SaaS Directories: The Top 15 and Your Strategy

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You’ve probably come across saas directories where you can list your SaaS product such as Capterra.

Here’s a list of the top 15 directories:

URLVendor InformationPaid Advertising?User Reviews?Ahref TrafficAhref Domain Rank
AlternativeToVendor information for AlternativeToNoYes198940817062
CapterraVendor information for CapterraYes - from $2 per clickYes13211654981
Software AdviceVendor information for Software AdvicePay per qualified lead programYes7038486943
FinancesOnlineVendor information for FinancesOnlineContent marketing, lead generation, brand awarenessYes52365826331
G2 CrowdVendor information for G2 CrowdRequest demo buttonsYes46172514660
GetAppVendor information for GetAppYesYes40784120925
TechnologyAdviceVendor information for TechnologyAdvicePay per lead programYes8019247346
SpiceWorksVendor information for SpiceWorksContent marketing, push notifications to buyersNo730027633
Software SuggestVendor information for Software SuggestPPC, Pay per leadYes57260547253
Trust RadiusVendor information for Trust RadiusAccelerated reviews, premium listingYes2980535853
IT Central StationVendor information for IT Central StationPay per lead programYes13040188319
TopAlternativesVendor information for TopAlternativesNoNo12643307976
App StormVendor information for App StormYesNo1217821015
CrozdeskVendor information for CrozdeskPay per clickYes5973292205

You might have also received an email from a lesser known one asking you to create your profile on their site.

What’s the best approach to software directories?

There’s a couple of ways to look at them.

Get Organic Traffic Indirectly to Your Site

Sites like Capterra or AlternativeTo get a large amount of organic traffic. For example, here’s Capterra’s profile on Ahref:

Ahref estimates that Capterra gets 1.3 million visits a month from Google with their content ranking on over half a million keywords.

While I’d always take these numbers with a grain of salt, it’s clear that Capterra ranks well. When I search for “project management software”, which gets about 20k searches a month, they take #1 position, outranking Wikipedia:

And they advertise on the keyword as well, just for good measure!

What has this all to do with SaaS directories?

It means that Capterra will get most of the organic clicks on many of the software “category” searches such as project management software.

By having a profile on Capterra, you’re indirectly benefiting from that organic traffic. By joining the PPC program at Capterra, you’re also getting a second shot at acquiring people who didn’t click on your ad but clicked on the first link to Capterra or have their ad blocker enabled.

Get Traffic Directly from the Directory Site

Some people will start their search for software on the directory sites instead of Google. It stands to reason that you’ll be able to grab some of these people by having your profile there.

Expand Your Visibility and Demonstrate Social Proof

It’s self evident that the more times potential customers see your offer and your brand, the more likely they are to trust you.

Therefore, having your SaaS product on directory sites will increase how visible you are in the market. If you also have positive reviews of your product on the directories, you’ll also establish social proof on a third-party platform.

Test Out New Niches for Your Product

Capterra alone has over 400 categories of software ranging from as broad as project management to as specific as church management.

This lets you test out bidding on clicks from specific categories. You can then track these cohorts separately to see how well they convert into paying customers.

I recommend finding multiple, narrow niches instead of broader ones, because you’ll face less competition and you’ll get more targeted traffic.

On Capterra, if you can find a category with only one or two other paid listings, you can put your bid in at the minimum bid of $2/click and still get most of the traffic, whereas on more crowded categories you’ll have to compete against outlandishly high bids to get traffic.

When Starting Out, Focus on the 20% of Directories that get 99% of Traffic

Creating a software directory requires very little effort and you can potentially turn it into a lucrative affiliate or ad-based business.

That means that new ones pop up every day.

Each one has their own set of requirements for listings, which can create a lot of maintenance work when you have to update your listings.

Therefore, I’d only list your SaaS product on directories that have a meaningful amount of traffic. You can also then target your review campaigns to spread reviews across your limited number of directories.

Ask Happy Customers for Reviews

When you first fill out your listing, you can reach out to existing, happy customers to ask whether they’d leave some feedback. Additionally, you can ask customers after particularly positive interactions with your team whether they’d consider giving you a review.


Facebook Lead Ads: 10X Results?

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Facebook has finally opened up lead ads to everyone.

What are lead ads, you might ask?

They look like this:

The core between this ad and most other Facebook ads is that you can enter your contact details right on the ad.

You skip the wait between clicking on an ad and arriving at a fully loaded page.

The result is that you remove a ton of friction from the process of opting in to an offer that you want.

It’s particularly powerful if you’re in an industry where you want to generate leads.

For example, you can offer a guide or a whitepaper in the Facebook lead ad in return for your customer’s email or phone number.

If you’re happy with their Facebook email, which is usually private, people often won’t even have to enter any data whatsoever: it’s automatically included on the form.

Recently, I ran a campaign in the freelancing space for an email course using a Facebook lead ad.

The ad reached:
– 31,898 people
– 362 people opted in
– 1.13% conversion rate from seeing the ad to opting in
– Cost per email of 1.13 euro

Previous experiments usually had a ~1% click-through rate on the ad and then a further ~10% conversion rate on the landing page.

Therefore, the Facebook Lead Ad resulted in a 10X increase in the amount of lead generated.

Why?

Well, 290 or 80% of the people opted in via their mobile device.

Opening up external landing page is slow on mobiles. It’s often hard to enter your data, particularly for people otherwise just surfing around on Facebook, rather than looking specifically for your offer.

This UX improvement over the classic pattern of ads leading to a landing page is a big one, and the performance stats show it.

So, if you’ve had poor performance generating leads on Facebook, consider giving lead ads a go.


AARRR Metrics Framework (and pirates)

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Dave McClure of 500 startups popularized the AARRR metrics framework for product managers and online marketing:

The Metrics

The acronym stands for:

  • Acquisition
  • Activation
  • Retention
  • Referral
  • Revenue

These steps follow on from each other, making up the funnel from acquiring users to generating revenue. Also, bonus points because you sound like a pirate saying it!

Acquisition

This means figuring out ways to bring people to your site. You want to focus on acquisition methods that are:

  • high volume;
  • high performing; or
  • low cost.

There are almost unlimited tactics and channels you can use to bring people to your site. In the very early days you may well be doing things that don’t scale. But quickly, most early stage teams focus on making one primary channel work. I call it finding your market-marketing fit.

Typically, for SaaS companies, this channel will be paid marketing or content marketing. Others just focus on outbound emailing campaigns built around an inside sales model.

Activation

Now, that you’ve hung up posters around your neighborhood, sent telegrams to your friends and hosted your launch party, people are starting to visit your site.

Activating them in the case of SaaS will be convincing them to sign up to your app and take first steps so they get their ‘aha’ moment that demonstrates the value of your product.

Here’s an example of Ahref, an SEO SaaS, to lead with a clear, convincing value prop coupled with a call to start a free trial:

And once they’ve hit that button, you’ll want to get them quickly to their ‘Aha’ moment when they see the value that your product will bring to them.

Often, you’ll have some onboarding such asking for specific user data as Front does here:

Retention

The lifetime value of SaaS customers is heavily dependent on a low churn rate. You get paid back on your acquisition and activation costs one monthly check at a time.

The type of efforts depend on what you can afford to spend. Typically, more expensive software will have account managers or customer success managers that check in regularly to make sure customers are still seeing value.

For less expensive products, you can offer webinars to train people on the software. You can send out emails based on triggers such as inactivity for a certain period.

Online, you’ll find a lot of discussion around credit card expiration and SaaS churn. While it certainly is a real thing, I feel this aspect is overrated. After all, if someone is so unengaged with your product that the credit card expiring is a reason why they churned, the problem isn’t really about the credit card.

At the same time, it’s great to remove as much friction from the process of adding a new credit card, including have sharable links that people can send to accounts.

Drip offers a free 11 -video course on getting the most out of Drip:

This course is super popular with Drip’s audience. Check out these comments:

One guy even wants to listen to the course audio on his commute!

As a side note, when it comes to small & medium businesses, you’ll often have to teach some of customers how to get the most out of your software.

Referral

Referrals are the holy grail, because it can mean that for every customer you “buy” you get a certain amount of additional customers for free. If you get more than 1 additional customers for each one you “buy”, you stand a chance at having exponential, viral growth.

Affiliate programs, referral incentives and simple calls to refer to others at strategic points in your app are all ways of improving this metric.

Dropbox famously “hacked” their way to initial traction by offering a two-sided incentive to sign up.

Typically, however, B2B SaaS companies don’t see massive amounts of sharing. However, if you’re a workflow app, you do enjoy the benefit of having a large amount of people who use your product on a regular basis. When they talk to other people in the industry, they’re likely to mention your product.

Revenue

In SaaS, revenue is fairly straight forward: your users pay you on a regular basis for the software. For self-service marketing models, you just ask them for their credit card at the end of the trial.

If you have a freemium model, you’ll have to figure out how to position your premium product so you have a decent rate of upgrade to your paying product.

Pricing for SaaS products will be increasingly important as you grow past your early stage.

How to Measure These Metrics?

It’s all very well talk about AARRR, but the real challenge is accurately measuring these metrics, so you can get a sense of your progress.

Broadly speaking, you can measure metrics in four ways:

  • quantitatively (Google Analytics, Mixpanel, conversion goals, event tracking, cookies)
  • qualitatively (user interviews, user testing)
  • comparatively (A/B testing a landing page, feature flagging a feature)
  • competitively (competitor analysis)

Acquisition metrics for online advertising are basically a solved problem. You buy ads on Facebook or Google, and you can track those visitors on your app.

Things get a little harder when you’re trying to track the effectiveness of an YouTube influencer campaign designed to drive mobile sign ups, for example.


The Long, Slow SaaS Ramp of Death

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Gail Goodman coined the concept of the “Long, Slow SaaS Ramp of Death” in a speech given back at the Business of Software in 2013.

Her talk is a “must watch” if you’re selling business software to small businesses for $30/month.

Spoiler: it’s really tough, takes more time than one would wish and there are no silver bullets.

In most business transactions, you don’t spend months marketing and selling via multiple channels to a customer only to end up with a monthly sale that might not be higher than the executive’s cable bill at home. Worse still, a SaaS product often doesn’t even have a minimum contract duration.

An agency that acquired 100 new customers over a period of a couple of months will be swamped with work. A SaaS company with a $30/month product will have a paltry $3k/month in revenue.

Tomasz Tungez mentions a simply way of dividing the software world into systems of record versus workflow applications.

  • Systems of record are the single source of truth in their area. A CRM will tell you about your sales. Accounting software will tell you about your financials.

  • Workflow applications help you get work done. For example, a task management app will help you get a handle on the work that needs to be done.

Now, the second one, the workflow application, is a typical entry path for SME SaaS companies, because you don’t need a top-down implementation. While it’s impossible to just start using a new sales CRM on your own, a sales person can start using a new workflow app such as Hunter.io by themselves.

The big piece, however, is figuring out how to get people to use your software and get value from it.

And that’s where growth typically slows. As Gail said regarding Constant Contact, most small businesses didn’t know how to do email marketing, so they didn’t have any need for email marketing software. It’s hard to sell workflow software for work that doesn’t exist.

So, Constant Contact looked into ways of helping small businesses to start with email marketing.

They had regional directors give 2-4 talks a week at small business events on email marketing. This way, they could reach 125,000 small businesses a year via in-depth, hour long seminars.

The core insight I got from this is many SME SaaS products are an informational product bundled with software.

MOZ first teaches people how to do search engine optimization and also offers some software to work more efficiently once you’ve learnt the basics.

Hubspot have a huge educational program reaching from the top of the funnel awareness content right down to training people on how to use their software.

If you’re selling software that helps small businesses do some aspect of their work, chances are you’ll end up teaching some of them how to do the work.


Adwords for SaaS: the Unique Challenges

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At some stage, all SaaS businesses will start using AdWords to acquire customers.

As of today, if I type in ‘team messaging’ into Google, I see an ad for Slack:

Even viral products such as Slack turn to Adwords at some stage.

It makes sense that advertising on relevant keywords such as ‘team messaging’ will bring customers for Slack.

As BJ Fogg says, you most easily change behavior by putting “hot triggers in the path of people who are motivated to respond to those triggers”.

People are motivated enough to search for team messaging. These people will be likely to be successful with Slack.

Therefore, Slack advertises as we see above.

So far, so good.

If you want to learn how to best use Adwords itself, there are many, many books and courses and agencies that will help you with that. I won’t focus on how best to tweak the settings to squeeze the most performance out of Adwords in this article.

Instead, I’ll focus on the particular challenges that SaaS presents when using Adwords:

  • You need to be able to track how well your cohorts of sign ups to your SaaS trial are converting into paying customers. You can’t easily see this in Adwords, so you have to get the data from your transactional database, a CRM or an analytics service such as Mixpanel.
  • Secondly, you need to spend quite a bit to get enough data to make decisions on optimizations. If you have fairly low conversion rates along the various stages of the funnel, you’ll need 100s of trials and 10s of conversions for each campaign to get reliable data. That takes time and money.
  • Even if you do the above, it’s very hard impossible to “close” the loop entirely in SaaS marketing and attribute every conversion to a particular campaign. The buying cycle is just too messy for that, especially for SaaS products that a large number of people will use.

Secondly, once you’ve mitigated these problems, you’ll be able to find out whether:
1. the math works out;
2. the math keeps working out when you expand and scale;

We’ll look at various approaches for using Adwords for you SaaS product, depending on your sales/marketing setup:
1. Low touch self-service SaaS
2. High touch sales-driven SaaS
3. Adwords as a Testing Channel

We’ll look at how to best monitor your performance over time and some criteria on whether Adwords is worth investing into right now.

Making Sure the Math Works Out

If you already have some data on your SaaS sales & marketing funnel, you can calculate whether the math works out:

Cost of Acquisition (CAC) = Cost per Click / (% of visitors signing up for the free trial * % of trials turning into customers)

Say you are paying 2 dollars for a click, 7.5% of visitors sign up for a free trial and 5% of those trials turn into customers, you’ll be on track for a cost of acquisition of $533.34.

You’re “paying” $533.34 for a customer.

I’d point out that you never actually “pay” for a customer. You pay N dollars for advertising and marketing, which later result in X customers. This is a very subtle difference that is really important to understand.

The result of this entire exercise is that you may well learn that Adwords is just not profitable for you. Famously, Dropbox found out that they were paying $233-$388 for a $99 product.

Particularly early stage startups will struggle to compete against established players in the Adwords game because they haven’t yet nailed a niche, don’t have an optimized marketing funnel and they don’t have deep enough pockets to pay steep customer acquisition costs upfront.

The Math isn’t as Clear Cut as It Sounds Above

The second issue is that all the variables in the above equation are very neat and simple. The assumption is that your conversion rates from signing up to the trial to becoming a paying customer will be constant, no matter the campaign.

But you’ll quickly find that these variables change. For example, ‘team chat’ might be a profitable keyword, but then you see an opportunity to get more sign ups by bidding on ‘group chat’ and the 100 trials from this keyword don’t convert at nearly the same rate into paying customers.

Most Adwords operators optimize for variables such as Cost per Click, Cost per Thousand Impressions or Cost per Trial or Lead, mainly because they are visible within Adwords.

However, these are intermediary objectives that often don’t correlate well with business goals.

For example, you may well find that a certain Adword Campaign delivers a lot of leads at a very low price per lead, but the leads never convert. Conversely, you might find that a source that delivers leads that seem quite expensive but convert well, so they’re still profitable.

A problem is that the sales cycle for SaaS is longer than in e-commerce. A 30-day trial period (considered very short compared to enterprise software) means you need to wait to find out the conversion rate for a particular Adwords campaign.

The problem is further compounded by the fact that you’ll need a certain amount of volume of leads or trial sign ups to accurately find out the conversion rate. For example, if you’d be happy with a 5% conversion rate, a 100 sign-ups will not be enough to give you an accurate read. The result is that you spend months waiting for enough data to come in.

Contrast this to e-commerce, where you can see sales almost instantly, and you can tweak the variables in Adwords to get more sales. The feedback loop is much tighter with e-commerce than with SaaS, the result being that Adwords for SaaS takes more time and money to optimize.

Common SaaS Playbooks for Adwords

I’ve seen two broad approaches to Adwords for Saas.

The first is a keyword optimized landing page leading directly into the product for low-touch software (think more basic email marketing software):


The second is offering an incentive such as a white paper or guide that provides context for the marketer on the topic (think more advanced software such as marketing automation). Once you give your email in return for the guide, the marketing funnel kicks in. You’re scored as a lead based on your subsequent actions on their site and your behavior. If you rank high, a sales rep may reach out to you and schedule a call.

Adwords as a Testing Channel

Adwords can play a role in testing your product-market fit and testing SEO plays.

Product Demo Recruitment

For example, if you feel that your chat service might be a great fit for customer support people, you could spend a limited amount of money to get the emails of a cohort of people looking for customer support solutions.

Then, you can schedule product demos for those people to find out whether your product will fit their needs.

Buy Before You Build

Secondly, if you want to rank high for competitive search terms, these days you need to invest a lot into high-quality content and then spend even more on promoting that content until it ranks. It’s a big investment, especially if you’re not 100% sure it will pay off. Adwords lets you ‘buy’ the top spot before you make the decision to ‘build’ in SEO.

Monitoring Your Performance

As I mentioned above, you can’t see the performance of your ads within Adwords easily, because you can’t easily track a conversion to paying customer within Adwords.

Therefore, you need to pull data from your transactional database, sales CRM or analytics tool such as Mixpanel to see the performance of each Adword campaign in terms of actual paying customers.

A dashboard overview with key KPIs across the funnel is very helpful.

Ideally, you break it down by campaign, because there can be significant differences between campaigns (branded versus non-branded keyword to give one example).

Deciding Whether to Start Using Adwords

For SaaS businesses, you can obviously get more business with Adwords, but it’s important to nail the analytics side of things, so you know what’s working and what isn’t. As we mentioned above, you need a certain scale before you can get enough data, so it’s not something that you can just spend 500 euros on and hope to get some answers.

For bootstrapped companies, Adwords can be a great way to acquire new customers within a large upfront investment so long as you carefully screen the sign ups (perhaps scheduling calls with them) to make sure they’re a good fit

For venture-backed SaaS, the picture is a little different. Investors don’t like being told that Adwords will solve the distribution of the product. It’s a sign in their eyes that the product isn’t a 10X improvement over the competitors. Therefore, like Slack above, Adwords will be a secondary channel at best.


Growth Workshop in Paris with Andrew Chen

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Andrew Chen currently works at Uber on acquiring users, and he organized a workshop in Paris on growth.

I went.

As a side-note, it was held in the Family HQ in Paris. The Family has a slightly zany cat-meme focused approach to decor and a cult-like feel to it. They have an excellent selection of books, which is a good sign. Peter Thiel in Zero to One advocates recruiting “a tribe of like-minded people fiercely devoted to the company’s mission”. I think The Family is aiming to do that in Paris.

What is Growth and Where Does It Sit in the Organization?

These days, you’ll find a lot of people donning the title of growth on Linkedin. I sure do.

Chen commented that you’ll see three different types of growth people:

  1. Product-led growth teams
  2. Marketing-led growth teams
  3. Sales-led growth teams

But ultimately, most growth teams are product-led. You can tweak ad campaigns, update landing pages and write content, but you need to alter the product itself if you want to unlock growth.

Interestingly, Chen pointed out that there are only a handful of large-scale growth teams globally with more than 100 members, mainly at companies such as Pinterest, Uber, and Facebook.

In the rest of the world, growth teams tend to be a single 7 +-2 scrum team focused on growth.

There are only a handful of ways to grow exponentially

Chen argues that there are only a couple of ways to scale users or revenue to hundreds of millions:

  1. Paid acquisition: existing campaigns pay for a larger amount of future campaigns
  2. Virality: each existing user refers more than 1 new user
  3. SEO: users generate content that attracts more people that generate more content.
  4. Sales: each additional sales agent generates a multiple of the revenue of they are paid, so you can hire even more sales agents.

He also cites there being the occasional sui generis way that will help, such as a partnership with a massive company, but they are rare.

These four growth loops are self-reinforcing, so they can scale companies incredibly quickly if the conditions are right.

Growth Loop Micro-optimization is Critical

Marketing techniques of PR, content marketing, partnerships, and app store features only get you so far. They’re great for bootstrapping your user base from zero to tens of thousands or even millions, but they aren’t self-reinforcing loops. They are linear in terms of results.

Because systems such as referrals are self-reinforcing, relatively small changes in conversions can have an outsized impact when played out over multiple levels of referrals.

Product teams tend to focus on the onboarding, the referrals systems, and the landing pages once early in a startup’s cycle and then they move on to more advanced features. The core product team will always want to focus on how to make a better and better product.

But you can end up in the product death spiral:

A great product doesn’t necessarily distribute itself.

That’s where the growth team comes in, focusing on endlessly optimizing each step in the chain, so you get the maximum amount of new users from each user.

It’s hard to pull off – a moonshot in Chen’s words – but the reward is exponential growth.

Growth Opportunities

Whereas new growth loops don’t come along very often, new platforms and channels are constantly emerging.

There is a window of opportunity with many of these channels before they close again. Facebook allowed many game developers to grow almost overnight into billion dollar companies such as Zynga. Facebook clamped down on games such as Farmersville, but Zynga still has a valuation of roughly 3 billion dollars as of today (although some argue that Zynga is more of a REIT with a game business on the side).

It’s all well and good to talk about past successful channels such as Facebook, but what about the future? What are the platforms and channels that show growth potential today?

Chen pointed out two platforms that both have more than a billion users each, today:

  1. Chrome
  2. Android

Chrome has won the browser. Mozilla’s former CTO admits as much.

Grammarly recently raised 110 million dollars as essentially a Chrome extension. One of the investors, Jules Maltz, stated that the company is growing faster than anything they normally see in San Francisco.

Personally, I love Grammarly, because it sits in the background when I’m writing in Messager, Gmail or WordPress, giving me value when I (frequently) mistype something.

Particularly for B2B SaaS companies browser extensions can be a powerful way to embed your product into the day-to-day of your user work.

Android has a remarkable level of penetration across devices from high-end to very basic devices. Whereas Apple tightly controls what you can do with iOS apps, you have much more free reign to build apps on Android that are deeply integrated into the underlying operating system.

Product Design and Growth

One topic that was touched on that’s particularly interesting to me is how the growth team impacts the product design.

When you’re constantly testing out new ideas in your product, you can run the risk of turning it into Las Vegas at night.

For example, Facebook’s current efforts to add “stories” to all its products feels in some cases quite disconnected from the rest of the product. In Whats App it feels to me that they’ve just slapped Stories into the product:

In many cases, Chen says, this is unavoidable when you are trying to grow a product exponentially. When I think of beautifully crafted products that shine with perfection, I’m generally thinking of products that have been around for a long time and have reached the plateau of productivity: Porsche cars, Rolex Watches, Italian suits.

However, one interesting idea I heard was the idea of designing your product to bemore modular so you can test individual aspects.

The example Chen gave was Amazon:

Each band of recommendations is separate, allowing Amazon to test different ideas for recommendations against each other thanks to the design flexibility.

Oh, and when I was in Paris I had a falafel in L’As du Fallafel. Highly recommended!


Pricing for SaaS products

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You can grow your SaaS business in three ways:
1. get more customers;
2. get customers to stay longer; or
3. get customers to pay more.

I believe that the last one, pricing, is an underrated lever of growth. We tend to focus on acquisition and, to a lesser extent, retention.

But get pricing right, and you’ll grow revenue and even increase customer satisfaction.

Pricing is a function of your marketing, meaning it reflects your product, your value proposition and your positioning. Your pricing sets the stage for the rest of your strategy.

I’ve worked at several SaaS companies over the years, and I’ve tested both terrible approaches to pricing and other approaches that worked really well.

Here, we’ll take a journey through the process of optimizing the price of your SaaS product.

Finding Your Price

Software is not about figuring out the cost of manufacturing the software, slapping on your margin and coming out with your price.

The whole point of getting into software is that you may start with a very low or negative margins, but over time your gross margin can increase to fantastical levels as you get more and more customers.

So, you focus instead on the value that the software provides, and you set the price accordingly.

The result of this is that your price comes from your customers, not from a spreadsheet.

You can talk to them, you can read their emails and you can go through customer support requests.

Their language, the words they use and how they describe your service will give you an idea of how they see you in terms of pricing.

For example a customer left this review of Planio on Trustpilot:

As you can see, this person certainly sees Planio as more than reasonable, describing it as “super cheap”. That’s an indicator that the pricing of Planio is low for this particular customer.

And what if you don’t have many customers yet? Well, Steli at Close.io tells a story on his website about how he found the “right” price for a new product while talking to new prospects.

When the person would ask about the price, he’d give them a price that was 5% higher than he’d quoted to the previous person.

Once he got to the stage where 20% of the customers were balking at the price, he felt he had reached an optimum level of pricing.

The Optimized Pricing Action Plan

You’ll read that pricing is a process. That pricing is something that you won’t get right the first time. That you just have to test.

Well, that’s true and it’s also pretty vague. Especially so if you’re the one responsible for doing something about your pricing.

It’s tough to tell the entire company that the hundreds of angry Tweets, emails and phone calls about your new pricing is just the “result of a test”.

So, where do you start and what, exactly, should you do?

Step 1: Gather Existing Data on Pricing

First off, if you have customers, I’d look at what they are saying in support tickets, emails or on review sites. That’s your first source of data on how they’re talking about your pricing.

They’ll give hints about where they put on you in terms of price and value.

If you don’t have any customers, I’d start looking at the same data for your nearest competitors.

This is the most basic step, however, and I think most people do this step.

Step 2: Set Up Calls with at least 10 Customers

It’s always amazing how little people talk to users and customers, despite that being a core part of the job of product managers, product designers and product marketers.

In my experience, people often get into the software business in the hope that they’ll avoid talking to customers.

However, the best software-as-a-service businesses talk relentless to customers in the stage from 0 – 1 million in ARR. The reason is that you need a rock solid understanding of your customers if you want to scale to 10, 20 or even 100 million.

It starts with talking to them on the phone. Talking to 10 people can lead to talking to even more. I went into detail on how you can go about this on a guest post over on GrowandConvert.com.

Step 3: Ask Them Questions about Pricing and Value

Usually, product designers and UX researchers use customer interviews to figure out how customers think and behave.

What never occurred to me until recently was that you can also use these calls to figure out what they think about your pricing.

Obviously, you can’t ask them straight up: what’s the most you’d actually pay for this software?

But you can ask questions that will reveal how they value your product.

On a webinar by PriceIntelligently.com, they gave me these three questions for pricing:

  1. At what price point would our product become expensive, but you’d still consider buying it?
  2. At what price point would our product become good value?
  3. At what price point would our product become so cheap that you’d start to question the quality of it?

Step 4: Change Your Existing Pricing

At this stage, you’ve gathered some data on your customers. You’ve learned some nuances on how they think about your pricing. And you’ve decided to change your pricing.

You can change your pricing in a variety of ways:

  1. Simply increase the price of your existing plans;
  2. change the amount of the core value metric each plan gets – i.e. the cheapest plan gets less seats;
  3. change your core value metric for your product – i.e. change from number of seats to number of projects for a project management app.

So, there’s more than one way of changing your pricing. It’s not just about increasing the dollar amount.

For example, at Planio, we changed the amount of users and the projects you get in each plan, rather than the amount charged.

Step 5: The Power of Grandfathering Your Existing Customers.

Grandfathering means that you don’t impose your new pricing on your existing customers. They get to stay on the old plan, often indefinitely, until they want to upgrade.

This drastically reduces the risks of trying out a new pricing model.

You’ll avoid a backlash from your customer base. In fact, in my experience, you’ll get emails from existing customers thanking you for letting them keep their old plans.

You’ll also reduce the risk if your new pricing model turns out to be disastrous. Imagine if you introduce a new core value metric, and you find out that your customers are behaving very different to what you expected – perhaps in a way that reduces, not increases, revenue.

You’ll be able to ‘reverse’ your pricing change with only a few months of customers on the failed pricing model, rather than your entire customer base.

Pricing as the Underutilized Tool

Much of the SaaS case studies online focus on acquisition of new customers.

I think this makes sense, because the wider audience is interested in starting a SaaS company. Not very many people actually have a SaaS product that has enough traction to start optimizing the pricing.

At the same time, if you’re in the lucky position of having a successful SaaS product, you’ll find that pricing will be a place where you get outsized returns.

In a webinar for Kissmetrics, Lars Lofgren mentions a case study involving a company called Bidsketch where they doubled average revenue per account via a new pricing model.

Amy Hoy tells about how she’s increased the price of her time tracking app four or five times with revenue going up every time.

So, once you’ve gotten to a certain point in your SaaS business, say 500 customers, I think it makes sense to start putting time into optimizing your pricing.

And I’d like to help you do that. If you click below, I’ll send you my top 10 SaaS pricing Resources I use.


The “Market-Marketing” Fit

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Thomas Carney  -  
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New startups or small bootstrapped companies find marketing excruciating.

I’ve talked to founders who’ve built an entire product, but they’re stumped at getting the first 100 paying customers.

Jason Lemkin at SaaStr comments that the first 10 unaffiliated paying customers is hardest thing you’ll do with as a software company.

The reason is that if you can get 10, you can get 100 and you can get to 1,000. The first 10 will be similar to the thousandth customer.

But back to our frustrated founders.

I often get the feeling that they’re exhausted by marketing.

They spend a week writing a blog post, only to see a few people read it.

They spend hours of precious dev time integrating with another app only to see a handful of new sign ups.

They create an affiliate program, but they haven’t gotten a single sale via the affiliates.

It just all feels very… tough. You’re putting in countless hours, and you could just put that time into the product, and surely the customer will come.

I think there is a concept that nascent businesses should bear in mind.

I’m calling it the “Market-Marketing fit”.

The basic idea is that for each new SaaS product there will be a certain approach to marketing a product that will win.

The fit will be more precise than merely channels such as blogging or affiliate marketing or inside sales.

And your early efforts at marketing should be focused on zeroing in on your market-marketing fit.

I’ll give you a few examples based on bootstrapped businesses around the web. I choose them because 1) they’re fairly relatable and 2) they’re quite open.

Big companies such as AirBnB don’t actually reveal how they grew. For example, I’ve heard that AirBnB grew in Europe via the brute force efforts of massive inside sales teams. But in most write ups of AirBnB’s success you’d think it was all down to some growth hack based on data analysis.

Note: this is just me observing from the outside. I know nothing of what actually goes on at these companies.

Baremetrics

Baremetrics is an analytics product for SaaS businesses using Stripe.

And the founder came up with an ingenious method of generating a flow of qualified prospects to Baremetric’s site.

Imagine you’re the CEO of a SaaS company.

You love seeing the key metrics for other SaaS companies, and Josh Pigford provided an open view of Baremetrics for Baremetrics itself.

I don’t even run a SaaS company, and I found it fascinating.

In addition, I imagine that showing these metrics for the world to see meant that Josh Pigford had to spend less time in the early days giving demonstrations.

ConvertKit

ConvertKit started out targeting authors. The problem is that author are generally terrible at marketing, so they don’t have big email lists (if they have one at all).

ConvertKit adjusted their positioning to professional bloggers and they used inside sale tactics to get those bloggers on board.

The benefit was that professional bloggers have huge email lists and they LOVE affiliate marketing, so ConvertKit could, in turn, offer them 30% of recurring revenue for new customers.

Nathan Barry got bloggers such as Leo Babauta from Zen Habits and Pat Flynn onboard as ConvertKit customers. There’s a big difference between landing a big customer who requires a confidentiality clause and landing a professional blogger who’s favourite thing to do is writing about whatever new software she’s using.

Those early customers probably had a very high virality coefficient – way above 1.

What I mean is that landing 1 big professional blogger as a customer potentially gets ConvertKit hundreds of new customers via affiliate and word-of-mouth sales, because that professional tells her list of 50,000 subscribers about ConvertKit.

When you land one big customer that doesn’t broadcast to a large audience for a living, your amount of new customers might be zero or close to that.

Bingo Card Creator

Patrick McKenzie came to Hacker News fame as a software developer trapped as a salaryman in a Japanese MegaCorp who found freedom via a bingo card creator.

I imagine they’ll make a movie about him one day.

Now, one of his marketing tactics takes a leaf out of the travel industry book.

Try this: type in “flights from #{insert any small town} and Rome” into Google. You’ll get a wall of results from travel companies even if that small town doesn’t have an airport.

The travel companies generate millions of landing pages around every conceivable combination of towns. It’s all done without human interaction, so Google likes it less and less these days, because the value to people is often low.

Patrick adopted and improved on this tactic for Bingo Cards. He had writers create articles for 10-30 dollars for keywords around “Christmas Bingo Cards” via a custom CMS built for this purpose.

He found that he could put money into these pages and get revenue in return in a similar manner to Google Adwords or paid advertising.

Now, the reason why he was probably successful was that at the time Google didn’t look down on such content as much and, secondly, Google didn’t have much other content around Christmas bingo cards to offer, so his content was the best.

Because he used writers meant that the content was probably much better than the travel industry’s automatically generated content.

If you have a niche market a wide variety of search keywords (“educational bingo cards”, “christmas bingo cards”) clustered around a common solution (“The Bingo Card Creator”), then this approach still works, particularly if the content is good enough to solve your target audience’s problem.

Buffer

Buffer is a great example of a company using content marketing as a tool to drive to 6 million/year in recurring revenue.

There’s is a couple things about Buffer’s success, however.

First off, content was in their founder’s DNA. Joel wrote about taking the first steps towards creating Buffer. He wrote about every step along the way. They constantly took challenges such as figuring out what to pay people and turned those challenges into content pieces. The most famous example is their salary spreadsheet that listed the salary of everyone in the company as part of “radical transparency”. It’s hard to achieve Buffer-like levels of success with content marketing if the founder team aren’t hardcore about writing and publishing content themselves.

Cheap customer acquisition for a company in its beginning from content marketing isn’t something that you can just strap on with a few interns or outsource to an agency.

Buffer’s price point of 10 dollars/month means that the only way to survive was to have super cheap acquisition costs. Buffer simply wouldn’t exist if they didn’t have that channel. Another competition called MeetEdgar comes in with a starting price point of 50 dollars a month, and they rocketed past 100k in MMR in record time. According to their founder Laura Roeder, they’ve been acquiring a lot of customers via Facebook ads. Admittedly, Laura Roeder also had a ready-to-go marketing channel in the form of her huge email list for her newsletter “Get the Dash”.

Still, I think it’s a good example of how having a premium price point allows you to more flexibility in acquiring customers.

Okay – that’s a few examples of the “market-marketing” fit in action.

I think it’s helpful to dig deeper than just the standard approach of thinking in terms of “blogging”.

You have to think in terms of what specific types of posts are going to be a good fit for your business.

If you have a new technology idea in AdTech that you want to ultimately sell to one of the big AdTech players, it might make sense to write high level thought piece articles or get some industry leaders in on your blog.

On the other hand, if you’re sell a 10 dollar/month social media tool, you’ll need meaty, practical “how-to” guides that social media managers will want to share with their fellow social media managers.

They’ll care far less about the state of social media in 10 years from some industry prophet.

And it’s entirely possible that you won’t find an approach to content marketing that works in your business. That’s fine, because you can focus on what does work – be that inside sales, Google AdWords or partnerships.

The key is to find that fit as fast as possible.


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