Are your clients stupid? Are your competitors bastards? Does The Reptilian Elite want your business fail? Even if it is true (but it isn’t – not really sure about reptilians ‘thought), your saas company will not fail because of them.
Blame one little number: your customer acquisition cost. Don’t believe me, eh? It is a symptom that you are paranoid. I can’t help you with that. But I’m about to give you 5 useful tips to decrease the one number that truly counts: your CAC. But before that…
Why is customer acquisition cost so important for SaaS companies?
In case you don’t believe me that customer acquisition cost is one of the most important numbers you should always decrease, I try to convince you. It will be a logical argumentation, so if you committed to blame customers, competitors or reptilians, don’t read further.
Your customer acquisition cost refers to the cost of “buying” one new client: the result of your marketing and sales efforts. Calculation is easy: take the whole cost of your sales and marketing in a specific period of time and divide it by the number of new customers:
Acquisition cost is important for companies because you probably do your business online (as you are a SaaS company). And there are lots of competitors and entities that will increase your customer acquisition cost. The lower you can get a new customer the faster and more sustainable your growth will be. Makes sense.
Although there is another number that should be tracked all the time. The Life Time Value (LTV) of your clients. It means how long a client will go with your solution – so whether you have the ability to monetize customers or not. The more you can retain your customers the more money they will give you, the more sustainable your business will be.
Just to make it clear: the best-performing companies have at least 3X higher Life Time Value than Customer Acquisition Cost. It means, that if you get 1 client for 50 USD, and the life time value of that customer is 150 USD, your business is growing fast.
Generally decreasing your Customer Acquisition Cost is very important! If it is too high, you are wasting money. Therefore here are the promised 5 tips.
Tip 1: Think about your contents as little funnels
Content creation is really a great way of attracting customers. It does not only decrease your customer acquisition cost by educating and nurturing them throughout your whole marketing and sales funnel but also have a good effect on your customer churn rate.
Blogging is a good thing to do but it won’t help you decrease your customer acquisition cost if you don’t do it the right way. In order to really be effective, listen to Neil Patel’s great framework of S.M.A.R.T. goals: Be Specific, set up goals that are Measurable, Achievable, Relevant and Timely.
In addition, if you start to think about your contents as funnels, you will be able to write it much more effectively.
- Title grabs attention
- Lead makes them read further
- Every sentence and paragraph try to make your reader go further
- Inserting CTAs to the right stage in your article will ask your visitor to convert or to move to another article (put your TOFU giveaway CTAs to the top of your article, in the middle the MOFU and if you have a deep diving, very long article, MOFU to the end.)
Blog as funnel:
- There are articles that grab attention (click baits)
- There are detailed case studies, anything that is detailed and educates people
- Comparison charts, blog articles that help people decide to use different solutions
Every content as funnel:
- Contents for attracting prospects (blog articles)
- Contents for generating leads (free giveaways)
- Contents for converting clients (sales texts, pricing page, etc.)
- Contents for converting clients to promoters and loyal customers (upsells, cross-sells, VIP communities, loyalty programs, etc.)
In addition, you need to understand that blogging is copywriting even if you don’t sell your product there. But you build trust, educate people and make your sales reps (if you even have) a clear path to selling.
All in all, you need to write in a way that is really sucking your reader in. There are lots of average contents out there. Be better. And generate leads that trust you. Your customer acquisition cost will decrease as fast as hell.
(In addition, read the 30 blogger tips on how to grow your blog readership.)
Tip 2: Automate as many marketing processes as it is possible
Automating processes are one of the most important things if you want to decrease your customer acquisition cost. Repetitive work consumes time, energy and tons of money.
And this is why you should send most of your emails automatically. Email automation is a great thing but requires skill, content and patience until it really starts to do its work. Just a few data for you:
- “Automated email messages average 70.5% higher open rates and 152% higher click-through rates than “business as usual” marketing messages.” Epsilon Mail Institute
- “B2C marketers who leverage automation have seen conversion rates as high as 50%.” eMarketer
- “Email is 40 times more effective at acquiring new customers than Facebook or Twitter.” McKinsey
So there is no excuse for not implementing a solution. But implementation can be difficult and you need to understand how to take advantage of automation. Therefore here is a completely automated email workflow system that nurtures your leads, makes them start your trial, makes them pay, makes them upgrade and sells even more.
You can read the details of this email workflow system in our article on how to fix a leaking conversion funnel to decrease SaaS churn utilizing email automation.
Tip 3: Target paid ads better
Targeting your ads well is very important. But very rarely happens that you aimed the right audience the first time. It takes time, testing and patience to find the better performing ads that could be scaled up. Therefore, I give you 4 articles about the 4 big ad platforms that will certainly help you reduce your customer acquisition cost.
- Facebook ad testing case study: A deep-dive description made by AdEspresso
- Twitter ad case study on different type of ads: Showing exact results for webinar, email course, ebook and account promotion made by Portent
- Linkedin ad case study with 1000 ad versions: Actionable insights made by The College Startup
- Adwords ad case study: 20% increase in customer acquisition made by AWR Cloud
In addition, taking advantage of retargeting can lower your costs too.
Tip 4: Experiment with your USP
Unique Selling Proposition is the differentiator of your business. There is no effective marketing at all without a clear statement.
In the picture below you can see an example table for creating a USP for an email automation service. It is fake and those statements are certainly bad but give you the basic things to do it for your own business:
If you have a buyer persona, you know that he has pain points. That is the “have” row. It helps you understand and structure the big “why”: why would anybody buy your product. Let’s see what your buyer persona has without you? What are those pain points? Then what will they have if they choose your product? What is the desired end result of your buyer persona?
Next step is to find out their feelings. Every people has feelings about their current situation they are in. In the example, the poor email marketer is always just crafting and sending out emails. It is a boring job to do but full of stress: his boss wants higher results. But email sending is time-consuming, therefore, he is always in a hurry. With an automation software, he will be able to meet his boss expectations, will feel like he is successful and has more energy.
The third step is to see how your product changes the buyer persona average day. In the example, it moves the marketer from repetitive work to a more strategic type of job.
And last but not least: everybody is interested in other people’s opinions about him. Our personality changes based on the feedback coming from the people that are close to us. So it is important that how your product will change their state in others eye? Do you make the buyer persona an influencer?
If we just look at Intercom.io web page, we can see that they have all of the answers above:
Without Intercom the stakeholders…
- have lots of tools and channels – communication is hard
- are puzzled, angry
- are wondering where and how to communicate
- are not communication personally.
This is clear messaging and strong USP.
You can’t simply gather this knowledge by sitting in a room and thinking. The only way you can have this strong USP is to go to your prospects and take advantage of lean customer development.
Tip 5: Optimize your trial for conversion
Activation is not enough, you need engaged users.
Just because you converted a lead into trial user your job is not over – you need to make them pay for your business.
One of the best things for that, create user action based messages. Your onboarding process will be much more successful than before.
But your job still continues!
You need engaged users, not simply active users. You can define your “active users” such as the number of logins they have (but no other activity). “Engaged user” is a much better thing: these users are realizing value.
Lincoln Murphy – father of trial conversion rates – give you a very good example:
“Consider a user with a lot of logins but no other activity. That could mean they want to get started but they can’t figure out how. They know – or believe because of your marketing – that your SaaS product should do what they need but they can’t figure it out.
So they leave. Then they come back later. And leave. Rinse and repeat for a while… until they stop coming back completely.”
So focus more on the engagement factor of your users to make them stick to your product and have customers with high lifetime value.
Identify bottlenecks, use exit interviews and try to tweak your onboarding process the way that really shows them the benefit they can have with you!
He graduated from the Technical University of Budapest, with master’s degree in Software Engineering, Economics and Management.
As a serial entrepreneur he has 10+ failed projects and one big winner one: growing Protopmail email marketing service from zero to a market leader position in Hungary.
He has been working more than 20 years in software development, more than 10 years in IT project management and also having the serious of 10+ years experience in email marketing and marketing automation.
Aside from running a successful business, Gabor is also an email marketing and marketing automation consultant and works for clients like GE Money, DHL, Bridgestone and for several banks and insurance companies.
He also appears at multiple online marketing colleges as a guest speaker, and a well-known speaker at online marketing related conferences.
Gabor speaks 4 languages, has three kids and he is a serious golf addict.