Are you a SaaS founder wondering when to start running paid user acquisition? It's a common question, and the answer isn't always straightforward. In this article, we'll discuss some key factors to consider when deciding if it's time to invest in paid user acquisition. From product-market fit to budget and beyond, we'll help you evaluate whether your company is ready to take the plunge.
To start, here are the 7 factors to consider:
Product market fit (PMF)
Product market fit indicates that your business is satisfying a strong market demand. You’ll know you’ve found it when you have happy paying customers who are referring more paying customers.
The entrepreneur and investor Marc Andreessen created the term, which he further describes as “a unique product offering that people desperately want.”
It makes sense to hold off on paid advertising until you have PMF so you know you’re pouring ad budget onto a product that already works in your market.
Paying users actively using your product
If you have PMF, then you likely have paying users actively using your product.
This step is important because it validates the product, the market, and your customer personas which we’ll touch on more next.
In order for an ad campaign to be successful, you need to have an idea of who is using your product and that they are successfully engaging with the product. Without this key indicator, you might pour ad dollars onto a product that converts people but doesn’t engage them. You need customers who love the product and continue to pay for it—not just one-time customers who sign up and forget about the product because they don’t really need it.
User personas are fictional representations of your ideal customers. They are based on market research and data and are used to help you better understand the needs, motivations, and behaviors of your target audience. By defining user personas, you can create more targeted and effective marketing campaigns that speak directly to the needs and interests of your customers.
We recommend to our clients before starting any ad campaigns that we get a clear sense of who we are targeting. This not only helps us write ad copy, it also helps us narrow down who we are targeting by location, age, hobbies, device usage, goals, pain points, etc.
Here’s an example of a user persona template created by T2D3:
The information in your customer personas helps your paid ads manager (or agency like us) tailor your ads to the right audience and significantly improves your ad performance. Without this level of customer awareness, your ads won’t be as precise.
Tracking to measure success
Before running Google ads, we recommend having the following in place so you can track performance:
- Set up Google Analytics 4 (GA4)
- Set up Google Tag Manager with your marketing channels
- Within GA4, set up goal tracking
- Create audiences for remarketing
- Use UTM tracking so you can see the traffic origin clearly in GA4
- Send tracking info to your CRM via these UTMs
To take it a step further, you can connect GA4 to your web application to look at how users are interacting with your application. For example, it’s good to track an “activation metric” in your app. Often SaaS businesses offer a free trial period and an activation metric like this can help you further understand the quality of traffic before the user makes a purchase.
Keep in mind that Google Ads has auto-tagging as well, so it will tag your URLs automatically if you have selected this option in Google Ads. However, it’s a jumble of characters and can only be deciphered by Google Analytic and some CRM tools, which is why we recommend using your own UTM parameters in addition to Google Ads auto-tagging.
BTW - if you want help with any of this, that is exactly what we’re here for. We manage the paid advertising of top SaaS companies. Reach out here.
We are often asked by founders: How much budget do we really need to get started with paid ads?
Our answer to this question? It depends.
You can start with an ad budget as low as $500 per month, but to start generating results, you need to invest upwards of $5k per month. Depending on how competitive your niche is, the cost per click (CPC) for your ads can be over $12.
Another benchmark to keep in mind is that some startups aim to invest upwards of 20% of their revenue on marketing.
No matter how you determine your budget, you’ll need some idea of what you’re willing to spend before you get started. It will also take time to figure out what messaging, keywords, and landing pages work for your business. We recommend taking a test-and-learn approach to build your advertising strategy in the initial stages.
Clear value prop and USP
Your USP is your unique selling proposition, meaning it’s the key differentiator between your product and your competitors’ products. For example, Slack’s value proposition is they give you an easier way to communicate with your coworkers. Evernote’s value prop and tagline is “effortless organisation.”
If you clearly understand the value you promise to deliver to your customers, then you’re on your way to writing great ad copy that will connect you with your target audience. Customers will click on your ads when they’re clear why you are different and why they should click on your link and not your competitor’s link.
An industry with high search volume indicates high demand, while an industry with lower search volume keywords can have more user intent and convert higher.
You can find data on your industry keywords by using Keywordtool.io, Google Keyword Planner or any of the SEO research tools out there. You’ll type in a few keywords that customers are likely to search for and check out the “Avg Monthly Searches.”
We consider high search volume to be anything over 10k+ per month for the US. However, keywords with 500+ searches per month is more than enough to start ads. One of our clients, Uplisting, is very niche in the property management software industry but their keywords convert very well, even with less than 500 searches per month.
If you’re in a niche with very low search volume keywords, this means you’ll likely need to generate demand through other marketing assets. For example, you might use content, eBooks, webinars, or awareness-building paid media campaigns to build a profile for your product. This is especially helpful if your solution, or even your industry, is just emerging in the market. This will in turn drive searches for your brand and product category.
Before starting paid ads, we recommend setting a clear goal for your efforts. Do you need to reach a revenue milestone? Paid ads can help you achieve those goals. Once your ads are running, you can measure success against your goal and determine if paids ads are effectively helping you reach your goals.
Keep in mind that you’ll need to test and learn. Just putting an ad campaign live by itself won’t work. You’ll need to test the landing pages, messaging, etc.
Deciding when to start running paid user acquisition for your SaaS company is a complex decision that requires careful consideration of several key factors. From achieving product-market fit to having a clear understanding of your user personas and value proposition, it's important to approach paid acquisition strategically and with a solid budget in place. By keeping these factors in mind and tracking performance, you can make data-driven decisions about your advertising efforts and ultimately drive the growth of your business.
Looking to acquire more customers?
We believe the best time to find a new customer is when they’re looking for a solution. We help brands do exactly that with paid advertising. In fact, one of our clients, Uplisting, has grown their revenue by 30x since we started working with them. While paid ads are only one element of this revenue growth, it’s still an important part of their overall growth strategy. We see this time and time again with our clients.
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