Top SaaS trends reveal concerning decline in marketing ROI, experts discuss data
By Zion Rufus
The software-as-a-service (SaaS) industry, known for its rapid evolution and innovation, is currently facing a pressing issue that’s sending shockwaves through the sector.
Leading figures, including Chris Walker, CEO of Refine Labs, have pointed to a consistent decline in marketing return on investment (ROI) over the past six fiscal quarters. This unsettling trend raises important questions about the future of companies operating in the SaaS landscape.
Conducting a deep dive into the financial health of more than 15 prominent SaaS companies, Refine Labs unveiled a pattern of diminishing marketing ROI. This decline has stirred concern among professionals and is altering the strategic landscape of the industry.
Although the SaaS market has been lauded for its ability to adapt to shifting trends, Walker’s report reveals the need for companies to rethink their marketing strategies, adopt data-driven practices, and navigate a landscape that is evolving at an unprecedented pace.
Highlighting the shift towards a more sustainable approach as the key to overcoming these challenges and securing a brighter future for SaaS companies, some of the key findings from the report include:
Consistent Marketing ROI Decline
Over the last six fiscal quarters, marketing ROI has been on a steady decline.
According to Walker, this trend raises questions about the effectiveness of current marketing strategies.
He said in a LinkedIn post “With the market slowdown, HIRO pipeline generation & closed won revenue has been declining since 1Q22. Companies have been cutting Marketing budgets to try to keep CAC in line, but not quickly enough as ROI continues to fall to untenable levels.”
Underperforming Content Syndication
Walker’s analysis also identified content syndication as consistently the worst-performing marketing program, especially concerning sales velocity and ROI.
“These programs are clearly not working when measured against HIRO pipeline, revenue, and sales velocity,” he said “but companies continue to justify them with misguided metrics like cost per lead or an influenced revenue report on first touch attribution.”
LinkedIn Ads in Need of Overhaul
LinkedIn ads have proven to be consistently ineffective and, according to Walker, require a complete overhaul to align with industry standards.
“Companies continue to build their LinkedIn ads strategy around getting “leads” to download e-books or other forms of content and optimize for cost per MQL. Most reports never even look at down-funnel metrics like conversion to HIRO pipeline, revenue generated or sales velocity,” he stated.
Decreasing Sales Velocity
The report also revealed a worrisome drop in sales velocity, observed over the past six quarters and suggesting potential challenges in closing deals.
Driven by declining win rates, lower overall HIRO pipeline creation, and lengthening sales cycles, Walker explains that companies are experiencing a major slowdown in sales velocity – the most critical metric for scaling net new customer acquisition.
Misleading Definitions of “Qualified Pipeline”
The use of subjective definitions for a “qualified pipeline” has led to significant pipeline inflation, potentially misleading stakeholders.
The report stated: “Pipeline inflation = companies think they have a lot more “pipeline” than they actually do because they use a subjective definition of pipeline such as Stage 1 opportunities blended across the entire GTM and not respecting the differences in funnel dynamics between different pipeline sources. This phenomena causes them to dramatically inflate their pipeline number, over-report on total Marketing ROI, and struggle to forecast & plan accurately to revenue targets.”
Influenced Revenue as a Double-Edged Sword
According to Walker, influenced revenue reports can be used to justify underperforming programs, potentially obscuring real issues in marketing strategies.
Influenced revenue reporting was built to prove the ROI of easy to measure marketing programs, not to be used as a strategic decision engine across the entire GTM.
He also urged companies to be very cautious when using these reports to determine budget allocations and overall strategy.
Overspending on Paid Search
Despite clear data indicating low ROI, many B2B companies continue to overspend on paid search, raising concerns about budget allocation.
“Despite paid search being likely the easiest to measure marketing channel against revenue, most B2B companies still do not have granular reporting to determine how to adjust this strategy. We find companies overspend on this channel by 2x-3x leading to degradation of ROI,” he added.
Industry professionals also contributed their thoughts as Walker’s findings ignited discussions among marketing professionals in the SaaS industry.
Highlighting the alarming similarity between the definition of a lead in many organizations and an ice-cold purchased email list, Justin Rowe, Founder and CMO of Impactable, shared that marketing efficiency has increasingly become a growing concern, particularly in the context of LinkedIn ads’ inefficacy.
For Andrew Dimmick, a growth marketing and operations leader, the interconnection between findings number 2 and 6 emphasizes that influenced revenue should have a clear attribution system.
“I fell into this trap myself. I think influenced revenue has its place, but when it becomes a guessing game with no clear attribution, then it’s misleading. Curious what your take is on this, but I think influenced revenue is useful for measuring the impact of marketing touchpoints that accelerate the deal forward. Like hosting an ultra targeted event that brings prospects and customers together,” he shared.
John Webster, CMO and VP of Marketing, encouraged marketing teams not to fear these trends but to embrace them with continuous optimization and accurate reporting. He also stressed the importance of extracting value from non-standard demand capture channels, such as Product-Led Growth (PLG).
“There’s a lot of discomforting truth in here.. good Marketing teams don’t need to fear this, they need to own it, via continuously honest program optimization and reporting accuracy, coupled with brutal stop/start/continue discussions (across go-to-market functions, supported by Rev Ops/Analytics). There’s a chance to differentiate quality of Marketing performance if you step-up, recognise the depth of issue and take steps to avoid waste. It’s also further reinforcement of the need to extract maximum value from non-standard demand capture channels such as PLG (without these, you’re just pouring money into the same channels as your competitors, vying for the same eyeball, and it’s a race to the bottom re ROI),” he stated.
On his part, Oleksandr Khudekovskyi, Chief Marketing Officer at Outcrowd, emphasized the significance of interpreting data and the need for executives to listen to marketers’ advice.
“Unfortunately, this is an issue for many companies,” he noted. “For the last decade or so there has been a cultivation of a data-gathering culture. Now, it is time (mostly for marketers) to nurture a data interpretation culture. What is also an important thing, is that even if there could be a correct or mostly correct data interpretation, executives should listen to marketers’ advice.”
Finally, urging marketing leaders to take tracking as seriously as they do creative and positioning, Drew Friesen, a fractional CMO, warned of the dangers of pipeline inflation.
“The pipeline inflation problem is real and dangerous. Marketing leaders may feel like it helps prop them up among the other leaders and show the impact of their department, and it MIGHT in the short term. But it erodes trust and wastes budgets in the long term as this huge “pipeline” they’ve generated doesn’t ever come to fruition. Marketing leaders need to take tracking as seriously as they take creative and positioning,” Friesen added.
RECOMMENDED ARTICLES
Comment
No comments found.