What’s the Lead Generation Profile of Fast Growing SaaS?
In November 2016 we held a two days #SaaSCamp during which we organised many workshops on topics ranging from product, finance, HR, sales and marketing.
One of the topics that was frequently requested by our portfolio companies is lead generation. Lead generation is a hot topic for many SaaS startups as they are, for most of them, never satisfied with their results and always trying to find ways to generate more leads.
So we decided to interview startups from our portfolio (and several from outside for a total of 20 companies) to create their lead generation profile and see if there was some interesting insights to draw from it.
One very interesting learning is that, when it comes to the fastest growing SaaS companies, 3 lead generation profiles emerged:
What’s important to understand here is that I’ve depicted “patterns” on the diagram above:
- The numbers are not exact numbers.
- Social Media, Software Marketplaces, Retargeting, Affiliation etc… do bring leads but in most cases they only account for 0–2% of new monthly leads and were never cited as “main lead gen channel”.
Several people asked me why the channels #2 and #3 were =>
It’s actually not a typo but the only way I found to say that channels #2 and #3 could be any combination of these 3 channels:
- Inbound marketing at #2 and SEM at #3
- SEM at #2 and Inbound Marketing at #3
- Growth Hacking at #2 and Inbound at #3
I know it might be a bit confusing so if you have an idea on how to better visualize it please tell me @clemnt.
1- You recognise a “SaaS rocket ship” to the volume of organic leads it generates
When you look at the 3 profiles above you notice that the channel from where most of the leads seems to come is the “organic — direct” channel.
Why is that?
The reason is that most of the fastest growing SaaS interviewed had a viral coefficient k well above 0.
I won’t come back in details on the concept of growth loops, you can read this article for a great overview, but basically for every acquisition tactic that you use you can calculate how much newly acquired users contribute to the acquisition of the next cohort of users.
Some acquisition tactics can be really viral (for SaaS standard). For instance the “powered by tactic” can lead to a k > 0.4, meaning that every 10 users acquired will generate 4 extras users. Some channels are inherently less “viral”, like Google Adwords that has a typical k factor between 0 and 0.2.
And very often when your viral coeff is high for a specific acquisition channel it deeply impacts the “Organic-direct” channel. Here are some examples of this phenomenon:
- “Powered by Tactic”: Every time a person fills a TypeForm form created by an existing user this visitor will see a “Powered By Typeform” link. A fraction of these visitors will click on it and arrive on the homepage where some will register. Plenty of the fastest growing SaaS use this tactic (TalkDesk, Algolia, Intercom etc…).
- Inbound Marketing: you write such a great content that plenty of people backlink to your website which leads to a better SEO ranking and more users acquired via organic search and brand awareness.
- Product word of mouth: people like so much your product that they share it with their friends or colleagues, on social media etc… For example EmailHunter measure their product word of mouth through inbound links (people writing about them and linking to their product) as well as their direct traffic coming from email clients.
There are three important aspects I want to emphasis:
- Your product is crucial to get a great K coeff.
- Lead generation channels are only amplifiers. This is why very often SEM, Inbound Marketing, Growth Hacking… (combined to a great product) contribute to the “organic-direct” channel.
- This is why you shouldn’t look at “direct signups” only. E.g Inbound Marketing can improve your SEO tremendously if it generates backlinks (or is the foundation of your brand) which is underestimated if you only look at the “content to product” direct conversion. Buffer is a great example of that.
2- Two to Three main channels seems like the magic numbers
In all cases a maximum of 2–3 channels generated +90% of the monthly new leads.
I didn’t encounter any startup with 10 different channels contributing each to 10% of their overall lead generation effort.
I think there are two reasons behind that:
- First it takes a long time master any lead generation channel. Most people told us it takes around 12 months to see consistent results (and not only “spikes”) with any channel. As a consequence it’s very hard to be strong on many of them at the same time.
- Second if you look at the list of channels above you’ll notice that only a handful really work as “main channels” (paid acquisition like SEM, Inbound Marketing and Growth Hacking). The other channels are good complementary channels but scaling purely with Twitter ads or emailing is very complicated.
3- Implications if you are not (yet) a fast growing SaaS:
- If you have a viral coefficient k = 0, you cannot generate new users from acquired users, first fix your product (or fix your users).
- The “spray and pray” tactic has its limits. It’s great to “experiment” with acquisition channels when your are an early stage SaaS but be aware that testing SEM for 6 months is not enough and that you’ll need to focus on 1–2 channels max at one point. It means time, people and cash investments.