By nature, SaaS marketing pro Peter Cohen is not a contrarian for the sake of being one. He doesn’t stand on a soapbox, and he doesn’t shout controversial business viewpoints and wait for the masses to work themselves into a furor.
So, when Cohen wrote a post on his blog in July with the headline, “When Lead Generation is a Bad Thing,” he wasn’t doing it simply to bring attention to himself or his consulting business, SaaS Marketing Strategy Advisors. He did it to help SaaS organizations improve an activity that is vitally important to their business — not to discredit SaaS lead generation entirely. The simple fact, Cohen points out, is that there’s no secret formula that will magically spawn SaaS lead generation success. And, despite popular opinion in the SaaS marketing world, SaaS lead generation can in fact be a bad thing if it’s not executed, managed, and monitored properly.
Cohen recently sat down with OpenView to talk about where SaaS companies often go wrong with lead generation, how they can improve it, and what SaaS sales and marketing organizations should really be doing to improve their sales pipelines.
In your blog post, you suggest that SaaS lead generation isn’t always a productive exercise and that, in some circumstances, it can cost companies more money than it makes them. What’s the essence of your argument?
I know that seems like an extreme point-of-view, but my main argument was that leads aren’t valuable just because they have a name and contact information associated with them. If leads are unqualified — in other words, they don’t really have a need for your service — then they are worthless. And putting those kinds of low quality leads into a funnel creates the kind of sales and marketing inefficiency that can kill a SaaS organization.
In other words, effective lead generation has nothing to do with quantity if the quality isn’t there. If you’re generating 1,000 leads and all of them have a direct need for your product or service, then lead generation can be hugely valuable. If your marketing team is simply dumping large quantities of leads into the top of the funnel for the sake of their quota or to validate their purpose, then SaaS lead generation will ultimately be a distraction, a hindrance, and a significant waste of precious marketing dollars.
I also think SaaS companies need to look at the size and scope of their target markets before they engage in lead generation. If their market or product is niche and there are a very limited number of prospects they can target, then executing a massive lead generation campaign is a waste of time. If, on the other hand, your SaaS application could be sold to hundreds of thousands of small businesses or a wide-range of customer segments, then broad-based lead generation might make sense.
In general, my contention is that SaaS companies need to pay particular attention to how they spend their sales and marketing resources, because they don’t often have the big upfront license fees that will cover initial customer acquisition costs. That’s why I think executing lead generation just for the sake of doing it is a bad idea. If a SaaS company doesn’t have the team or structure in place to properly execute lead generation, or if it isn’t applicable to their audience, then the company is probably spending money on leads that it will never get back.
What are some indicators that SaaS lead generation is broken, or that the leads being generated are hurting more than helping?
All companies, particularly SaaS companies, should have a dashboard in place that reveals the yield on their leads. There’s no exact benchmark number that works for every market or company, but customer acquisition cost and lifetime value are generally very important metrics to monitor. If you notice that your leads are costing you more than the business they’re bringing in, you’ll know that something is broken.
Another indicator of SaaS lead generation failure is negative feedback relative to lead quality from the sales team. For instance, if your salespeople are repeatedly telling you that the leads they’re receiving are worthless, then that’s a sure sign that you either have a sales and marketing alignment issue, or a wasteful lead gen program. The bottom line is that if your salespeople have no confidence in the leads that the marketing team is sending them, then they’re not likely to follow-up on them. And if that’s the case, the money you’ve invested in generating those leads is going right down the drain.
How should SaaS marketers be monitoring the health of their lead gen process, and why is it important to ensure that it’s working in conjunction with their lead qualifying and nurturing systems?
To start, I think it’s very important that SaaS companies look at the customer acquisition process end-to-end, rather than one piece at a time. In other words, don’t look at SaaS lead generation as a top-of-the-funnel activity that’s totally separate from the nurturing, closing, onboarding, and retention part of SaaS sales and marketing.
From there, companies should establish metrics that allow them to assess the effect their lead generation pipeline has on the entire customer acquisition process. They should be able to measure yield during each step and analyze how well leads are converting to qualified opportunities, and how well those opportunities are converting to customers. By doing that, a company can identify gaps or bottlenecks that might be impeding the entire process and fix them before they get worse.
When a SaaS company is struggling to get new customers, the tendency is often to ramp up lead generation and throw more leads into the top of the funnel. That might be a temporary fix, but it’s like putting a Band-Aid on a gaping wound. At the end of the day, SaaS companies have to be far more careful about how they spend their sales and marketing dollars than other software companies. And if they’re not paying attention to things like customer retention, churn, and renewals — the things that on-premise software companies don’t need to worry about — then no amount of lead generation is going to fix their problems.
Peter Cohen is the founder and managing partner of SaaS Marketing Strategy Advisors, a consultancy that helps companies better identify their audience, articulate their value proposition, and establish processes that will cost-effectively build visibility, generate and nurture leads, and accelerate sales. Cohen has more than 25 years of experience developing successful customer acquisition strategies for SaaS companies like Constant Contact, Buildium, and Progress Software.