It’s not uncommon to hear many organizations say “We’ve tried outbound marketing, but haven’t had any ROI on it.”
Let’s break down “haven’t had any ROI” further. Typically it falls under two brackets.
- First is not generating any campaign results. For example, you send hundreds if not thousands of emails, but have very few people responding positively or none at all. You end up speaking to very few people barely making any new sales.
- Second is where your campaigns are working really well, but you end up without an ROI.
The first scenario is quite self explanatory. If your campaign doesn’t generate enough results, you won’t be making enough sales.
The second scenario might not be as straightforward. Let’s take an example of a SaaS product that has a LTV of $60k and another SaaS product that has an LTV of $600.
We can do outbound marketing in both instances. Let’s say you spend $5k per month on outbound marketing activity and book 30 appointments with a 90% show-up rate. This means, you end up talking to 27 people during that particular month.
If your close rate is 15%, you make 4 sales during that month. (27 * 15% ~ 4)
SaaS product one with $60k LTV would have made $240K revenue during that month, whereas the product with $600 LTV would have made $2400 revenue.
SaaS one just made $235K gross profit, whereas SaaS two has lost $2,600 before considering any operations and fulfillment cost. In order to breakeven on the outbound marketing activity, SaaS two should at least achieve 9 sales per month.
So, the point being just because outbound marketing works for you doesn’t mean you should be doing it. First thing is to figure out whether your LTV (Lifetime value) supports the CAC (Customer Acquisition Cost) to be in a profitable position.
In above examples, SaaS one had a CAC of $1250 per customer to make $60K revenue. Meanwhile, SaaS two had a $1250 CAC, making only $600 on the sale.($650 gross loss) So, it’s important to understand these numbers and make an assessment of whether to invest resources into making outbound marketing work for your B2B organization. (This not only applied to SaaS, but all B2B organizations)
On top of this, you should also consider the cost of delivering the service or product. In the above examples, let’s assume that the product delivery cost is 50% of the price it’s sold at.
That means SaaS one would have a net profit of ($235K – 0.5*$240K) = $235K = $120K = $115K.
SaaS two would have a product delivery cost of $300 making the net loss ($650 + $300) = $950.
You can see how critical it can be to consider LTV and CAC before stepping into outbound activities. Though we have compared this with the context of outbound marketing, it’s applicable for any marketing channels and will ensure you’re planning for sustainable growth.
If a particular channel makes sense to you, the next step is to implement and get a baseline of the numbers. (Leads to booked appointments, closure rate, churn, etc.)
Once you have this established, you’re on your way to predictability. Congratulations! Now, you know how many sales to expect the next month and the exact input required from your end to make it happen without any guess work.
Feel free to drop a comment if you have any questions.
