams have ever done before. Think of it this way: for every one deliverable marketing teams used to produce, they have to produce at least twice the amount – an A and B – and perhaps an ever-evolving version. I would argue that automation only raises expectations.
Myth IV – SaaS means freemium
Reality – SaaS is a delivery model. Freemium is an acquisition model. And freemium is only good for certain products. Many complex products, such as SaaS accounting packages, require a more conventional enterprise software sales approach.
Have any others to share? I’d like to hear them, and maybe include them in the book.