Monday Musings #003: Two Possible Effects on SaaS Marketing from Covid

When you look at the possible impacts COVID will have on the world going forward, they seem innumerable. Will we leave cities for good? Will companies encourage remote work to save on rent and attract more diverse candidates? Will we swarm back to bars and concerts, or will we hesitate? What types of businesses come out of this stronger, and what kinds fail? Will this glimpse into a world with less pollution encourage us to fight harder against emissions? 

I'll leave those questions to the experts. 

Where I'd like to try to focus today is on SaaS marketing, a field near and dear to my heart. I'm not an expert on it by any means, but I do care about what the future of it looks like. 

There are two areas that I think SaaS marketing teams will invest more in post-pandemic. 

1. Customer marketing 
2. Product-led growth marketing

Why?

There's a figure that circulates around marketing blogs that says "it costs 5x more to get a new customer than to retain and old one."

There is not a ton of data that I could find to support this statement, but the data DOES tell us that customer acquisition costs are higher than they've ever been. 

First, let's outline the definition of CAC (customer acquisition costs). CAC measures the total marketing cost to acquire a customer. The formula can be simplified into [CAC = Total marketing expense / # of customers acquired].

CAC were relatively inexpensive when distribution channels were newer. But according to research conducted by Profitwell, customer acquisition costs in 2018 had risen almost 50% compared to 2013.  

This, in part, can be attributed to a large of amount of D2C disruption brands (Warby Parker, Casper, etc) dumping money into digital channels. I definitely can't escape Facebook without seeing an Allbirds ad. 

With so many D2C brands flooding the digital channels, SaaS marketers have to pay more for the same eyeballs than they did in the past. 

So then you ask, ok, if paid efforts are getting more expensive, should I invest more in my organic reach? 

Maybe, but that's getting harder, too. 

Why? Because Google is getting better at better at delivering the answers people need, right on the SERP (search engine results page), and organic content results are getting pushed further and further down the page. 

Take my query of "crm", for example:

Every result that you see on that page (takes up my entire screen on a 13 inch Macbook) is either an ad, or a featured snippet. According to backlinko, the  #1 result in Google gets 31.7% of all clicks, and only 0.78% of searchers clicked on something from the second page. 

So, if you're pursuing organic reach (which you still should) you should prioritize optimizing your content to win  featured snippets and getting as highly ranked as possible to give yourself a fighting chance. 

So this all sounds pretty dire for acquisition, right? Paid is too expensive and organic is a tough battle. It's true, acquisition as we know it is harder than it's ever been, but it's evolving, and companies are finding creative ways to keep winning at acquisition. 

In addition to rising CAC and a challenging search environment, the world got hit by the COVID pandemic. We are likely headed into a recession, and when we want to plan for the future, we can look to the past to try to tell us what helped during past recessions. 

What does the past tell us? 

Companies that invested in their customers fared better than those who didn't. 

In a recent article from HubSpot, it mentions, "during the recession of 2007-2009, companies that prioritized customer experience delivered three times the shareholder return of those that didn't.

This is interesting, right? When a recession hits, a natural reaction can be to to push the gas pedal on new sales, but that can be expensive and come off as tone-deaf. Almost everyone struggles during a recession. Not as many people are buying, but you can be certain that most of your customers will be evaluating where they can cut costs. In order to keep those relationships strong, you should invest there. 

Here's another example from cmswire.com:

During the 2000 recession, Office Depot cut 6% of its workforce while Staples increased theirs by 10%, primarily to support the high-end categories and services it introduced. The reorientation around these offerings — personalized printing, business, tech services — ultimately worked to serve their customers better. In the three years following that recession, Staples was, on average, 30% more profitable than Office Depot.

So two datapoints, one from 2008 and one from 2000 point towards prioritizing customers, but how does that affect marketing? 

In my opinion, right now SaaS marketing departments should figure out how to better align their customer marketing team with their customer success team. 

Customer marketing teams are good at listening to their customers. They read reviews, interact with them on social, and even talk to a few. But Customer Success Managers are the ones building the relationships and driving critical value to a customers' business. 

There is a real opportunity to utilize those relationships. Maybe form a panel of CSMs and have them debrief marketing leadership every week on what they are hearing from customers. Maybe have your marketers shadow a couple of CSM calls to get an understanding of what people are feeling right now. 

Either way, an investment in customer success and customer marketing is critical. Customers are happy when you know you are listening to them, and they'll remember how brands acted during this crisis. 

So an investment in customer marketing is the first area of focus I predict coming out of this pandemic. For the second, I'd like to focus more on the product side. 

Companies will continue to invest in Product-Led Growth

For all of the reasons above, I believe SaaS companies will invest more in product-led growth coming out of this pandemic. 

What is product led growth? Openview Partners describes it as "an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion and expansion."

There are a few examples of companies that do this particularly well. 

1. Slack
   • When you think about it, it's likely that you don't even really remember how you started using Slack. It was either your company had already adopted it, your friend told you about it, or your coworker used it. I'd be willing to wager that you didn't go through a traditional marketing funnel with them. That's because end users are now finding products on their own and telling their bosses which ones to buy. 
   • Slack stated in its S-1 filing, “Many organizations adopt Slack initially as part of our self-service go-to-market approach. Organic growth is generated as users realize the benefits of Slack.”
2. HubSpot
   • HubSpot is really good at this, too. Our free CRM is a huge driver of acquisition. We offer a TON of value in the free versions of our tools, get users excited about it, and it's easier for them to see the value of the paid tools. 
3. Spotify
   • This is an outlier compared to those two SaaS examples, but I love how Spotify uses its product to market itself. My favorite example is their Spotify Wrapped campaign, which uses your listening data to generate an annual summary of your year in music. It's fun to share, and drives new users to the platform because they see their friends sharing all of their year recaps and want to join in. 

The list goes on of companies adopting a product-led growth strategy. 

Why? According to productled.com, "product-led companies often benefit from shorter sales cycles, lower Customer Acquisition Costs, and a higher revenue per employee."

Those are three things that would sound extra appealing during a recession. 

To some acquisition marketers (including me) this focus on product-led growth might lead to some concerns about how it shifts our responsibilities and roles. 

But when it comes down to it, I don't think it will too much. I think we will continue to focus on what we do best: providing genuine value upfront to our target audience.

In conclusion

We have a tough road ahead. We are only beginning to see the economic impacts of COVID and there are bound to be more surprises (AKA Murder Hornets) around the corner.

Marketers have a challenging year ahead of us. And marketing will change. 

I believe marketing departments will place more value in building marketing relationships with their customers and customer success team, and I think that companies will invest even further in product led growth marketing. 

Marketing has always been about adapting and trying to stay ahead. So if you're intimidated by the changes, that's good. Nerves are good. But the only way out is through.