It is amazing that small software vendors are spending more than 50% of their revenues on customer acquisition!
A recent survey from TrialPay on software customer acquisition methods shows the discrepancies between marketing costs for small and larger software vendors.
The key takeaways from the survey include:
1) Software companies spend on average 39% of revenues on customer acquisition. This number varies dramatically based on size, with larger companies spending considerably less. Vendors with more than $5M in annual revenue spend about 17% of revenues on customer acquisition, vendors with revenue included between ¢100k and ¢5M spend 15% on customer acquisition while smaller vendors with under $100K in annual revenues are spending 54% of their revenues to acquire customers!
2) SEO and SEM are still he most effective online method for acquiring customers. 29% of companies cite SEO as their top method, with 21% for SEM and 14% for E-mail marketing. 61 % of software vendors plan to increase spending on SEO and SEM, with 45 percent planning to increase e-mail marketing expenditures and 43 percent planning to spend more on PR.
3) Social media marketing is gaining in popularity. 60% plan to increase their investment in this area over the coming years.
4) Use of vendor cross-sell will increase. A quarter of software vendors cross-sell their products in other vendor’s carts today, and that number is expected to grow about 40% in 2011.
5) Product pricing influence customer acquisition costs (CAC). Companies with an average product price of less than $15 spend about 26% of their revenues on customer acquisition. That number almost doubles for companies with an average product price between $19-$30 (54%).
6) Software vendors are looking for new channels to acquire customers at better cost. 50 % sell via online retailers and it will increase to 61 % in 2011.
TrialPay also asked software vendors to describe their most successful customer acquisition campaigns and have selected the top 8 strategies:
1) Use specific keywords to attract people searching for the free version of your software
2) Help customers “steal” your software
3) Think beyond software when trying to reach your core customer segment
4) “Retarget” active prospects
5) Double-down on referral incentive programs
6) Partner with complementary products.
7) Offer a “lite” version & give it away fre
8) Use a long-tail SEO Strategy
We believe at GetApp.com that referral programs are underused by software vendors and specifically by SaaS vendors. Bloggers, consultants, agents, customers, friends, other vendors are a great channel to spread the word about your solutions. By putting in place partners programs with the right incentives and transparent tracking and payment systems, vendors will have an amazing opportunity to scale their business with the right Customer Acquisition Costs.
In fact, we think it will be such a play in the future go to market strategy of the SaaS ecosystem that we have been working at a way to make it easy for vendors to find new distribution channels and for partners to find the programs that will offer them the best incentives to sell to their online or offline audiences.
Stay tuned, more to come in a few weeks but in the meantime, we recommend that you download this free report on software customer acquisition.
