If you are reading this I’m pretty sure you’ve been feeling or hearing it too over the last few years. Experienced operators and founders share the following with me regularly:

• “Adwords feels unsustainable and expensive for single product companies to really scale growth with. I just don’t feel like I have another choice.”
• “Outbound response rates on LinkedIn messaging or email are generating less results.”
• “Keyword content is very competitive and doesn’t seem to be effective.”

If you think about it, all three of these channels tend to be treated as transactional or “pay-to-play”. Because of this, I think of them all as “rented channels”. Two of which the landlord is Google.

This article aims to question if these make sense for early-stage SaaS companies anymore, and addresses the core issues with them. I’ll also provide some real-world alternatives that I’ve either seen or helped build, what worked and what didn’t, and some questions to help guide your thinking on if it’s time to adjust your channel strategies.

Beware of Rented Channels

A few points can pretty easily explain what’s happening with the effectiveness and efficiency of these channels (and any channel that you don’t own).

1. Competition is growing: It’s pretty obvious and it’s the sheer growth in B2B SaaS companies over the last 10 years. Depending on who you ask, the number of active SaaS companies is around 30,000 today. If that isn’t crazy enough, we all know that we don’t just compete with direct saas competition for customers. There are full-service agencies, on-prem providers, in-house and even free/open source to consider.

2. Rented Channels are easier to get started with: The benefit of “pay-to-play” channels is that you can get them set-up really quickly. There are literally thousands of Adwords, Content/SEO and even outsourced SDR agencies around the world to make it “simple to get started right away”! All of them want you to think of the channels on performance basis (CPA, CPL, etc.) that you can turn on right now and with little effort.
3. You are often competing against companies with bigger Customer LTVs: This point is the most nuanced, but critical to remember. Most companies that are struggling with channel identification tend to be 1) single-product saas businesses and 2) earlier in their life (startups). And in almost all cases, they are using price and a focused feature set to compete with the existing market. If you are going up against a competitor that has a fundamentally higher average Customer LTV, it is almost certain that they will always be able to outbid you. The reason for this is because they can make back the money over the life of the customer.

Real-World Example: CRM

To drive this home, let’s consider that we want to start a new CRM. How are we going to sustainably and profitably acquire customers considering these factors?

Let’s think through the three points above:

1. Competition: Obviously CRM is a competitive space with both vertical specific and horizontal providers.
2. Easy/Rented Channels: The rented channels have been executed on and optimized by the likes of Salesforce, Pipedrive, etc. who have deep pockets. Remember, these tend to function like auctions and the seats are full of bidders. Probably not the best place to start.
3. LTV of Competition: The lifetime value of the competitive companies (Salesforce, Pipedrive, etc.) have a proven LTV that is way higher than we do so all competitive channels will be expensive to us. Even if you think that you’re LTV is theoretically better, that’s a dangerous bet!

This really means we have to find a new way to get to our customers. So how does our new CRM company compete??

Take a step back and articulate the drivers of your GTM approach

For this, I think the best framework available is one that Brian Balfour created called The Four Fits or Market-Product-Model-Channel-Fit. If you haven’t heard of it, I’ll walk you through a quick example here.

Most founders know these things intuitively, but never actually write them out and think of them as ever-changing building blocks. To start, break down your GTM Strategy into the following framework to see where you stand today:

1. Market:
   - Who am I building my product to serve?
   - Example Definition (the more detailed understanding of your market, the better):

2. Product:
   - What is the product that I’m offering and how does it differ from the competition?‍
3. Model:
   - How do customers engage with your company to purchase the product? Does this make sense considering my target market and how they want to purchase products?

4. Channel:
   - What marketing channels am I investing into that fit this product, model and is relevant to my target audience?

Assess your approach today:

Now that you have these four critical pieces defined, what you want to do next is start to look at the interplay of each of the four areas and how they fit with each other.

Note: These are just made up responses, but it does highlight the level of depth in which you can inspect your entire GTM motion and how your product “shows-up” in distribution.

Helpful, but how do I find my edge?

The best founders and operators I know don’t want to compete with existing teams for the attention of their target audience…they want to own a direct relationship that goes deeper and has efficiencies built in over time. So, what can we learn from them to apply to our businesses?

I put together a few examples of great acquisition channels that aren't rented. The goal is to help you think outside of rented/obvious channels:

One thing you'll notice right away is that the initial lift for each of these is much higher than that of the “rented channels” (Adwords, Outbound Sales, etc.) we spoke about earlier in the post. With that being said, the "Nth" activity is usually much lower and costs way less. This is what we are looking for. Barrier to entry is real, but you get to live in the Low-CAC Garden of Eden once you build it and it works.

If that’s not enough, here are some that I’ve helped build out over the years:

Here is the deep dive an exactly what it took to launch the podcast for Flagsmith.

A final source that can be helpful is writing these out for both the direct competitors as well as the service provider competitors in your space. What learnings do you have after analyzing their approach to acquisition? Does it align with their market, product and model? What can you execute on uniquely in your broader space that they cannot?

As you go and look for these alternative channels for your business, I’d strongly recommend that you make sure they line-up to the questions for quality that we outlined in this post. When brainstorming, remember to not be afraid of things that have a higher barrier to entry as long as the incremental investment is low. Over time, the lower the calories spent and higher repeatability of the effort, the better! That’s where you see the low CAC impact over time.

Things just aren’t working with my current approach. How do I know when it’s time to adjust or add more channels?

To help with people in this stage, these questions can help you with critical thinking:

Adjust/Optimize or Cut Existing Channel:

• Why isn’t {insert channel here} working like it used to for my company?
• Has something changed in the habits of my competition or target customer that would impact this?
• Have I allowed a very specific approach (example: outbound to high-value accounts) to broaden (example: outbound to any account) which changed the ROI?
• If yes, re-consider your approach.
• If no, look to optimize and adjust the channel. If you believe in this channel and feel there is more, it might be time to up-level with experience.
• If you aren’t sure, talk to existing or potential customers about the channel and whether they still value it.

Adding/Launching a new channel:

• Should I start doing {insert channel here} today?
• Is this how my target customer purchases?
• Is this a relevant channel to them?
• Do I have a specific definition of how we should execute this channel specific to our product, model and market?
• If yes, start now!
• If not, don’t do it.
• If you aren’t sure, talk to existing or potential customers about their habits.
• Note: We get this question a lot with content. The answer here is that content comes in many forms (podcast, blogs, 3rd party influencers, talks, playbooks, etc.) and I haven’t met a SaaS company that doesn’t do something in this space. What is common is that they all call it something different. The most effective teams have their audience in mind when they create their definition of content and they’ve considered if it’s relevant and if it’s distributed through the channels where their audience already exists.

Hopefully these are some helpful tools for you to drive sustainable and efficient growth. Remember…don’t just do what your competition is doing. Do the thing that your target audience would actually get value out of.

Thanks,

Matt