How to Reduce SaaS Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is a critical metric for B2B SaaS companies for obvious reasons — more seats sold means more revenue. In general, you can improve CAC in two ways: by growing your number of leads or by improving your conversion rates.

Many founders think Conversion Rate Optimization (CRO) means focusing on Inbound, Top of Funnel actions only, like getting more people to click through to their newsletter sign-up page. But your options for getting more SaaS sales go well beyond that.

In this guide, we're going to talk about improving conversions for both Inbound and Outbound leads, and for every crucial funnel stage.

First, though, you can't convert leads you don't have. So, how do you get more leads?

Inbound Lead Generation

The best lead gen assets a SaaS company can have are 1) a well-built website with strong content and 2) an email list.

It's safe to make these assets the core of your inbound marketing efforts since they belong to you and they can't be taken away, unlike your social media page or YouTube account.

Let's first take a look at boosting your website traffic:

Increase Website Traffic

Driving website traffic is mainly a long-term game due to how search engine rankings and Search Engine Optimization (SEO) works.

Google Ranking Factors

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Content alone is responsible for 25% of the ranking signal pie. Content-dependent factors like keywording and backlinks are together responsible for a further 47%.

Ranking is important because the majority of clicks from Search Engine Results Pages (SERPs) go to the top organic search results:

55% of clicks go to the top three organic results

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This is a characteristic "big head, long tail" graph: the overwhelming majority of clicks go to first-page results, second page mops up the crumbs, and third page and beyond is, figuratively, the best place to bury a body.

The relationship between doing basic SEO well, appearing in SERPs, and getting appropriate, convertible traffic is not as simple and linear as I've made it look here. But if you publish quality, valuable content regularly and tick the basic site structure boxes, you can expect to see steady increases in your traffic over time.

I've seen content strategy, properly implemented, generate 7X more traffic to a site in under a year. By posting "evergreen" blog posts and other content assets, you can continue to generate value for your business long after publication; the most effective blog posts in terms of traffic and leads are often several years old.

Website Optimization

Run your website through Screaming Frog. Their SEO spider is free for sites up to 500 pages and only takes a minute or two.

You'll get at-a-glance comprehension from charts, and detailed spreadsheets you can download or copy and paste into Excel or Google Sheets.

Screaming Frog

Check the reports for:

Page titles
H1 tags
H2 tags
Images
Meta descriptions

Sort out duplicates, titles and tags that are too long or short, and unoptimized images. This is a few hours work for a large site in poor repair, but it's housekeeping-level stuff that will pay off every step of the way from here on out.

If you take a look at your competitors sites, you'll probably see that most people haven't done any of this, so you can score over competition easily.

Next, check out GTmetrix. This site gives you a waterfall report on your site load speed, which is an important Google ranking factor.

For the best ranking, your website should load in 2 seconds or less. You want to see this:

GTmetrix Page Details

If yours takes longer, use GTmetrix to find out what's slowing you down.

The biggest culprits are usually weird inline styling code, something odd in your site's Javascript, or — worst issue by a country mile — giant images that take forever to render.

Use GTmetrix' waterfall graph to identify and fix these issues:

GTmetrix Waterfall

Content is King

These days, content marketing isn't just a game changer. It's practically the whole game. For many SaaS companies, it's possible to build an effective marketing strategy out of nothing but content.

Let's look at how to get the best from your content assets:

Your Blog

A great blog is the engine that powers the traffic to your site. It's a source of fresh content, which Google and other search engines love, and it lets you reach out and be there when prospects hit the search bar to ask, "How do I...?"

Google Game-changing Moments

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Only two of the game-changing moments above really apply to B2B SaaS products: "I want to do..." and "I want to know...", since you'll often be solving a fairly niche, specific business problem. Few people make major business software purchase decisions on their first tilt at Google, so blog content should be aimed at teaching readers the value of your offering and how to use it.

Unlike B2C companies that often have little product differentiation and may not have much opportunity to educate their buyers, your customer journey is going to be longer and involve a lot more information — which is ideal, because you can write that content yourself and profit by it.

It also lets you build a whole funnel out of content, with multiple opportunities to convert along the way. (Don't forget about upsell and growth conversions too.)

The killer example here is Ahrefs, who built their whole company on top of their blog. By educating readers on how to use Ahrefs to do new and innovative things in content marketing and SEO, the blog generated a huge readership who already knew how to use the tool, and why it was good, before they even tried it.

Your YouTube Channel

If you don't have a YouTube channel, it may be because it's a poor fit for your business, or because you're too busy to create and promote content for it. But YouTube is the second-biggest search engine out there, and the first-biggest one gives YouTube results preferential treatment in SERPs. It's also increasingly where people go for step-by-step instructions to solve specific problems. So there's a lot of solid reasons to use YouTube.

Most SaaS companies start their YouTube promotion efforts by posting their product's explainer video. There's nothing wrong with this other than its main value will be on your website; you're not going to get many new leads with it directly from YouTube, especially with so many other SaaS explainer videos vying for the same eyeballs.

If you can, create content for YouTube that explains how to use your product and shows it in real time. This humanizes your brand and gets you in front of your audience in a way that feels much more personal than the written word. More importantly it educates your audience on the value of your product and on how to use it, guiding them toward purchase.

Notion, the "all-in-one workspace," has a ton of functionality but isn't very beginner-friendly. But they have an extensive library of videos that show you under the hood, teaching you how to use their product:

Your Frequently Asked Questions (FAQs)

An underused content marketing powerhouse that doesn't get the love it deserves, FAQs are often tacked onto websites as an afterthought. Too often, as Sales Lion's Marcus Sheridan says, a company "lists 5-15 (average) of their most frequently asked questions and immediately, under each, they list a 2-3 sentence answer...and usually not a good answer at that."

However, they should be treated as what they are: evergreen content that exactly match search queries. This is exactly the kind of thing users and Google love.

Here's how to nail FAQs:

One Question Per Page

"How do I integrate product.io with Hubspot CRM?" is one query, so it should get it's own page. That tells Google that the page is specific to that query and makes it more likely to serve the page in response. If you have a web page with answers to 25 questions on it, that page is only 4% relevant to "How do I integrate..." Consequently, Google is less likely to serve it.

Answer the Question Completely

Make the most clear and complete answer you can, linking out to other resources where appropriate. The more complete the answer to the question, the more likely the reader will implement it by referring to your FAQ page for guidance, thus increasing your time on page stats and making you rank better. You'll also please both your users and your prospects by becoming a reliable source of useful information.

Answer the Questions Your Customers Care About

Quantifying what makes an answer "good" is tough. But for our purposes, ask yourself "Would it satisfy my customers?" If you're not sure what that entails, it's worth asking your customers directly.

To do this, consider bundling requests for feedback with support tickets or adding a "Did this answer your question?" form to your extant FAQs and knowledge base. It's also worth looking on social sites like Reddit or Quora to see what questions get asked about your product or your space, and which answers are most well-regarded.

Look for Unconventional Channels

Most SaaS companies market the same way and get the same results, but there's value in looking off the beaten track to identify opportunities.

For example, when PayPal was starting out in 2004, they needed a new customer base. They already had eBay, but the company needed new customers to grow and their marketing plan called for "off-eBay volume."

PayPal sought to meet their prospects as close to purchase as possible to minimize cost lost to lead acquisition and nurturing. So they focused on something that few would think of as a marketing channel: web hosting companies.

At the time, web hosting companies were increasingly selling webspace, website builders, and marketing tools to eCommerce entrepreneurs. After buying hosting, CMS, plugins, and more, the thoughts of entrepreneurs naturally turned to payment.

PayPal arranged to have web hosting companies offer PayPal as a payment option to their customers on their new eCommerce websites. This was a win-win for both parties; Hosting companies could offer a more comprehensive service to their customers, and entrepreneurs could take rapid, secure payments — at a time when the alternative required extensive coding and explaining to a bank what "eCommerce" is. For many years onward, PayPal derived a significant proportion of its income from the channel.

Clearly, successful marketing doesn't always have to look like marketing. Look for similar innovative approaches within your niche.

Outbound Lead Generation

Cold Email and Cold Calls

There's more to lead generation than the inbound game. Inbound leads are usually cheaper and worth more than outbound, but that's changing as outbound becomes more tightly controlled and data-driven.

The days when a cold call consisted of getting a CEO in the five minutes between meetings so you could mispronounce her name are, thankfully, over. Cold calls and cold emails don't have to be "cold"; a few simple templating tricks can skyrocket their efficacy.

The difficulty with this approach is that a data-driven methodology requires large data sets, extensive processing power, and no small amount of money — something that might fit some startups post series A. While it does have the potential to drive massive growth, it won't suit fledgling SaaS companies.

Instead, what works without additional investment is leveraging your personal networks to create outreach opportunities that aren't cold. While at the time of writing opportunities for personal interaction are limited by pandemic restrictions, founders should be handing off potential contacts to marketing for email or LinkedIn contact and making every effort to grow their networks.

Conversion Rate Optimization (CRO)

Top of Funnel Optimization

Conversion optimization on websites gets a lot of attention, mostly because of the dramatic improvements in conversions it can generate when done right. This typically excites marketing more than sales people because of the stage of customer journey where it usually occurs.

Generally speaking, the more customer data you have, the further down the funnel you can target Conversion Rate Optimization (CRO) and the more effect improvements have on your customer numbers and bottom line.

Without any data at all, there are some basic rules you can follow to increase the likelihood of conversions on your website:

Conversion Element Design

Most elements on a web page are styled to make the website easy to navigate. By contrast, conversion elements are there to sell — sign-ups, free trials, content downloads, and so on. If people are looking for these elements, make them easy to find. That means large, conspicuous and brightly colored.

Mailchimp Landing Page

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Take a look at that screenshot and it's instantly obvious where you're supposed to click. That's what you want.

Make your conversion buttons buttons, not text or something experimental. Keep it simple and make them rectangular buttons, with or without rounded corners.

Make their text represent a desirable outcome like "Get started" or "Get your 100 free leads now" and not an instruction like "Click here". This is one of the most important pieces of copy on your website and you don't have a lot of words to play with; give it some attention.

Build a single button into your landing page, and several conversion elements as highlighted text into blog posts and content assets.

For color, choose something that both stands out against, and harmonizes with, the general color scheme of your site. Try a tool like Cohesive Colors to match you with a good color choice for your buttons; BrandColors shows you how others approach color selection to give you some ideas.

Mid-Funnel Optimization

What about optimizing further down the funnel? Are you "CROing" your newsletter recipients with the same fervour and attention to detail as you are your website visitors? If you are, congratulations, because most folks aren't.

You don't have to run a 3 million dollar tech newsletter. And you may not be big enough to get much benefit from segmented emails — there's not much point trying to segment content from a weekly email when you publish once a week. But you can target your content and your newsletter to prospects who match your Ideal Customer Profile (ICP) and optimize for opens and clickthroughs from that cohort right now. Much of this depends on integration between technical marketing choices and content strategy, and content / customer fit needs to lead the way.

Take Advantage of Data

Growing traffic without checking whether it's possible to convert it could leave you paying too much. So segment your traffic by its conversion rate, then prioritize the campaigns, channels, and methods that deliver that traffic.

We've talked about this before, so I'll keep this section short: a lot of SaaS companies are attracting traffic indiscriminately and then trying to A/B test and optimize their way to profitability on an incoherent, uninterested audience.

Here are three fairly simple ways to diagnose if you're doing that:

Diagnostic 1: Google Analytics returning visitors report

You'll find this in Google Analytics under Audience > Behavior > New vs Returning:

Google Analytics Returning Visitors Report

The stats in the screenshot above are strongly skewed to new visitors that aren't spending a lot of time on site.

New visitors who leave soon after arriving either got the answer to one simple question and left, or came to your website by mistake. If you're creating the standard 500-word B2B SaaS blog posts and seeing 1.5 minute average time on site, people are either not reading your posts or your audience is made up of speed readers.

In the example above, you can see that the returning visitors are spending about four times longer on the site, bouncing less, and visiting more pages. These are your real audience. The others are passers-bys leaning through the open door of your site, then walking on. You can't nurture these visitors because they're not actually leads.

Diagnostic 2: Your conversion rate is around the industry standard

Industry standard conversion rates are poor — benchmark visitor to lead conversion rate is around 2.35%, and benchmark free trial to paid customer rate is around 25%.

If your initial visitor-lead conversion rate is around the industry average, then the chances are good that your traffic targeting is average too, meaning much of your traffic is never going to convert (probably around 80% to 90%).

If you're targeting the right traffic to begin with your conversion rate should be much higher. That's because, if 94% of your traffic isn't ever going to convert, your real conversion rate already is higher.

Diagnostic 3: Your traffic data doesn't match your ICP

If your traffic all comes from India and South America but your ideal customers are Japanese startups, you're attracting the wrong traffic. If your visitors are all on mobile but you're a desktop-centric app, you may be targeting the wrong traffic.

Look in your analytics for firmographic, demographic, and geographic data, then compare it with your ICP. You should be following a constant process of testing traffic data against the goals they're meant to fulfill.

Always ask yourself:

Does the traffic I'm getting look like traffic that has converted to free trial users before?
Does the traffic I'm getting look like traffic that has converted to paid accounts before?
Does the traffic I'm getting look like traffic that has converted to premium paid accounts and/or to long-term customers?

The more you can match these up the more you can target the right people from the get-go and make your funnel cleaner and more efficient.