SaaS METRIC OF THE WEEK: CAC!
Understanding customer acquisition cost can help create, measure, and improve a growth strategy that can put a business on the path to profitability. Here is a deep dive into the whys, the whats, and hows of CAC.
Top 10 in Tech - What to know for Week ending April 16, 2021
MARKETPLACES
2020 was a bit of a gut punch for many marketplace categories, I even (very optimistically) in a pre-covid newslettermused what marketplace consolidation will occur in the upcoming year. Little did I know! a16z have just updated their Marketplace 100 and guess what? Consolidation was very much a thing: last year, four startups accounted for 76 % of consumer spending. This year more than 70 % of Market Value can be attributed to just one company (Instacart is the Covid winner) and 10% of companies from last year went public or were acquired. Ed Tech is also the newest category winner.
VENTURE CAPITAL
BOOM! Investments to US-based companies surged to a record high of $62 Billion in Q1 21 according to the PwC and CB Insights Q1 2021 MoneyTree Headline report (that's up 62% from Q4 of last year) - to put this into context, it's almost half of all money raised last year (and 2020 was a historical high). Deal activity is also up 14% YoY (1,735 deals) - great sign, unless you are looking for Seed $$'s, as deal activity is up in all stages except seed (which is down in comparison to Q4 of last year)
PRODUCT MARKETING
Marketing is a very broad practice, see here for a list of the separate marketing functions that can exist. So here is a very helpful dive into Product Marketingand specifically what the roles and responsibilities are of a Product Marketing Manager.
PERSONALIZATION
Did you know that marketing personalization can reduce acquisition costs as much as 50% and 87% of companies see a lift in key growth metrics when they employ personalization? SaaS marketers have been leveraging personalization to increase conversion rates, improve customer success, and increase the quality of sales/marketing funnels for some time so here is a great article from Chart Mogulon the (modern-day) personalization fundamentals.
DEATH TO EMAIL
Just kidding. Email is a long way from going bye-bye, we spend, on average, over 3 hours a day using it, so don't rush out to delete your inbox just yet. Communication platform companies have been making this death-to-email statement for years though - looking at you Yammer. The irony is not lost as I'm sure many of you are suffering from intense Slack/Zoom/Teams fatigue. But guess what? These platforms are absolutely not going anywhere. A new (VERY Slack-centric) report from Slack shows the impact and importance of collaboration platforms in our new post-pandemic workplace environments: 40% of meetings can be replaced, 95% of Slack users say they prefer Slack to video calls when connecting with their team, and 100% of Slack users want to keep using Slack even after the pandemic!
RENEWALS
Existing customers are the lifeblood of growth in a SaaS business, so making sure they renew is an exercise in revenue efficiency. New customer acquisition costs about $1.10+ per $1 of ARR). Compare that to the cost of retaining or up-selling existing customers (about 12c-15c per $1 of ARR) - that’s 8 times cheaper. So take a peep at this article that not only lists 5 SaaS Renewal Best Practices but also explains how best to go about calculating renewal rates.
COMMISSIONS
How do you pay out your different sales channels? Commission levels of sales are pretty stable across sale types at about 10-14%. Commissions on renewals are only 3% and upsell is 9% - however about 50% of the time, this is not paid at all. (Bringing up another subject on how much revenue a Customer Service Managercan manage).
CSM ATTRIBUTION
This is an extension of the last link above: How do you account for, or budget the cost, of a Customer Sucess team? The team at Gainsight dives deep into this question and comes up with some fantastic insight - even though the question itself is complicated and the answers end up being more non-monetary than you would probably like. Owning the renewal, up-sell, cross-sell are key delineation points between expense attribution across different departments who CSM teams may sit under.
CASE STUDY
Dropbox! I've been a big Dropbox user since inception - I was an early birder! As were they to Product Lead Growth strategies - they have a legendary story of 3900% growth in just 15 months! Just mind-boggling. Check out how they made all that happen.