The How SaaS Works series simplifies the complex world of software-as-a-service (SaaS) into the practical fundamentals for anyone involved in SaaS. These are the real-world lessons learned from founding a SaaS company from ground zero to growing it all the way to acquisition as well as case studies from other SaaS companies who have both succeeded and failed.

Introduction to Lead Generation

The lead generation component of the SaaS engine is analogous to gasoline in an internal combustion engine. This is the fuel that gives our engine the energy to run. Sales engines exist to convert leads into revenue. To convert those leads, we first have to generate them. Welcome to the top of our SaaS sales funnel. Every other component in the SaaS engine can be built to perfection but will sputter and starve if we cannot generate enough leads to feed the engine.

What is a SaaS lead?

A lead is a prospective user, someone who may be a candidate for our service, that we have some way to communicate with. That communication may be either one-way or two-way. Different companies have different criteria for what they consider to be a lead for their particular product.

Examples of a lead include:

• an email address collected from a landing page.
• a visitor to our website.
• a person who reads our blog post.
• a person who signs up for a trial of our service.
• a person we are introduced to at an industry meetup.
• a business card we collect at a conference.
• a person who clicks on our Facebook ad.
• a customer who purchases a hardware product that our company sells.

The Most Important Aspects of Lead Generation

Lead generation must deliver in both quality and quantity of leads. If the top of our sales funnel delivers poor quality leads, conversion rates down the funnel suffer and the engine stalls. This would be analogous to bad gas in our car (imagine putting diesel into your gasoline engine). For example, getting a list of soccer parents when we have built a swim team management tool does not make sense; neither does targeting ads to Fortune 500 when we only sell into SMB. Low quality leads waste our team’s energy as we spend invaluable time chasing leads that never convert.

If the top of our sales funnel delivers a low number of leads, we cannot feed our sales team, and our business starves. This would be analogous to running out of gas in our car … on the interstate … during rush hour … with a crying baby in the backseat.

We need to generate both lead quality and lead quantity to succeed.

How Do Great SaaS Companies Generate Leads?

Today’s best SaaS companies heavily leverage one or more of the following to generate leads:

• Content marketing (aka inbound marketing) — Create content your ideal target customer is searching for that pulls them into a call-to-action.
• Search engine optimization (SEO) — Optimize your website and content for specific, high-value search keywords.
• Outbound ads+landing pages — Run targeted ads to your ideal target customer that directs them to a landing page with a call-to-action.
• Conferences / meetings — Go where your ideal target customer physically is and talk to them.
• Partnership / sponsorships — Pair your service with another related offering (e.g. free trial of service with purchase of Acme Flux Capacitor).
• Network effect / virality / word of mouth — Incentivize your users to talk about your service (e.g. share on social media, refer-a-friend).
• Unfair competitive advantage — Leverage something you have that your competitors do not (e.g. a large existing customer base, Elon Musk’s endorsement).

Why isn’t email marketing on your list of great ways to generate leads?

Email marketing used to be considered one of the best ways to generate B2B leads across all industries. In fact, a Hubspot survey in 2013 ranked email marketing as one of the most consistent lead generation performers across different demographics and business sizes. Fast forward to today, and you don’t see this tactic successfully used as much to drum up brand new leads. Think about how many times you responded to a cold email outreach in the last month (my personal count is adding up to zero, although there is a Prince in my inbox who wants to send me $2.5M). Email marketing still plays an important role in most SaaS businesses but has shifted away from generating new leads to nurturing existing leads and customers. Do not confuse lead generation with lead nurturing. Someone who has expressed an interest in your business is far more likely to read and respond to your email than someone cold.

What Else Does Not Work Well for Lead Generation?

Since we just talked about one common lead generation tactic that does not yield lead quality or quantity, let’s go through some others:

• Spam — Spamming every LinkedIN group and sending mass cold emails rarely results in quality leads and may end up damaging your company’s reputation. Don’t do it.
• Buying Lists — Marketers typically buy lists of “leads” so they can spam that list. Lazy lead generation typically leads to poor results.
• Build it and they will come — The “Field of Dreams” is just that, a dream. There is too much noise you have to rise above to be passive. You need a real lead generation strategy because your competitors already have one.
• Tweet and they will come — Social media has the potential to generate quality leads but rarely does in practice and ends up being ranked as one of the least effective methods of B2B lead generation. Lots of noise in social media to rise above. Don’t rely on it.

The Data Behind the Tactics

Be wary of information presented without being backed by data and/or examples. Luckily, we live in the age of data driven marketing, which means there is plenty of data on lead generation efficacy to study.

A consumer survey on inbound vs outbound marketing efficacy by Moz back in 2015 provides insights on consumer purchasing behavior which supports the evolution of today’s SaaS lead generation tactics. (*side note: the survey and blog post linked above is a great example of Moz’s own content marketing strategy, driving traffic to their site.) From the survey:

“More than 88% use online search to seek out more information about a company, and greater than 93% had done so within a week’s time.”

Compare that to “53.8% of respondents have not clicked on any ads within a week of being surveyed”. This survey tells us that both SEO and ads work in generating leads, but SEO works significantly better if you can get it. What is a good way to get higher SEO? Great content, which is why content marketing is so hot in SaaS today.

The 2015 Moz survey foreshadowed the decline of email marketing for new lead generation — “44% of respondents slightly less likely (22.9%) or significantly less likely (21.4%) to buy something they hear about via email marketing.” Anything that tarnishes our brand is the opposite of what we want to happen in marketing.

Even in 2015, social media posts and press releases were shown to be mostly “meh” (aka neutral) for consumers. They just do not help that much in terms of attracting new product users.

The annual B2B Content Marketing Benchmarks, Budgets, and Trends report (2019) focuses on B2B insights. The 2015 report ranked the most effective B2B lead generation tactic as in-person events followed by a variety of content methods. That particular ranked list fell off of their reports in subsequent years, but it is safe to say that in-person events are still quite effective in generating quality leads. In 2018, 91% of B2B respondents attempt to utilize content marketing. The top applications of content marketing were lead generation and brand awareness (no surprise).

Generating Leads Ain’t Easy

What is the top marketing challenge for today’s company’s? Hubspot’s 2019 marketing statistics report ranks “Generating Traffic and Leads” as the #1 marketing challenge by a large margin (63% of respondents vs 40% for #2).

Generating quality leads in large enough quantities for a new SaaS product is straight up hard unless you have some kind of unfair competitive advantage. Content marketing + SEO rank as the top methods utilized by today’s most successful SaaS companies. Creating content your ideal customer target is searching AND getting SEO on that content hits high on the difficulty meter. If you want quality leads from content marketing, you need equally great content paired with a solid SEO/distribution strategy.

Everyone wants their product to go viral where a user begets a user (repeat). Way too many SaaS startups bet the farm on getting virality and lost that long-shot bet in spectacular fashion. It can happen, but don’t rely on it. Virality often proves to be too fragile and short-lived to be your only strategy. You need a sustainable plan for lead generation. You won’t find “going viral” ranked as a common primary strategy of successful SaaS companies in any respectable data report.

Lead generation can be considered both an art and a science. Every successful company has a unique lead generation formula. The product, price point, market, ideal customer target, and world around us play into lead generation strategies. There exists no “one size fits all” solution, which is why lead generation is partly an art. Once a strategy is put in motion, the output and effect of lead generation on the rest of the SaaS engine can be methodically observed. How the changes and tweaks affect the key performance indicators (KPIs) can be easily measured. This is why lead generation is partly a science.

There are always extremely interesting examples to study and exceptions to the rule. Let’s start with some interesting content marketing case studies.

Up Next … Content Marketing Case Studies from Hubspot, Initial State, and Basecamp >>