Three mistakes SaaS providers must not make
Editor’s note: Anka Twum-Baah is CMO at Chief Outsiders.
It is both natural and wise for software-as-a-service (SaaS) providers to seek out concrete key performance indicators (KPIs) by which to orient their marketing efforts. Choosing carelessly can leave the company blind or misdirected, pouring time and resources into low return-on-investment marketing tactics.
The solution is not to avoid KPIs, of course, but to exercise forethought and caution when choosing the reference points by which to market. To aid in that effort, three of the most common missteps made by SaaS companies – focusing on the broader market, neglecting channel management and only looking outward – are discussed below. By avoiding these basic errors, SaaS marketers can narrow down their options and confidently select the KPIs that will steer them forward.
1. Forgetting about your clients
Many SaaS companies get caught up with market trends, macroeconomic fluctuations and industry-wide statistics. While these have their place, executives would do well to focus their attention first on their own clients. While the economy or the industry as a whole might be plummeting, a particular niche of SaaS may be thriving, or vice versa. KPIs drawn from any demographic which is not immediately relevant to the company should therefore come second to metrics that concern its current and potential customers.
Relevant KPIs include metrics such as customer lifetime value and net promoter score, which give insight toward customer satisfaction by measuring the duration of their business or their likelihood of recommending the service to someone else. Metrics like marketing qualified lead (MQL) or product qualified lead are similarly helpful in demonstrating how well potential customers respond to marketing efforts and, by extension, how effective those efforts actually are.
2. Neglecting channel management
Even a well selected set of specific customer-based KPIs are not sufficient on their own. The customer represents just one end of the marketing chain, and whether a SaaS provider can reach their clientele depends on the effectiveness of its oft-neglected marketing channels. It is therefore essential for any SaaS company to select KPIs which directly report the health of every channel that it employs, allowing them to invest their energy into the mediums that work.
Digital marketing metrics, such as open- or click-through-rates on marketing e-mails and advertisements, follower or subscriber counts on social media profiles and search engine optimization measurements like the domain authority of the company website are all but intrinsic to the software industry and are easily accessible. Any non-digital channels should also be carefully monitored for response ratios. Metrics such as customer acquisition cost and monthly recurring revenue, when measured on a channel basis, can both highlight the avenues that are useful and identify those that are not.
3. Failing to look inward
Even when a SaaS company is hyper-focused on their target demographic and their ability to reach it, they are still liable to neglect the internal infrastructure that produces marketing content. This is with good reason; few business models are more sensitive to the whims of the customer than subscription-based services and monitoring external factors seems a natural priority. But emphasizing customer- and channel-centered KPIs at the expense of the marketing department itself will do SaaS providers little good, especially in a hyper-competitive industry where quality marketing content is often all that separates one company from the next.
For example, the relationship between a company’s marketing budget and revenue is often entirely overlooked. Software companies tend to allocate around 22% of their revenue sum to marketing – nearly twice the national average. While that number should vary based on the size and goals of the company, a disproportionate funding ratio can explain many marketing woes in one simple metric. More internal KPIs include the gross amount of MQLs and sales-qualified leads in the system, the cost of converting the former into the latter and the rate at which it is accomplished, all of which provide insight into a marketing organization’s efficiency.
Understanding the boundaries and pitfalls
SaaS providers need dependable marketing KPIs if they are to find their bearings in a year as unsteady and competitive as 2024. Choosing the right set of metrics from the hundreds of available options can be an overwhelming task, and looking in the wrong places will almost certainly end up costing the company in the long run. Steering clear of the pitfalls discussed above will remove the brunt of that risk. Then, with the boundaries clearly drawn, marketers can support a stabilized organization and focus on driving business growth.