For SaaS companies, PPC marketing presents some unique challenges.
That’s because SaaS funnels are longer and more complex than for most non-SaaS businesses.
This means it’s harder to track conversions – and calculate the return you’re getting on your PPC marketing.
Common mistakes SaaS companies make when optimising their PPC marketing
When reviewing pay per click accounts for SaaS clients, the biggest – and most deadly – mistake I see them making is that they treat all trialists as equal.
They’ll look at their overall metrics – their average LTV and what percentage of trialists convert to paid – and assign an overall allowable cost per trial.
Something like: “Average lifetime value is $500. 16% of trialists become paying users. We want a 2:1 return on ad spend…so we have an allowable cost per conversion of $40.”
And then their PPC manager sets off to get as many trialists as possible under $40/trial.
The problem is – and this is the sad reality of marketing – there’s usually an inverse relationship between the cost of a SaaS trialist and the value of that trialist.
That’s because “buying keywords” tend to cost more than “informational keywords.”
So, for example, if you were in the SaaS accounting software market and you’re advertising on Google, you’ll pay far more per click for “accounting software” than for “free invoice template.”
The latter might convert ok – leading to a low cost per trial – but they’re unlikely to convert to a paying user. And, even if they do convert, they probably won’t stay for long.
“My PPC trialists are up, but my revenue is down”
So, if you use this $40/trial as the goal for your PPC marketing, you’re headed for trouble.
You’ll get lots of signups, but your number of paying users – and your LTV – will suffer.
(BTW, this is why SaaS companies should never judge their Chief Marketing Officer by how many trialists they’re generating.)
The right way to set allowable cost per conversion in your Google Ads
As you might imagine, the solution is, rather than have a universal allowable cost per conversion – across your whole PPC account – you need to adjust it depending on keyword, device, location…
That way, you’re not under-bidding for the best prospects or over-bidding for the worst.
How to calculate the LTV for different PPC keywords
But this can be tricky. If your PPC account isn’t bringing in a ton of visitors, you’ll struggle to have statistically significant traffic for most of your keywords.
I’d love to be able to give you hard and fast rules for solving this, but, like much of marketing, it’s an art, rather than a science.
My own approach is to have tightly-focused ad groups and evaluate those ad groups as a whole, rather than each individual keyword.
That increases the sample size I’m looking at.
Similarly, I look at lifetime value per device – or location – for all our Google Ads traffic. If I see a general pattern – say, mobile trialists are worth 20% less than desktop – I’ll adjust my target CPA accordingly.
Summary
SaaS PPC marketing requires a lot more data analysis than most Google Ads management.
The downside is that it’s harder – and it’s harder to find a PPC marketer who can do it well.
The upside is that, if you find the right PPC specialist, your SaaS will be able to out-market your competitors.
All the best,
Steve Gibson
