Marketing Strategy for SaaS: The Four R’s

1. Retention: Customers acquired vs. customers lost

Yes, it really is that simple. No, you don’t need to track revenue here. Just the number of new customers that signed up in the month, compared to the number of customers that canceled.

One word of caution, though: this number is easily fudged. If you have a churn problem, and you give your retention reps a bunch of levers to pull to “save” customers, you can end up with a lot of saved-but-worthless customers. If you suspect this may be the case, the answer can be found in the average recurring revenue per customer, under the fourth R.

2. Referrals: Number of referrals, percentage of sales

Want more sales? Got your eyes on a huge prospect? Would you like to reach more qualified, ready-to-buy decision-makers who already believe in your value proposition? How about a lead source with ROI percentage in the thousands?

If you answered “no” to any of these questions, you’re on the wrong website!

At CrewTracks, we attributed nearly 10% of our sales in a year to a single referral partner. Later, that same partner referred one of the largest clients CrewTracks serves to this day. Referrals are your best lead source in terms of qualified decision-makers and positive ROI.

Again, keep it simple. Just two numbers: how many referrals did you receive, and what percentage of your sales is attributed to referrals? Just monitor these two numbers. Last month’s number is the benchmark for this month. No unrealistic goals.

3. ROI: By channel and by specific lead source

This is potentially the most complicated part of the four R’s, but as with all SaaS marketing endeavors, version one is better than version none. Categorize what you can easily, and then chip away at the “other” category a bit at a time.

One word of warning, especially in the SaaS world: do not rely on last-touch attribution.

A brief introduction to first-touch, last-touch, and multi-touch attribution may be necessary here.

Let’s say a prospect who has never heard of you stops by your booth at a trade show. This is their “first touch” with your company, and even if they become a customer years later, first-touch attribution will always go to that first trade show.

After the trade show, the prospect visits your website, clicks on a retargeting ad, follows your TikTok, stops by your booth at a second trade show, and finally requests a demo via a Facebook ad. The demo results in a sale.

Multi-touch attribution gives credit to all of the ways this prospect interacted with your business, while last-touch attribution goes to the Facebook ad.

If you rely on last-touch attribution, this sale would lead you to spend more money on Facebook ads, but how many people are scheduling demos from your Facebook ads if they haven’t met you at a trade show or two?

You can see how ROI by lead source can become endlessly complicated, so here’s a rule of thumb for SaaS marketers: track all the touches you can, but rely on first-touch attribution while you establish the four R’s.

CRM Management Tip:

Use built-in lead source tracking to establish first-touch attribution, and then use tags (or your CRM’s equivalent) to track all touches. The timing of tag applications will allow you to sort out more detailed data later. If you’d like, use a last-touch custom field that you can overwrite every time a new touch is recorded.

4. Revenue: Recurring revenue acquired and churned, and average recurring revenue per customer

Acquired revenue can get a bit sticky in the world of SaaS. For example, if a customer signed a 1-year contract and got a discount by paying for the year upfront, how much “recurring” revenue have you just acquired? To ask the same question in a different way, are you using cash accounting or accrual accounting?

Again, keep it simple. When establishing the four R’s, use annual recurring revenue so you don’t have to worry about the distinction between monthly and yearly payments.

Similarly, when tracking churned revenue, look at actual payments by the canceled customer in the last 12 months – that way you don’t have to worry about the distinction between customers that canceled during their first year and those that canceled later.

If Customer A signed up at $300/month seven months ago and then canceled, the churned ARR is $2,100.

If Customer B signed up at $300/month five years ago and, due to upsells and expansion, has paid $6,000 in the past 12 months, and just canceled, the churned ARR is $6,000.

These numbers aren’t perfect. Customer A is a higher-value customer than their churn attribution suggests. Customer B may have some one-time revenue hiding in there. You don’t care. When establishing the four R’s, use actual money paid over the past 12 months and get more granular later.

Final Note: Wait List is Active

I’m following my own advice and publishing “version one” of this post. I will come back and edit later. At the time of publishing, I’m currently not accepting new retainer clients.

If you would like to implement proven SaaS strategies without me, please take a look at my free playbook. If you’d like to work with me, sign up for the waiting list or purchase a one-time project. For now, the best advice I can offer you is this: drop everything else until you’ve established and begun monitoring the four R’s.