With the rapid cloud adoption, SaaS tools have been the go-to technologies for most enterprises. However, hard competition and regular technological innovations create challenges for marketers. How do they create strategies to market their SaaS software profitably?
Software as a Service is the biggest support for enterprises looking to invest optimally in software tools. Their pay-per-use strategy ensures that enterprises can derive the most efficient tools for their marketing outreach at the cost they can afford. Being cloud-based, SaaS tools offer much flexibility and accessibility to users’ teams.
As the enterprise expands, it can increase its subscriptions to functionalities without burning a hole in its pocket. This supports growth at optimal costs and delivers high efficiencies.
In addition, these tools can help businesses increase their productivity by automating their processes. They can thus streamline their workflows. The advantage of automation is that each activity can deliver data-driven insights. For marketers, this is the Holy Grail that gives them a solid base on which to make informed decisions.
Adopting SaaS marketing tools results in better customer experience and increased competitive advantage.
Despite these benefits, SaaS marketers face challenges. We shall discuss some of these challenges and their solutions in this article.
Challenges of Crafting SaaS Marketing Strategy and How to Win Them
Need for Evolving Strategies Due to Frequent Churn
The biggest strength of a SaaS product is the option to work with subscriptions and pay-per-use. However, it could also become a big challenge. This option gives customers out, and there is no long-term engagement guaranteed.
There is data to prove this aspect of SaaS:
According to ThriveMyway statistics, the average churn rate of a SaaS firm is 6-10%, and a new startup may face up to 60% revenue churn rate.
However, about 33% of all SaaS companies have seen an increase in this rate over 2023. And only about half of all companies make annual contracts for their products.
To fight this challenge, marketing for SaaS products needs a continuously evolving strategy to keep customer engagement very high. Otherwise, the churn in customer retention will become a huge challenge for the brand.
They must offer freebies, long-term contract discounts, and loyalty rewards. Their strategies need to be heavily customer-friendly and ready to change focus if the market needs correction.
The Trap of Free Accounts Conversion to Paid
Strategies that start with giving free subscriptions to users often face the challenge of converting them later. Companies that take up a software subscription only because it’s free for now, may not want to become a paid customer later.
Experts consider 2% conversion rates to be a good move. So, clearly, for every 100 accounts that are working on free, if only two are converting, it makes very little business sense.
Assuming that a free account can be convinced to become a paying customer later on, is a risk. SaaStr estimates you need around 50 million active freemium users to create a sustainable business model.
Having said that, enterprise brands rarely go for freemium accounts- they are either free or paid.
However, the marketing model has worked for many premium brands- Spotify, Dropbox- to name a few. So there are marketing strategies that could help in this aspect:
- Don’t make the freemium or free plan too robust. An upgrade will become critical if the plan doesn’t deliver all the features. That is when the account needs to become paid. But it’s important not to make it too hard, or even the value of fermium account will be lost.
- Withhold the product data usage details- and allow only for paid plans. With any increase in usage or regular subscriptions, SaaS brands can release a ‘one more’ feature for upgrade, which needs to be paid!
Users realize that if they don’t pay, they will lose the advantage they had up until now.
Spotify used this strategy very well.
- Build the relationship so that the software becomes indispensable for the users. Then, it is much easier to sell the paid package.
- Focus on building differentiation. It’s a crowded marketplace, and only brands offering something different will successfully grab attention.
Internal stakeholder Closure Challenges
Often, too many checks and balances and too much bureaucracy become a challenge for the decision-making process. Checking every approval and every OK, may slow down the time to market.
Often, this delay could be the difference between a customer won and zero sales. Marketers need to understand how to get buy-in from stakeholders that matter.
They can support a quick marketing strategy response or approval. Because of the high levels of competition, time lost could be a customer lost. A smart, quick demonstration of the benefits of the strategy will help the leadership to approve faster.
Also, aligning the marketing strategy to the company and business objectives will ensure a faster approval of marketing strategies by the powers that be!
Never-ending sales Cycles delay closure
One of the more visible challenges of marketing a SaaS product is the long sales cycle it has to go through. The cost of sustained marketing efforts is quite high, often taking several teams’ combined efforts. But the closure time is not simple to deal with.
SaaStr founder Jason Lemkin says in his blog::
- SaaS solutions with an annual contract value (ACV) of USD 2,000 close within 14 days.
- Deals with an ACV of around USD 25,000 close in 90 days.
- Depending on the number of stakeholders who must approve the purchase, deals worth USD 100,000 or more in ACV close in 90 to 180 days.
Often, ABM (Account based marketing) can remedy this.
It will clearly focus on the accounts that need to be closed on priority. The marketing strategy can then deliver a much more effective outreach.
This makes it easier for stakeholders to be on the same platform. It also helps to build relationships in the customer’s stakeholders. Then, the move ahead becomes easier.
Provide all information for decision making
According to insights from a new report from CSO Insights, the research division of Miller Heiman Group, ‘ More than 70 percent of B2B buyers fully define their needs before engaging with a sales representative’.
In most cases, they are in the final stages of deciding which product to buy. Most company leaders do their own market study and collate information about SaaS products. As a good marketing strategy, try to provide this information instead of just sharing product and solution features.
Once their mind is made up, it is difficult to change it. The way out is to provide extremely well-defined educational material and marketing messaging in the market. This way, the strengths of the SaaS solution will be identified even before the buying decision is made. The points to focus on are:
- What is the differentiator you are offering- aka- why is your SaaS better than any other SaaS.
- What is the channel from which decision-makers collect their insights (ensure your marketing material is present there).
- What is the competition saying? Be sure NOT to go that route. Decision-makers want to hear something different.
Satisfy All Levels of Stakeholders
Enterprise businesses rarely have a single layer of decision-makers. For every product considered, this group of astute business leaders discusses the features, attributes, and economics of any particular brand. This makes it difficult to craft a linear marketing message.
So, the marketing strategy must be good enough to satisfy every level of decision makers- the technology leader, the user teams, and the budget approvers. A good marketing strategy here will define each buyer’s persona and provide information to convince them.
The strength of such a strategy will be that it is holistic and targeted at several layers of decision-makers. This will increase the chances of a favorable view.
Using typical strategies may not effectively reach this specific audience. Furthermore, frequent innovation and change are the norm in the software industry. This influences marketing strategies, requiring agility to stay competitive.
Demonstrating the experience and benefits of your software through demonstrations, free trials, or testimonials becomes increasingly important.
Personalized communication and addressing pain points can significantly impact audience engagement and conversion rates. Recognizing these challenges and developing tailored marketing strategies will help you bridge the gap between your SaaS service and your target customer.
Conclusion:
Creating a successful Software as a Service (SaaS) marketing strategy involves guiding prospective clients through a seamless transition from initial introduction to valued user status. To maximize conversions, you must first identify and address any blockages in your marketing funnel.
Adopt cutting-edge marketing platforms, tailor your tactics to B2B clients’ rational decision-making processes, and build a brand that stands out and inspires steadfast loyalty.
Your company can succeed in this competitive and exciting market if it combines innovation, flexibility, and focused efforts.
