How to create a Growth Engine for your SaaS product Aaron Beashel 05.05.2014 SaaS Share Facebook

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These days we have more access to great information on marketing our SaaS products than ever before. People like Sean Ellis, Neil Patel, Chris Hexton, Peep Laja and many others choose to share their knowledge of online marketing via blog posts and eBooks and it is all available for us to learn completely free as long as we have the desire.

But do you get the feeling that there is just so much you could be doing it’s hard to know how it all fits together to achieve that illusive ‘Growth’?

I’ve been fortunate to lead marketing & growth for several great SaaS companies, and in that time it has been my responsibility to take all this great knowledge & information and distill it into a strategic plan and a set of prioritised initiatives to which we can execute.

I haven’t always gotten it right, but over the years I have formed somewhat of a ‘framework’ for how all these different initiatives come together to drive growth. This framework focuses on combining all these different initiatives into a ‘machine’ I like to call a Growth Engine.

I wanted to present this framework for thinking about customer acquisition and retention in the hope it will give some context to all the different marketing channels and initiatives that are available to you and help you prioritise and execute the right ones at the right time.

What is a growth engine?

Let’s start with a definition – A Growth Engine is a systemised, measurable and scalable process for turning potential customers into happy, paying customers.

A Growth Engine should be a structured, machine-like process that takes into account the different paths users can follow to becoming a customer, and provides an automated, integrated process to meet their needs at each stage of the buying process and drive them towards the ultimate conversion point of becoming an happy, paying customer.

This customer-centric, machine-like approach is designed to ensure the following:

The process of acquiring customers is aligned with the way customers buy the ?product

The process is scalable and efficient, so that you can maximize ROI on top of funnel ?marketing activity (channels).

The process is automated where possible, so that it can be run with as little human ?resources as possible.

The process can be thoroughly instrumented, so that you can identify bottlenecks in the machine, prioritise activities based on those that will gives you the highest ROI and understand what channels are turning a positive ROI and scale them.

How do I design a growth engine for my SaaS product?

It’s important to note that SaaS is a product delivery model, not a business model. Salesforce, Xero and Unbounce are all SaaS products but their business models are VERY different. Salesforce has a huge team of inside sales representatives that drive their sales, Xero gets almost half of their revenue from channel sales whilst Unbounce is almost exclusively leverages touchless acquisition.

In order to design a Growth Engine for your SaaS product you first need to have a firm grasp on your business model and ensure it is aligned with the way your customers buy. I’ve never seen a business sell a $10,000 per month SaaS product on a touchless acquisiton model. It’s just unrealistic.

Assuming you have this handled however, the next step is to create a diagram of your Growth Engine. When doing this, think about all the different pathways a person can go from potential customer all the way through to happy paying customer.

To show you what I mean, I have included two examples below from different types of organisations:

Model 1: Touchless Acquisition + Inside Sales

The above diagram is an example for an organisation that uses a combination of touchless acquisition for SMB customers and inside sales for enterprise customers.

Potential customers find the product through the various channels (SEO, PR, etc) and arrive at the destinations (Marketing site, blog, etc) where they are educated about the product. From here, they can either signup for the product and start using it themselves (known as touchless acquisition) or they can request a demo or download an eBook, in which case they are put through lead nurturing and scoring processes and ultimately passed to the sales team for closing (known as inside sales).

Model 2: Touchless Acquisition + Bottom Up Sales

This diagram on the contrary, is for an organisation that uses a touchless, bottom up approach to acquisition.

Potential customers find the product through the various channels (SEO, PR, etc) and arrive at the destinations (marketing site, blog, etc) where they are educated about the product. From here, they can download a content offer and go into the lead nurturing stream or they can progress down the direct conversion path by signing up, activating and going on to upgrade to a paying account. Once a user has signed up and started receiving value from the product, an assessment on whether they are a Sales Qualified Lead (SQL) happens and if they’re qualified they are moved into the sales process in an attempt to upsell them to enterprise-level plans.

As you can see from the above diagrams, there is a fairly significant difference in the growth engine depending on your business model, target market, customer buying process, etc. Not only do the channels you use change, but the way you convert them from website visitor into paying customer is significantly different.

How do I build a Growth Engine for my SaaS product?

Now that you understand what a Growth Engine looks like and have mapped it out, it’s time to start building and optimising the engine to start driving that illusive growth.

In order to wrap your head around it and get an understanding of where to begin, it’s helpful to look at the Growth Engine in multiple ‘parts’ just like a normal engine.

I generally look at a Growth Engine as having 4 parts; channels, destinations, conversion paths & customer success.

Channels

Channels are top of funnel activities designed to reach customers where they’re hanging out (social networks, other blogs & news sites, etc.), raise awareness of your product and drive traffic to the website.

There are a number of different channels available to SaaS marketers today and your mix will likely be unique to you and your target market, however there are some general ones that are available – with varying effectiveness – in all situations, including:

SEO – There are more than 131 billion searches conducted everyday and in my experience, traffic from search tends to convert 3 -4 x better than other sources due to the intent visitors arriving from this channel have. Definitely worth exploring for your product.

– There are more than 131 billion searches conducted everyday and in my experience, traffic from search tends to convert 3 -4 x better than other sources due to the intent visitors arriving from this channel have. Definitely worth exploring for your product. Direct – Direct is one of those channels that is a bit harder to measure and optimise. Depending on your product and marketing mix it can include word of mouth and customer referrals, offline campaigns & brand awareness and many others.

– Direct is one of those channels that is a bit harder to measure and optimise. Depending on your product and marketing mix it can include word of mouth and customer referrals, offline campaigns & brand awareness and many others. PR/Guest Posting – Whilst only proper customer discovery can tell you where your target market is hanging out, it is highly likely they are reading various blogs on the web and a significant opportunity exists to leverage the audience of these bloggers to drive traffic and signups.

– Whilst only proper customer discovery can tell you where your target market is hanging out, it is highly likely they are reading various blogs on the web and a significant opportunity exists to leverage the audience of these bloggers to drive traffic and signups. Paid Acquisition – When done right, paid acquisition can be a solid source of visitors and signups, but it isn’t always easy to do it right. You need to have a thorough understanding of what a sustainable CAC is (I like to base this on time to payback as per this great article) and then you need to experiment relentlessly with the different networks & sites that have a reach into your target market.

– When done right, paid acquisition can be a solid source of visitors and signups, but it isn’t always easy to do it right. You need to have a thorough understanding of what a sustainable CAC is (I like to base this on time to payback as per this great article) and then you need to experiment relentlessly with the different networks & sites that have a reach into your target market. Viral Mechanisms – If you have a product that has an inherent viral aspect to it (I.e. people share things using your product, like files with Dropbox or designs with InVision) then it is likely you will be driving some traffic through this channel. There are a number of things that can be done to optimise this, but it all starts with measurement.

– If you have a product that has an inherent viral aspect to it (I.e. people share things using your product, like files with Dropbox or designs with InVision) then it is likely you will be driving some traffic through this channel. There are a number of things that can be done to optimise this, but it all starts with measurement. Social Media – While customer discovery will help you understand where your target market is hanging out, it is high likely they are active on at least one or two social networks. Through the creation and curation of great content relevant to your target market you can build a strong social following that can one day turn into customers, or at the very least help you spread your content to others that will (little tricks like this can also help).

Destinations

As the above diagrams shows, channels are essentially all designed to draw users back to your destinations, which in most cases will include a marketing site as well as a blog and often even landing pages for content offers (such as eBooks, webinars, etc).

Every organisation may have a slightly different series of ‘destinations’ depending on your goals, target market, business model, etc, but generally speaking for a SaaS product they will include:

Marketing Website – The goal of the marketing site should be to provide a user with the information they need at each stage of their buying cycle and provide a clear path to conversion (signup, request a demo, etc).

– The goal of the marketing site should be to provide a user with the information they need at each stage of their buying cycle and provide a clear path to conversion (signup, request a demo, etc). Blog – Depending on your customer acquisition model, the blog can serve many goals. For those with primarily an Inside Sales model, the main goal should be to drive traffic from channels like search and social and expose potential customers to your various offers (free demos, ebooks, etc) in an attempt to turn them into a lead. If you have a touchless model, the blog is largely a driver of traffic which you can convert into free trial signups.

– Depending on your customer acquisition model, the blog can serve many goals. For those with primarily an Inside Sales model, the main goal should be to drive traffic from channels like search and social and expose potential customers to your various offers (free demos, ebooks, etc) in an attempt to turn them into a lead. If you have a touchless model, the blog is largely a driver of traffic which you can convert into free trial signups. Lead Generation Pages – Generally speaking, lead generation pages are dedicated landing pages for different offers your business is utilising to generate leads, including eBooks, webinars, toolkits & more. Their purpose is to present offers in a clear and concise manner and convince the user to give up their details in return for the promise offer.

Conversion Paths

As the example diagrams show, conversion paths are the various pathways in which website visitors can convert. Depending on your acquisition model, this could either be into a lead through some sort of offer (demo, eBook, etc) or into a free trial/freemium user.

Successful SaaS companies have multiple conversion paths> They realise that 90% of visitors to their site aren’t yet ready to purchase so they attempt capture their details through some sort of offer so they can continue to market to them and convert them into paying customers at a later date.

Direct Conversion Path

If your product utilises a touchless acquisition model, than those that are ready to purchase will likely progress through your direct conversion path. Generally speaking, this path has the following stages:

A definition of each stage is below:

Visited Marketing Site – Visited the marketing site (I wouldn’t count visits to your blog, but your call)

– Visited the marketing site (I wouldn’t count visits to your blog, but your call) Sign Up – Signed up for your free trial or freemium offering

– Signed up for your free trial or freemium offering Activated – Reached the ‘Aha moment’, the point where they realise the value your product adds to their lives.

– Reached the ‘Aha moment’, the point where they realise the value your product adds to their lives. Purchased– The first time they are billed for your service, usually by becoming a paying customer beyond your trial period or by upgrading to a paid plan from your free plan.

Activities to enhance conversion rates through your direct conversion path are generally outside the scope of this article, but ideas include:

Optimising your marketing website – This could include the addition of prominent calls to action, creating persona-centric solutions pages, increasing social proof through case studies and customer testimonials, clearly presenting pricing and more.

– This could include the addition of prominent calls to action, creating persona-centric solutions pages, increasing social proof through case studies and customer testimonials, clearly presenting pricing and more. Implementing lifecycle emails – This includes the design and development of a series of email workflows that get sent when users complete (or don’t complete) certain actions in your app, and are usually aimed at driving users towards completing the steps needed to reach ‘activation’.

– This includes the design and development of a series of email workflows that get sent when users complete (or don’t complete) certain actions in your app, and are usually aimed at driving users towards completing the steps needed to reach ‘activation’. Implementing in-app tours or a tailored new user experience – This includes having some sort of interface unique to new users of your product that guides them through the steps they need to take to realise the value your product offers and ultimately reach Activation. Dropbox’s getting started page is a great example of a very effective onboarding experience.

– This includes having some sort of interface unique to new users of your product that guides them through the steps they need to take to realise the value your product offers and ultimately reach Activation. Dropbox’s getting started page is a great example of a very effective onboarding experience. Exposing self-serve help documentation – This includes the creation and implementation of a self-serve help portal with videos and articles showing users how to perform certain actions within the application.

Lead Nurturing Path

Those that are not ready to purchase do not have an immediate need for your product and therefore will not likely progress down the direct conversion path. In this case, you should attempt to capture their information (Name, Email, Company Name, etc.) so that you can push them through a lead nurturing process, educating them on the problem your product solves, the benefits of your product offering and ultimately pushing them back into the direct conversion process (either through the touchless conversion process or through the inside sales process, depending on your acquisition model).

Patrick McKenzie has a great course on deploying a series of lead nurturing emails and it’s really not a hard thing to do, particularly considering the results it can generate. Essentially, he recommends a series of 8 emails over 30 days that increase in ‘Salesness’ as time goes on:

A simple email lead nurturing campaign could be as follows:

The problem email – Designed to break the status quo (remember; everybody is using something else to achieve what your product does, whether it be pen & paper, excel, email, whatever) and open the reader to the possibilities of replacing there existing process with software. This email should focus on educating readers on the problems associated with their current method and should barely mention your product.

– Designed to break the status quo (remember; everybody is using something else to achieve what your product does, whether it be pen & paper, excel, email, whatever) and open the reader to the possibilities of replacing there existing process with software. This email should focus on educating readers on the problems associated with their current method and should barely mention your product. The benefit email – A look at the benefits of using software like yours to achieve whatever it is your product achieves. This email should focus on the benefits of using your category of product (I.e. person-based analytics tools as opposed to KISSmetrics directly)?and how it can help improve their lives.

– A look at the benefits of using software like yours to achieve whatever it is your product achieves. This email should focus on the benefits of using your category of product (I.e. person-based analytics tools as opposed to KISSmetrics directly)?and how it can help improve their lives. The transition email – As mentioned before, everybody is switching from something and the switching process itself is a barrier you need to overcome. This email should focus on outlining a simple and easy process for making the switch to using software to achieve the problem.

– As mentioned before, everybody is switching from something and the switching process itself is a barrier you need to overcome. This email should focus on outlining a simple and easy process for making the switch to using software to achieve the problem. The tools email – An overview of the tools available to achieve what your product achieves, almost a quick buyers guide. This is the first time you introduce your product and outline why it’s superior to your competition. Include a CTA to signup for your free trial/free plan in this email.

– An overview of the tools available to achieve what your product achieves, almost a quick buyers guide. This is the first time you introduce your product and outline why it’s superior to your competition. Include a CTA to signup for your free trial/free plan in this email. The case study email – A case study on how one of your customers uses your product, what problems it solves for them (tied to the problems outlined in the first email and what benefits it bring them (tied to the benefits outlined in the second email). Include a testimonial from you customer and a CTA to signup for your free trial/free plan in this email.

– A case study on how one of your customers uses your product, what problems it solves for them (tied to the problems outlined in the first email and what benefits it bring them (tied to the benefits outlined in the second email). Include a testimonial from you customer and a CTA to signup for your free trial/free plan in this email. The resources email – The final email. Suggest some other eBooks, blogs, templates, kits, etc for learning more about whatever it is your product does. Include a CTA to signup for your product with a discount code or special offer as if you haven’t converted from the previous emails, a special offer can help tip them over the edge.

Whilst this is just an example campaign, you can see that the focus is on educating prospects rather than making the hard sale. Only once they have been sufficiently educated on the problems of their existing approach and the benefits of replacing it with software do you introduce your product and make an offer, at which point they are much more likely to signup for your free trial/free plan.

Assisted Conversion Path

The assisted conversion path is designed to provide those who require more information a pathway in which to get that information and ultimately convert. In most cases, this is an offer of a free demonstration of your product or in some cases a free evaluation of something (their workflow, their existing marketing, etc) where you can showcase how your product can help them with their specific use case

This path generally has the following stages:

In terms of optimising this conversion path, it is obviously possible to devise and run A/B tests in an attempt to improve the conversion rate but before you start, I would ask yourself whether the volume of demo requests warrants optimisation of this path? Unless you are receiving hundreds of demo requests each month it will likely take months for your tests to reach statistical significance and even if they do the lift in the actual number of demo requests would likely be minimal.

Retargeting Path

In order to capture users who visit and leave the website without progressing through any of the previous paths, it can be effective to implement a retargeting system that serves advertisements to users as they move across other sites on the web.

Considering these people have already visited your site and not converted, it is likely that they are not yet ready to purchase and blasting them with ads right after they leave the site isn’t likely to change that. Instead, use retargeting to promote a top of funnel content offers (like an eBook or an email course) and drive people to landing pages where they can download your content and be entered into the lead nurturing path.

Customer Success

As the example diagrams show, the work of the Growth Engine does not stop once the user has upgraded and become a paying customer, the focus then shifts into making sure sure they become a happy, paying customer.

There is a two-fold focus here; retain paying customers by preventing them from churning and activating your most engaged customers and turning them into evangelists.

Retention

Customer Retention (or Churn) is one the key factors of a successful SaaS business. As per the goals, it is one of they key ways to increase MRR and also has a significant effect on the CAC – LTV ratio, which is another critical success factor tied to the unit economics of your SaaS product.

Consider this example: If you have 10,000 customers with an annual ARPU of $500 and your Churn rate is 15%, you are losing $750,000 worth of potential revenue every year. If you can reduce that Churn rate to 5%, the lost revenue drops to $250,000, netting you an extra $500,000 per year.

I have previously written a post outlining some ways to help reduce churn in your SaaS product, but as an overview:

Implement customer marketing – Using your analytics tool, find out what features of your product are being used by your most engaged, happy customers and build a profile of a ‘happy customer’. Next use the marketing channels available to you (triggered emails, customer focused blogs, support sites, transaction emails, etc.) to promote the use of these features and drive people towards becoming a ‘happy customer’.

– Using your analytics tool, find out what features of your product are being used by your most engaged, happy customers and build a profile of a ‘happy customer’. Next use the marketing channels available to you (triggered emails, customer focused blogs, support sites, transaction emails, etc.) to promote the use of these features and drive people towards becoming a ‘happy customer’. Utilise your pricing structure – Most people look at their pricing structure and try to optimise it to get people to signup or upgrade to a higher plan, but there is also a great opportunity to utilise your pricing structure to reduce churn. I see so many SaaS companies who base their pricing tiers on product usage (# of contacts, # of emails sent, # of projects, etc) and while value based pricing is definitely a smart idea, I would suggest introducing more axes to your pricing structure in order to prevent people from downgrading their plan just because of changes within their business. Is there a feature that people absolutely love and couldn’t do without? How could you structure that feature in your pricing plans to prevent people from downgrading their plan? Worth thinking about.

Referral/Evangelism

Word of mouth and referrals are one of the most powerful customer acquisition channels you can activate, not only because of their ability to scale at a low cost but because of the persuasion ability of a referral from a friend or trusted source.

The idea of activities in the Referral/Evangelism part of the Growth Machine is to activate those customers that love your product and get them to refer others.

There are a number of ways you can do this to great effect but that’s for another post (or an upcoming eBook I’m creating), however here’s a few ideas:

Implement a referral program – A referral program is a methodology that allows your existing customers to share your product with a friend, usually in return for something. There are a number of key factors in a good referral program, including: Two way rewards – When implementing a referral program, you need to make sure there is a reward for both users. Dropbox’s infamous ‘refer a friend and get 2GB of storage free’ is a great example of rewarding the referrer, but you also need to incentivise the referree to take up the offer with something like an extended free trial, free projects, more storage or whatever. Make it easy – Like any process you want users to complete, it is critical you reduce friction through the steps of referral. From my experience, giving people their own unique URL’s to share is the best way to do this as it allows them to share through whatever channels they feel most appropriate (email, Facebook, Twitter, etc) rather than having to try type people’s emails into some dialog box. Optimise for conversions – Each step in the referral process is a potential dropoff point, so make you use all the tricks in the book to optimise conversions along the way. One company doing this really well is Freshbooks, who have created a personalised landing page for every unique referral URL generated that contains all the features of a great landing page, including a clear link to the referring source (Aaron Beashel has invited you to join Freshbooks), a clear value proposition, social proof, on-page signup form & more. Instrument It – Depending on your product and how passionate people are, this can be a huge growth channel for you so make sure you have the ability to optimise it (if you can reach the illusive viral factor = 1 than you are laughing all the way to IPO). Make sure you have instrumented each step of the referral process (number of invites sent, invites converted, subsequent invites sent, etc) so that you can deploy initiatives to optimise the conversion rates at each stage. Depending on your scale, small gains in conversion rates at each of these stages can mean BIG gains in # of customers acquired through the program. Implement channel sales – Whilst probably not traditionally thought of as a ‘referral’ tactic, in my opinion channel sales is a massive opportunity to create a one to many effect if you have the right market. HubSpot initially sold their product direct to customers like most SaaS businesses do, however an idea from a sales representative to implement channel sales changed all that. Initially shut down by CEO Brian Halligan, the employee was persistent and Halligan eventually agreed to let him work on it in his own spare time. He did, and these days 20% of new HubSpot customers now from the channel (which primarily consists of small marketing agencies selling the product and inbound marketing consulting and execution services on top of it). It’s worth thinking about who else is selling products and services to your customer base? And what value could you potentially add to these people’s lives that would make them want to sell your product as well?

– A referral program is a methodology that allows your existing customers to share your product with a friend, usually in return for something. There are a number of key factors in a good referral program, including:

As I mentioned in the introduction to this post, the point was not to provide an in-depth how-to of different growth hacks or marketing initiatives you should be implementing, but to provide a framework for understanding how all these different channels and initiatives all lead to that illusive ‘growth’ and how you can prioritise them based on the things that are going to return the quickest ROI with the least output.

I hope this has helped you achieved that.

I would love to hear your thoughts and feedback in the comments below.