ROI is a vital metric for measuring the digital marketing performance of SaaS companies. It will show you whether your investment is flowing in the right direction.
Learn how to measure SaaS marketing ROI and, more importantly, what to do to increase it instantly. In this article, we will share proven methods that helped other companies significantly grow their return on investment.
What is ROI?
Return on investment (ROI) is a performance measure used to evaluate the profitability or efficiency of an investment. It tries to directly measure the return on a particular investment relative to the investment’s cost. Simply put, ROI shows whether your efforts are paying off.
This is how you can calculate ROI:
ROI = ((Current Value of Investment – Cost of Investment) / Cost of Investment) x 100
You can also see how to put this into practice in this video.
Example: How to measure ROI on digital marketing
According to a “State of Marketing Measurement report”, 82% of marketers say that their executives require all campaigns to be measured. However, less than can evaluate the ROI of each channel effectively. In the case of TV and radio, there is no reliable data, but digital marketing is a different story.
Let’s have a look at an example campaign for the average SaaS company:
- Marketing costs: Marketing staff 4000 USD + Ad spend 2 000 USD = 6 000 USD
- Revenue: Number of sales 127 x Average order value 150 USD = 19 050 USD
This means that the ROI from the campaign is (19 050–6 000) / 6 000 x 100 = 217,5 %
But there are some situations when ROI isn’t the right metric to focus on. For example, if your campaign goal is to raise brand awareness.
Why is ROI important for SaaS companies?
The SaaS sector is becoming more and more saturated. Therefore, marketing is vital in giving companies a fighting chance. In fact, new SaaS businesses spend on average 92 % of their year-one revenue on client acquisition.
That’s a lot of money that needs to flow in the right direction. And that is where ROI comes into play. It tells you what activities are working well and what should be improved or removed.
4 Tips for Higher SaaS ROI
Improving your SaaS ROI is mostly about data. But there are some proven methods that can help you improve your ROI beyond that. Let’s have a look at them.
1. Back up Your Claims with Social Proof
Imagine you’re trying to choose a restaurant. Would you rather go to one filled with satisfied-looking people, or an empty one? Chances are that you’d go for the first one.
Our decisions are consciously or subconsciously influenced by the choices, opinions, and actions of the people around us.
And this applies to everything – not just restaurants, but your company too. Talking about your SaaS benefits is not enough. People will believe your claims only when they’re proven by someone else’s experience. In fact, testimonials alone can increase conversions on sales pages by 34 %!
You can add social proof to your site with:
- Case studies
- Website notifications
Go through your website and ensure that the social proof is visible in several places. Update your testimonials or reviews and think about new case studies you could share.
Website notification as a social proof
2. Find the Right Messages with Voice of Customer Data
Gartner research discovered that companies who implement a “voice of customer” (VOC) strategy generate a 10x greater year-over-year increase in annual company revenue. That’s a huge potential you shouldn’t miss.
In case you’re not sure what Voice of Customer data is, it’s a research strategy aimed to help you discover what your customers think of your business, product, or service. The most common methods used to acquire those customers’ data are surveys, social listening, customer interviews, and focus groups.
Did you know that Apple CEO Tim Cook responds to up to 100 customer service emails daily?
Knowing what customers like and dislike about your brand is the key to growing the whole business. It also helps improve your product or service and find the right marketing message to resonate with your customers. Take their feedback into account when making your business and marketing strategy.
Just make sure that your whole team is in the same boat. Sales and marketing alignment is crucial to keep the business consistent and lead the customers’ journey from the first touch to becoming loyal customers. The efforts and success of both teams, and therefore the business, are intertwined.
3. Promise a Brighter Future with Outcomes-Based Copy
We tend to focus on the features when describing the product or service. But that’s not what will convince your potential client to hit the buy button. What he wants to hear is the outcome that your solution will deliver. How is it going to improve his business?
Tell them what their future will look like after purchasing the product. Be as specific as possible. For example:
- Instead of saying: “No more manual dialing or data entry. Our solution will save your team time.”
- Say: “Boost your sales and convert more leads. No more manual dialing or data entry means an increase in productivity (up to 260 %!)”
Can you hear the difference? The second example discusses the outcome your client desires – increasing productivity and boosting sales.
Review your web texts and see if you can make any improvements based on this marketing method. Show your potential clients a brighter future, and they will get with your SaaS solution.
4. Let them try the product
If there are any doubts left, dispel them by offering a free trial of your product.
It is the best way to showcase what your software has to offer. Just like getting a free ice cream sample, you get to taste the flavor before you commit to a whole cone. If you like it, it’s impossible to resist buying the whole thing.
Giving your prospects an option to try your software in their day-to-day work lives will show them how much it helps. It allows them to make a more informed purchase decision and reduces the fear of a long-term commitment. Offer a free trial in your marketing campaign, and you will see an increase in ROI!
But there are even more benefits to offering a free trial:
- You can get valuable feedback (do you remember the power of the voice of customer data?)
- You will collect email addresses for you marketing campaigns.
- Free trials have the potential to reduce the number of negative reviews you receive.
Don’t forget to follow up quickly when the free trial is about to end so you convert the people into paying clients. You should have an email ready to automatically send out to everybody who finishes their demo or free trial.
Important SaaS marketing metrics
However, calculating the profitability is not always as straightforward as we explained initially. There are several other metrics connected to ROI that you should keep tracking, so you can understand the performance of your activities. Here are the seven most important ones:
Traffic is the number of website visitors. Measure the traffic sources and fluctuation in the number of visitors.
2. Marketing and Sales Qualified Leads
A lead who has indicated an interest in your offer based on marketing efforts. Tracking the number of leads per channel will show you which channels or campaigns are effective in generating new leads.
3. Customer Acquisition Cost (CAC)
The average cost for acquiring a new customer is a good indicator of which marketing channel is the most cost-effective in acquiring new customers.
4. Lead to sale CVR%
The percentage rate at which your leads turn into customers. It is vital to calculate ROI.
The percentage rate at which your customers stop the subscription. If your churn rate is rising, you should put more effort into customer retention.
6. Lead quality
The factors that determine a quality lead. You can define what is a good lead for your business based on their budget, authority to make the purchase, need for the product, and timing (BANT rating).
7. Customer Lifetime Value (CLV)
A measure of the average customers’ revenue generated over their entire relationship with a company.
Data analysis – How to Turn the Numbers to Insights
In marketing for SaaS companies, data is everything. But as much as it’s valuable, it can also be overwhelming. Turning that mounds of numbers into insights is often a big challenge. But it is necessary to drive the right decisions.
The more specific information you can get from your marketing campaigns, the easier it is to use that data for predicting the future. If you see that one of the marketing channels or specific ad message brings exceptional results, try digging deeper to find out WHY.
For example, if your PPC search ad is performing well, you could figure out which keywords you are targeting and use them to create SEO content for your blog. Then you can promote this blog post on social media targeting a similar audience that performed well in the PPC search ad.
So what to do now?
Do you want to get massive SaaS ROI but don’t know where to start? Then data is your solution. We recommend you start with the “voice of customer” data. Collect feedback, so you know how to improve your product or service and find the right marketing message.
None of the other tools will work effectively if you don’t have a perfect product and marketing message your customers love.