Marketing Lessons We Learned From Running Software Companies | Ep. #723

Welcome to another episode of Marketing School. I'm Eric Siu.

And I'm Neil Patel.

And today we're going to give you 7 marketing lessons we learned from running software companies. And Neil, you're going first because you've ran more software companies than I have.

Before we get started, I know many of you guys don't have software companies, you don't have subscription-based businesses, but a lot of the lessons that we learned could be applied to e-commerce, service-based businesses, any business that isn't necessarily software-oriented. And what we found is when you apply these strategies that worked in the software industry to traditional-based businesses or other internet-based businesses, it can help them grow faster. So the first lesson I learned from running a software business is it's not all about the conversion point. Companies, for some reason, optimize for how many visitors do I get, and out of them, how many of them purchase? Sure, that's one great way to look at if you're doing well with your marketing, but what's a better way is optimizing for lifetime value. Software companies are notoriously known for this because people typically pay softwares on a monthly or quarterly or annual basis, and there's renewals. So they want them to keep continually paying quarter after quarter or year after year or month after month. If you optimize for lifetime value, the traffic that's not just causing a customer to come once, let's say you're an ecommerce company like Amazon, but causing people to keep coming back and purchasing more and more, that's what you should focus on because in the long run, not only will that help you grow your revenue, but it'll maximize your profitability. See, if you keep driving traffic, traffic costs money. Whether it's SEO or paid, it still costs time, energy, money, right? But if you focus on the channels that drive the highest LTV, that's where you'll notice that you'll maximize your profitability. All right.

So, this is number 2. Number 2, what I've learned is, and this is even going back to the days where I worked at other software companies, it's all about onboarding. Everything is about onboarding initially. If you don't deliver a really good experience where you're trying to get people to that aha moment where it's like, I get how to use this as quickly as possible, we're talking ideally within the first 48 hours or so, ideally even faster than that, you're going to have a problem because you're going to spend all this money acquiring these customers, but they're just going to drop right out because You are failing to impress. First impressions matter and that applies to software as well. And a lot of people, it doesn't seem like a really sexy thing to talk about, but it is the number one thing to think about or else you're going to be in trouble.

Number 3, the cool part about software companies is I've learned over the years that you end up losing around like 4 or 5% of your revenue just because people's credit card numbers expire or they change. And yes, you can ask people for their new credit card details, Or you could just do what GoDaddy, Yahoo, and all the big companies do. They sign up for this service called Visa and MasterCard Updater, in which when someone's credit card gets stolen or expires or their number changes, you can pay Visa and MasterCard, it's anywhere from like 9 cents to 17 cents depending on your volume, for their new credit card details. Stripe also has it built in, and the cool part about this is you no longer have to keep bugging people to update their credit card. It automatically updates. Even if you run an ecommerce company or a service-based business and you're charging people, you know, monthly bills, or let's say ecommerce company and someone has their credit card saved, you want to make it so they don't have to keep updating their number. This little trick will drive you more revenue.

Great. And number 4, right? Number 4. Number 4 is around customer development. So again, this is not one of those sexy, oh, I need a marketing growth hack, whatever. Like these are the foundational things that you get right. So you're going to be okay and you can run these cool marketing tactics, growth hacks, whatever you want to call them later. So, what you can do is you could Google jobs to be done and there's a lot of blog posts about this, but you use the jobs to be done framework. And the idea behind this is that, look, you might, you might come up with a really good idea initially, but ultimately if you're not talking to customers and you're not kind of constantly iterating, you're talking to enterprise people, if you're trying to sell upmarket and you're not addressing their pain points, You're going to be operating in a vacuum and ultimately it's not— well, ultimately it falls all on you if people aren't buying because you operated in a vacuum. So, set aside time to do customer development. It's going to save you a lot of headache in the long term.

Yeah. What are we on right now?

5?

5? Yeah, 5.

Cool.

The 5th one that I ended up learning from running software companies is you only have one shot with customers. In software, if someone uses your software and they don't like it, you're shit out of luck. They're not going to come back. They're not going to say good things. It doesn't matter if you revamp everything. It's really hard to change people's perceptions. That works with almost every single business out there. But in the software world, I found that it to be really hard in which first opinions really stick. In product, you release a new line of shoes or whatnot. Yeah, people may forgive you or be like, oh, that's cool. Sure, I'll sign up. So whatever you end up releasing with your product or service, make sure it's exceptional and amazing. If you're not proud of it, you don't want to put your name behind it, you're not proud to rep it, you shouldn't release it. Create an amazing product or service. You can't just go put poop on a metal hook and be like, these are earrings, and then sell it to people.

Polishing a golden turd. There you go.

If what you're creating is amazing, people write reviews, they'll talk about it. Like, if you look at the product BuzzSumo, Ahrefs, a lot of the tools in the marketing space, they didn't do well because they're the best marketers or they're going out there and they're like doing Google Ads really well or webinars. They did really well because they created an exceptional product. Like you look at BuzzSumo, they mainly grew because all these bloggers would talk about BuzzSumo and break down how they use it and how it's amazing. If you create an amazing product or service, you can get that from day one. But if you're in an industry Where, like, if you create a product that just sucks and you're in an industry that's already crowded, you've lost your chances. If you're in a brand new industry though, and there's no competition, sure, you could potentially get away with mediocre products or services, but I recommend no matter what you create, it's amazing from day one because then you'll get the best press out there.

All right. Number 6 is around pricing. Get your pricing right. And a lot of people, what happens in the beginning is they just will copy their competitors or try to charge really low because they're not comfortable charging a lot. To Neil's point a little earlier, You got to be proud if you're putting something out there, you got to be proud to rep it. When you're— when you're basically doing yourself a disservice if you're charging $9.99 because what happens is you can't serve these people, you're going to have a bunch of customers coming in, you're not going to have the right infrastructure for that, you're going to be in trouble. So, what happens is what I've been seeing recently, talked about this a while ago is when I was at SaaStr, the largest SaaS conference or one of the largest SaaS conferences in the world, what I found was that everyone was going Upmarket, right? And a big reason why they were going upmarket is because a lot of them raised venture capital. But the trend is still like, you know, charge what you think the value that you're delivering. Don't just charge a really low arbitrary amount just because your competitors are or you aren't comfortable. Be proud of what you're putting out there. Charge more.

Last but not least, pay attention to market trends and conditions. For example, when we were running Kissmetrics, I'm no longer there. Well, when we were running Kissmetrics, Mixpanel was kicking our butt because they had a freemium plan and they're going after mobile. Back then, mobile was starting to become popular. We didn't adapt quick enough. And if we did, we would have been a much bigger company. The same goes with your product or service. Doesn't matter if it's a physical or a service. If you pay attention to market trends and conditions and you adapt fast enough, it's 10 times easier to market whatever you're selling. If you're not, You're pretty much just going against the grain and no one's going to want to sign up or buy whatever you're selling.

Great. So that is it for today. But again, we have a survey for you to fill out just to improve this experience on this podcast for you. Go to singlegrain.com/survey. It'll take 2 minutes of your time and it's going to help us make this way better for you.