Calculating the True Cost (and Return) of a Nurture Program

As the CMO or marketing manager of a SaaS company, it is your responsibility to develop profitable marketing and sales programs. 8QIRUWXQDWHO\��WKLV�SURFHVV�IRU�PDQ\�FRPSDQLHV�LV�D�FRPSOH[�DDLU�WKDW�UHOLHV�RQ�DQ�DUUD\�RI�PHWULFV��PDQ\�RI�ZKLFK�DUH�GLɝFXOW�WR�WUDFN�DV�WKH\�DUH�constantly changing. In this brief on calculating the true cost and return of a

nurture program, we will highlight common nurture programs, outline associated costs, and present an approach to forecasting your return.

Common SaaS Nurture Campaigns

As the market matures, SaaS companies are becoming increasingly diverse. This diversity makes it almost impossible to generalize what Software as a Service encompasses, but there are a few marketing and sales oriented nurture campaigns WKDW�PRVW�FRPSDQLHV�FDQ�EHQHȴW�IURP�

1) Those designed to support a user post-purchase. Designed to increase: User satisfaction Number of accounts (seats) Lifetime value (LTV)

2) Programs to help guide a user from a free trial to a paying subscription. Progress users into paying customers (subscriptions) +LJKOLJKW�WKH�YDOXH�RI�D�IXOO��SDLG��6DD6�RHULQJ Demonstrate usability and interface Present successful use cases

3) Nurture campaigns for SaaS products with a higher entry barrier (cost). Designed to educate users as they work towards purchase.

CalculatingYour Cost

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For each of these campaigns, a common set of metrics helps calculate the true cost. A comprehensive measurement will include the cost of employee time, tools used, DVVHW�FUHDWLRQ��DQG�SURPRWLRQ��)RUHFDVWLQJ�WKHVH�FRVWV�DQG�\RXU�UHWXUQ�LV�FULWLFDO�DV�it will help identify a break even point - how much revenue or how many leads a VSHFLȴF�FDPSDLJQ�QHHGV�WR�DFKLHYH�LQ�RUGHU�WR�H[FHHG�LWV�LQYHVWPHQW��

For SaaS companies, there is generally an exponentially larger return as the number of customers generated from a single campaign increases. Most nurture path campaigns include a higher amount RI�ȴ[HG�FRVWV��ZKLFK�UHPDLQ�constant regardless of the number of users or customers generated), than variable costs.

Before you begin setting up a nurture path, you will want to understand where these costs will come from��DQG�KRZ�PXFK�LQYHVWPHQW�\RXU�FDPSDLJQ�ZLOO�UHTXLUH��6RPH�campaigns, like sending pamphlets to potential customers, have high variables costs (you have to pay for each pamphlet you want to send), while others have higher ȴ[HG�FRVWV�DQG�ORZHU�YDULDEOH�FRVWV��VXFK�DV�D�PDVV�HPDLOLQJ�FDPSDLJQ��ZKHUH�\RX�pay to use an email platform, but can then send as many emails as you like). Ȋ)RUHFDVWLQJȋ�WKRVH�FRVWV�ZLOO�KHOS�\RX�SLWFK�WKH�LGHD�WR�\RXU�SHHUV��DQG�KROG�\RX�accountable for the campaign.

Forecasting costs and understanding your customer lifetime value allows you to determine a break even point (how many customers your campaign must VXFFHVVIXOO\�DFTXLUH�WR�SD\�IRU�LWVHOI���6HSDUDWLQJ�ȴ[HG�FRVWV�IURP�YDULDEOH�FRVWV�ZLOO�help outline how the price of your campaign will change as it touches more audience members. Remember, it’s a learning process: once all is said and done, you can go back and compare your forecast to your actual costs. The next time you plan a campaign, you’ll have a better idea of how much it will cost.

Fixed CostsVariable Costs

Employee time to promote, support, and

track the campaign

Marketing Tool Costs (does the platform

use cost more for a broader reach?)

Cost of assets created for use in the campaign

Accompanying Promotion: ad spend, email list purchase, outreach, etc.

Once your campaign is up and rolling, what sort of return can you expect? Before this TXHVWLRQ�FDQ�EH�DQVZHUHG��\RXȇOO�KDYH�WR�GHFLGH�KRZ�\RXȇUH�JRLQJ�WR�DWWULEXWH�revenue to various marketing activities. Some companies give all of the credit for QHZ�UHYHQXH�WR�WKH�ȴQDO�WRXFK�SRLQW��RU�DFWLYLW\��WKDW�KHOSHG�FRQYHUW�D�OHDG�LQWR�D�FXVWRPHU��EXW�WKLV�LV�DQ�RYHUVLPSOLȴFDWLRQ�RI�WKH�SURFHVV�

An Attribution Model can help show how multiple channels worked together in converting a lead. What is an Attribution Model? It’s the practice of fairly dividing expenses and revenue between a several campaigns. The idea is that, while a nurture campaign may successfully develop a user into a paying customer, it is probably not the only touch point they have with your brand.

Most of the time, it doesn’t make sense to give all of the credit to a single touch point or campaign. ΖW�LV�PRUH�OLNHO\�WKDW�D�FRPELQDWLRQ�RI�HRUWV�FDPH�WRJHWKHU�WR�convert a lead into a customer. A few popular attribution models that attempt to split up the costs more fairly are:

Common SaaS Nurture Campaigns

Time decay - most recent interaction gets majority, and each � � SUHYLRXV�LQWHUDFWLRQ�D�VXEVHTXHQWO\�VPDOOHU�VKDUHLast interaction - all attribution (revenue) to last interactionFirst interaction -�DOO�DWWULEXWLRQ��UHYHQXH��WR�ȴUVW�LQWHUDFWLRQEven split - attribution (revenue) split between interactions

Employee Salary

Asset Creation

Tool CostMarketing Spend

Total

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Forecast

Actual

50 300 150 250 75042 350 150 225 767

Nurture Program Cost

Choosing which model to use is a matter of preference, and usually depends on the organization as a whole. We’re going to focus on the Last Interaction Attribution 0RGHO��EHFDXVH�PRVW�QXUWXUH�SDWKV�UHTXLUH�D�ODUJH�LQLWLDO�LQYHVWPHQW�LQ�VHW�XS��DQG�little maintenance costs (or variable costs). Once you have chosen an Attribution Model, you can determine how much of your revenue can be credited to your nurture path.

7KLV�FDOFXODWLRQ�ZLOO�WHOO�\RX�WKH�QXPEHU�RI�FXVWRPHUV�\RX�QHHG�WR�DFTXLUH�IURP�D�single nurture campaign in order to break even. If the number of new customers exceeds your expectations for the campaign, you should take another look at your costs and/or conversion expectations to ensure you generate a positive return.

Hopefully our brief on calculating the true cost (return) of a nurture program has helped you analyze the planning and expectations of your campaigns.

By forecasting costs and revenue generated you can set expectations for return, and adjust your nurture campaign to ensure you break even - at the least!

Understanding Your Return

B.E. Point = cost of nurture program ($) / average customer lifetime value ($)

Return on a Fixed Cost Program

# of New Customers

Break Even Point

Cost of Program

Net Revenue

Valu

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sers

The goal of any nurture (marketing) campaign is at minimum to break even -- but you VKRXOG�EH�VWULYLQJ�WR�SURYLGH�D�PXFK�VWURQJHU�UHWXUQ��)LQG�\RXU�EUHDN�HYHQ�SRLQW�