The top 2 strategies SaaS startups need to win in 2022
Less land, more expand.
Happy New Year and welcome to the first issue of The Revenue Architect for 2022. If you’re a regular reader finding the content thought-provoking, please share it with your colleagues! And if you’re landing here for the first time, trust me its worth subscribing!
With the explosion of SaaS companies over the last few years—there are now 25,000 of them in Crunchbase—competition has never been fiercer, both for customers and for talent.
Succeeding in this highly competitive environment comes down to doing two things differently:
A greater emphasis on growth from existing customers.
A more sophisticated approach to targeting new customers.
These are the two strategies that need to be top of mind for GTM leaders this year in order to continue to grow. Let’s look at each of them in more detail.
A greater emphasis on growth from existing customers
Given the choice between generating an incremental $25k ARR from a new customer vs an existing customer, most leaders would agree that the existing customer is easier, faster and cheaper to sell to.
It’s easier because you’ve already established a relationship with the customer. It’s faster because you have established credibility and it’s cheaper because you don’t incur any marketing costs (and often pay lower sales commission).
However, the SaaS industry has long been infatuated with driving growth from new logos. We see this in the numbers; most of the sales and marketing expense in a SaaS company is spent on customer acquisition, with customer retention and growth usually an area of under-investment—even though its where most of the profit lies.
Part of this is down to legacy behavior; people go from job to job taking the same practices with them without thinking whether they still make sense. Its easy to fall into the trap of replicating your old playbook, especially if you got hired based on your past experience.
Part of this is also down to investor pressure; whether they say it explicitly or not, VCs want you to go big or go home as quickly as possible so that they can consolidate their time and money into their winners. “Hire more salespeople, spend more on marketing, go go go!”
But GTM teams have started to change. The era of customer success as a reactive customer support function is over. Companies can no longer wait around for their customers to have issues as its too late. They will simply switch vendors. My friends in the hyper-competitive adtech industry know this only too well.
The era of customer success as a proactive account management function is here to stay. Companies need to show their customers that they are getting the impact they were promised during the sale. Not just once, not just 3 months before the renewal, but on an ongoing basis from the moment they become a customer.
A customer who sees their initial impact during the onboarding process is more likely to feel good about making the purchase. This is especially true for exec sponsors, who tend to get involved in the latter stages of the buying process and then bask in the glory of the initial success. This is why your onboarding process should end with an exec review of the initial impact, not with simply training end users.
A customer who sees recurring impact is more likely to give you the context for how you are impacting their overall business. This is critical for developing your messaging and positioning because the way your current customers describe the benefits of using your product to you is the way you should describe them to your future customers. The way an exec sponsor describes the impact may differ from the way a frontline manager or individual contributor describes what matters to them. This is why your customer journey needs to have regular impact reviews with all your stakeholders.
A customer who sees recurring impact is of course less likely to churn but more importantly is more likely to ask, “what else can we do together?”. This is why demonstrating recurring impact is the key to unlocking growth from existing customers. I’ve experienced this so many times as both a buyer and seller. Nobody wants to add another vendor if they don’t have to. It’s a hassle to get them approved and then another hassle to manage them. But the only way to predictably earn the right to have that growth conversation is to demonstrate recurring impact.
A more sophisticated approach to targeting new customers
Given the choice between calling on more companies vs calling on more people at fewer companies, most SaaS companies lean towards the former. It’s easier. But it doesn’t actually make sense anymore.
Martech may have made it easier than ever to spam the shit out of outbound your prospects at scale, but response rates continue to hit new lows every year. Throw in the escalating costs of talent and the only growth that is guaranteed is in the cost of customer acquisition.
The era of quantity is finally over. Companies can no longer define their customer profile based on the lowest common denominator in ZoomInfo, pull a list of 10,000 businesses and contacts, upload them into Salesforce, fire up out Outreach and expect the inbox to fill up. Every one of those 10,000 contacts is already getting dozens of pitches a week.
The era of quality is here to stay. Companies need to identify their sweet spot, focus on it and ignore the margins.
Finding your sweet spot starts with analyzing your existing customers to understand who they are. A great way to kick this off to pull a report of your last 100 wins and losses and append firmographic data to them. You’ll quickly find the profile of company where you have the highest and lowest deal flow and win rate. If you haven’t done this I guarantee it will become apparent where your sweet spot is and where the margins are.
Focusing on your sweet spot comes down to understanding the people inside the companies, the problems they have, the impact they are looking for and communicating to them how they will achieve that impact from working with you.
The fastest way to understand the people, problems and impact is through structured deal reviews. Take 20 recent wins and losses and ask the salesperson on each deal who they met with, what role they had, what problems they had, what impact they were looking for and who else was involved in the decision process. You’ll soon start to see the common threads.
When it comes down to communicating how a prospect will achieve the impact they are looking for, you have to take a customer-centric approach, which in turn requires some thoughtfulness to make it relevant.
Many sales leaders push back on doing thoughtful. “It sounds great in theory but in practice it’s too time consuming and we can’t train reps to do it”. After all, to be relevant we have to do hours of research, right? Wrong.
The #1 way to make messaging relevant is to build it around unique insights that join the dots between using your product and achieving a business outcome. The reason this works is because your prospect can’t help but react to them. These unique insights will come from the data you are collecting as your existing customers use your product. And the way you describe them will come from the way your existing customers describe the impact they are achieving from using your product. This is why the proactive account management approach described earlier is so important.
Ignoring the margins means not getting distracted by the unexpected. Yes I know its hard—show me a CEO who doesn’t get distracted by an outlier deal and I’ll make a donation to your charity of choice—but if you do the work to identify your sweet spot and build the processes to focus on it, it will be easier to stay aligned.
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