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Hasn’t SaaS flipped software completely?
Ironically, it has also flipped (literally) the financial model of all SaaS based software product companies. So no more lumpsum upfront payments and predictable annual maintenance contracts, but a continuous monthly grind into the horizon. Supposedly, there is a pot of gold somewhere there.
This complicated challenge has driven the software entrepreneur community to pursue market acquisition models that push the lifetime value (LTV) of customer high and pull down the customer acquisition costs (CAC). Thus, creating attractive LTV / CAC ratios that determine success or struggle.
Pricing is integral to LTV. And that isn’t straightforward. Market naturally exerts downward pressure on price. Thus, the magic of LTV kicks in, over a longer period of time. No wonder the pressure on CAC.
In traditional software organizations, the sales guys accounted for revenues (most of the times) and costs (all the time). Thus, a high CAC was offset by significant upfront revenues. In the flipped SaaS case, this was a problem since revenues were not upfront and instead paid out over a period of time. A traditional sales driven model would have still meant a high CAC, but negligible upfront revenues. The brief couldn’t be clearer: a sustainable CAC diminishing over a period of time. How does one achieve it?
The unlikely combination of the Lean Startup concept, user adoption of digital media and the pressure to develop viable market acquisition models, encouraged SaaS Software Entrepreneurs to experiment at pace, with minimum capital outlay.
They made the most of the opportunity. Whether it was determining the product-market fit, or developing buyer personas or undertaking customer acquisition. Inbound Marketing played sandbox and the playground, for all market acquisition initiatives. Organic search, social media, content marketing and email prospecting; all inbound marketing channels were made good use of.
With persistence and continuous market feedback; the process driven ones figured it out, some learned their lessons and the rest, I guess, are still figuring it out.
Because, it is overwhelming, both for the marketer and the customer.
I have been lucky to witness this confusion at close quarters on many occasions. With some luck and persistence, we were able to crack organic methods of growing traffic, nurturing the marketing funnel with timely useful information and ingenious ways of digging out more results.
It seems the hustle has only begun.