A Few Pointers About Affiliate Marketing in SaaS

Generally speaking, affiliate marketing in B2B SaaS depends on

  1. how you want to incentivize the partner
  2. your average ticket size from one referred sale
  3. how fast your product is selling
  4. the cost of acquiring one customer
  5. how much post-sale training and support is required by the customer
  6. who provides this training and support
  7. the cost of this training and support

Here are some general rules of thumb

  1. If your product is flying off the shelves and is primarily DIY, then you can have a 10 to 15% monthly commission for the lifetime of the customer and you’ll have affiliates queuing up to sell.
  2. If the product is not selling, is not well known, or has a bad reputation, then you’ll have to significantly increase the commission (and therefore, your CAC) to get affiliates interested. If your average deal size is less than $150 you’ll find it extremely difficult to find long-term, committed partners.
  3. If you have annual contract values in the $xx or $xxx thousands, then you’ll rarely have affiliates. Instead, you’ll go for strategic partners who will work with you pre and post sale (like Salesforce or Radian6) and the deal will be more complex than a 15% commission. In such cases, it might go up to 60% where the partner provides lifetime support and training to the customer, while you make a sale and get out of the way.
  4. If you’re on MRR and churn is more than 2% monthly (meaning it’s easy for customers to switch or stop using your product), pay the partner their commission for the lifetime of the customer. If you pay for only a year, then the partner has every incentive to ask the customer to switch to a competitor after one year, or simply stop caring. If you’re paying commission for the lifetime, then the partner has some incentive to keep the customer with you.
  5. Don’t be cheap. In SaaS, a good LTV:CAC is 3:1 so try and pay handsomely for performance. Eg. if a customer stays for more than 6 months then the partner gets 20% monthly (from month 7 onwards), if the customer stays for more than a year then go ahead and pay 25% monthly.

End of the day – partners are not invested in your growth, they’re invested in theirs. So you will have to show them potential returns. Which is why referral and affiliate partnerships work best AFTER you’re a name in the market and are already selling a lot on your own.

Hope this helps!

SaaS Marketing Mistakes – Targeting

A few months ago, we got together a cartoonist and a developer to create a crazy-ass parallax scrolling page. This particular piece of beauty is probably the easiest guide to A/B testing on the web. It is really good and we were mighty excited to share it all over the interwebs. As part of that, we first shared it on HackerNews.

What is A B Testing    Hacker News

Pretty sweet huh? The post was smartly shared on HN in the morning when most of the US was asleep and it stayed on HN’s front-page for almost the entire day. We got a lot of comments and our traffic saw an immediate (but obviously temporary) spike.

HackerNews effect on traffic

Even better, our active trials (the CTA at the end of the page was to sign up for a free trial of Visual Website Optimizer) shot up like there’s no tomorrow!

Active Trials shot up!

So all this felt really nice. We spread this in some other places and got interesting responses. I happily reported to the CEO that we’re reaping significant benefits and the campaign is working well.

The truth unfolds

This is what our active free trials looked like after the campaign (time frame: start of campaign to three months later).

Our active trials go down to pre-campaign levels

At the end of the day, this was a push that bumped up our ‘free trial’ signups, but couldn’t sustain that number. Kind-of obvious. One can’t expect HN to always be following you. But what was surprising was that not one of those free trials converted to a paid account. That’s right, not one single convert from all the HN traffic.

Absolutely no transactions from those who landed on the page!
Absolutely no transactions from those who landed on the page!

The mistake

We ran after vanity metrics like page views and “sign up for free trial” (yeah, in this case that’s a vanity metric). The bigger mistake was that the we got carried away with our work and ran to show it off to those who would appreciate the technical aspects of it. In the process, we neglected the Small Business Owners for whom it was originally meant, and who would actually be influenced by the page. The readers of HN understand A/B testing very well and don’t need a simple story/analogy like Bob. But small business owners worldwide would have really connected with it.

Unfortunately, very few of them actually got to see it.

What we learnt from this

Here’s what we (and you!) can learn from this:

  1. HN is great to introduce new technical concepts (we created a cool parallax page to explain A/B testing and introduce Visual Website Optimizer)
  2. HN might be good if your product solves the problems of technical people
  3. Before creating any marketing campaign/message, think very carefully about the target audience and how you want to reach them
  4. At the end of the day it is all about being relevant

Here’s another nugget of insight that we gleaned from the conversation that happened on HN.

Comment about how useful this would be for Small and Medium Businesses to understand A/b testing

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