Most new SaaS companies approach marketing and sales like this:
- conduct market research
- identify ideal customers
- develop buyer personas
- target ideal customers with content and ads that are personalized for personas
We took a different approach. Throughout 2016, we targeted many customer types—small businesses and enterprise corporations across a variety of industries and sectors.
During that time, we used our own platform, Ruler Analytics, to collect data on anonymous visitors to our website, visitors who became leads, and leads who became customers.
Toward the end of 2016, we integrated with several other tools to identify our most profitable customer segments.
Instead of starting with buyer personas, we defined our ideal customer after we saw exactly who that was. We used historical data to uncover what customer segments were most likely to buy our service—and most likely to have the highest LTVs.
Then we shifted all of our sales and marketing efforts to focus 100 percent on those segments.
The result: we doubled our 2016 revenue in the first six months of 2017.
Here’s how we did it.
Step 1: Collecting Customer Data
Data is our bread and butter. Naturally, we were focused from day one on collecting as much data as possible about how prospects and customers were interacting with our website, content, and product.
We use our analytics platform to capture data about site visitors: what pages and content they interact with, and what keywords and campaigns drive them to our website. We maintain this data for each anonymous visitor so we have it easily available when those visitors become leads and/or customers.
Once an anonymous visitor becomes a lead—by downloading gated content, requesting a demo, or getting in touch with a question—we pass all of the historical behavior data to our CRM using Zapier (check Zapier pricing). Zapier automatically passes all of the data we have on the lead from Ruler Analytics directly into Pipedrive, our CRM.
This information is helpful for our sales team because it provides more context on the specific features that leads are interested in. For example, if a lead viewed several sales pages on call tracking, we know they’re more interested in our call tracking features than our closed-loop marketing features.
But this is just the first set of data we collect. Next, we use Clearbit’s data-enrichment API to gather many other important pieces of data, such as the name of the company the lead works for and that company’s industry, sector, size, and location.
It was this data that helped us form a strategy for major revenue increases in 2017.
Step 2: Mining Collected Data for Revenue-Driving Insights
Leads are managed in Pipedrive until they convert. Once a prospect converts, all of the data we’ve collected on that customer and his/her organization is transferred to either a Google Sheet or database using another Zapier integration. Data from the Google Sheet and database sync to ChartMogul periodically throughout the day.
It was in ChartMogul that we found our most important revenue-driving insights.
By default, ChartMogul allows you to create data visualizations on important attributes like location, so we can see what countries and cities most of our customers are located in. But we went beyond the default setup and created custom reports that helped us identify important industries and customer segments.
We created custom attributes in ChartMogul that allowed us to segment customers by marketing campaigns, features used in our product, business size, and business sector.
The first two custom attributes showed us which marketing campaigns and product features were generating the most sales. The second two showed us the makeup of our ideal customer.
What we learned surprised us. We discovered we were earning the most revenue from customers in the marketing sector. By far, marketing agencies were purchasing our product more than any other customer type or business sector.
Step 3: Shifting Our Strategy
Prior to learning that marketing agencies were our ideal customers, our marketing and sales communications were focused broadly on companies in many industries, verticals, and segments—anyone in need of website analytics and call tracking platform.
When we discovered that our most profitable customer segment was marketing agencies, we decided to target 100 percent of our marketing efforts on that segment.
What was initially a hypothesis was quickly proven as fact. By focusing our efforts on that segment, our monthly recurring revenue grew 2.5 times more quickly in the following two months, and we ultimately doubled our 2016 revenue within the first six months of 2017.
Step 4: Validating Our Strategy Over Time
Another benefit of our string of data integrations is that ChartMogul integrates directly with Stripe—our payment processor. What this means is that we can track how customers in different segments perform over the entire customer lifecycle. We track new customer payments and account renewals.
This allows us to validate that our strategy is working long-term. That’s important because, ultimately, the most valuable customer segment will be the one that drives the most long-term revenue.
If a segment is high-converting but unlikely to renew after a month or year, it may actually be less profitable than one with fewer conversions but more consistent renewals.
With the final integration with Stripe, we can monitor the impacts of focusing on a single segment over time to continue to validate that the segment is our most profitable.
Actionable tip!Gain an edge in your market. Discover how price anchoring can help you dominate your industry and increase your revenue.
Finding Your Most Profitable Customer Segment
We use a system of tools and integrations to automate data collection and ultimately simplify the process of extracting and visualizing important information.
Each system we use has multiple purposes. Pipedrive isn’t just a repository of lead data. Our sales team actively uses it to manage leads, view historical interactions, track conversions, and collect relevant marketing data before sales calls and demos.
ChartMogul helps us identify important customer segments, but it also helps us visualize which marketing campaigns are generating the most leads and conversions, which ad campaigns are driving the most revenue, and which salespeople are bringing in the most lifetime revenue.
If your business doesn’t need all of these features, replicating our method may not make sense. It may create more complexity than necessary.
What you need will depend, in part, on the size of your business. If your business is small or if you’re just getting started, you may be able to manage this data yourself in a Google Sheet.
Any time you onboard a new customer, add a line to your spreadsheet for the industry, sector, or vertical that customer belongs to. Your sales team should know this information, or you can find it easily by visiting the customer’s website.
Also, record the amount of revenue generated by the conversion. Over time, you’ll be able to monitor trends. Look for sectors that appear repeatedly and overall revenue values that exceed those of other sectors.
Of course, tracking the information manually is prone to error, so another option is to have leads/customers provide the information via a gated content form, demo request form, or checkout process.
Simply have a developer add a “sector” or “industry” selection to the appropriate form, and use your analytics platform’s form tracking capabilities to collect and view sector data.
The sooner you start tracking this information, the sooner you’ll discover your most profitable customer segments, and the more quickly you can begin targeting the customers that will make your SaaS product the most profits.
Using Customer Segments in a Marketing Strategy
Before we discovered that marketing agencies were our most profitable sector, our marketing strategy targeted prospects in many different industries. For example, we commonly targeted e-commerce companies—a sector that’s highly reliant on website analytics—and law firms, a sector that’s highly reliant on call tracking.
After identifying marketing agencies as our most profitable sector, we shifted our entire marketing strategy to focus on that sector.
- Each blog post we publish as part of our content marketing efforts is written for marketers and marketing agencies.
- We added a sales page to our website that’s specifically for agencies. This is our only audience with its own personalized landing page.
- We focused our social media marketing efforts on attracting followers from marketing and advertising agencies.
Focusing our efforts completely on this segment helped us grow more rapidly, but it has also allowed us to have a better relationship with our prospects and customers.
We provide solutions to some of the biggest hurdles in the marketing industry in our content, and we’ve recently launched new product features that are designed to help marketers close the loop between marketing and sales.
All of our content is personalized to our target audience—speaks to that audience’s needs and pain points—and therefore generates more interest and engagement.
At some point in the future, we may decide to step back and target one of the segments we were interested in previously. If the marketing agency business dries up and fails to continue driving new revenue for our business, we could easily shift our marketing strategy, in the same way, to cater to our new target audience.
Actionable tip!Connect your customer segments with the right pricing strategy. Popular options include SaaS value-based pricing and a tiered pricing strategy.
Moving from Buyer Personas to Profitable Customer Segments
It’s not bad to begin a marketing and sales strategy with buyer personas. Before you have any customers, you only have market research to rely on.
But once you start building a customer base for your SaaS product, you no longer need to rely on research and assumptions. You have hard data—real customers—to use to determine who to target for the most profitability.
At Ruler Analytics, our experiment in identifying our most profitable customer segments resulted in many desirable benefits:
- We grew our MRR 2.5 times quicker in the two months following our strategy shift.
- We doubled our 2016 revenue in the first six months of 2017.
- We expect to have tripled our revenue by the end of 2017.
- We did all of this with less stress than before, improving overall team morale.
Growing a business doesn’t require as much guesswork as it did in the past. There’s so much data available today for founders, executives, marketers, and even developers to use to target the right customers, create personalized messaging, and build the most in-demand features.
Neglecting that data and operating on research and assumptions alone is a quick way to build a failed SaaS business. Instead, get started in the right way. Adopt the tools you need to track important data about your first customers and analyze that data frequently to determine which segments result in the most revenue.
And don’t be afraid to take a chance and focus on those profitable sectors with all of your marketing communications. If you’re lucky, you’ll see the kind of success we’ve seen with that approach. If it doesn’t work, find new data and try again until you find the strategy that works the best for your business