Building a high-performing marketing funnel is crucial for SaaS businesses. Once you’ve identified your most effective acquisition channels, the next step is to strategically scale your investment in these proven winners. Here’s how to effectively refine, test and expand your marketing efforts to ensure maximum Return On Marketing Investment (ROMI).
Step 1: Identify Your Proven Channels
Begin by clearly defining what success looks like in your marketing strategy. Proven channels aren’t just those generating the highest volume of leads—they’re the channels providing leads that convert at the best rates and deliver the highest customer lifetime value (LTV).
Example: Your SaaS business, SmartCRM, has multiple marketing channels. After evaluation, you identify that LinkedIn Ads is your strongest performer.
Key Metrics to Evaluate:
- Customer Acquisition Cost (CAC): The average cost to acquire a new customer.
- Calculation:
CAC = Total Marketing & Sales Spend / Number of New Customers Acquired - Example:
$10,000 spent on LinkedIn Ads / 100 new customers = $100 CAC
- Calculation:
- Conversion Rate: Percentage of leads who become paying customers.
- Calculation:
Conversion Rate = (Number of Conversions / Number of Leads) × 100 - Example:
100 customers / 1,000 leads × 100 = 10%
- Calculation:
- Customer Lifetime Value (LTV): The average revenue generated from a customer over their lifetime.
- Calculation:
LTV = Average Revenue per User (ARPU) × Average Customer Lifespan - Example:
$50 monthly ARPU × 24-month average lifespan = $1,200 LTV - For younger companies: If your business has limited historical data (e.g., only 10 months), use current ARPU multiplied by the available lifespan as a baseline, and periodically adjust as you collect more data.
- Calculation:
- Return on Ad Spend (ROAS): Revenue generated for every dollar spent on advertising.
- Calculation:
ROAS = Revenue from Ad Campaign / Cost of Ad Campaign - Example:
$120,000 revenue from ads / $10,000 ad spend = 12x ROAS
- Calculation:
Use a structured framework to rank your marketing channels based on these metrics.
Step 2: Strategically Increase Investment
Once you’ve identified your top-performing channels, incrementally increase investment to test scalability. Rather than making large jumps, expand budgets by approximately 20-25% to evaluate if ROMI remains consistent or improves.
Example: You increase your LinkedIn Ads budget by 25%, from $10,000 to $12,500 per month.
Best Practices:
- Gradually scale budgets (10-25% increments)
- Monitor closely over 2-4 week intervals
- Compare incremental CAC and ROMI before increasing further
Step 3: Measure Incremental ROMI
To justify continued investment, measure incremental Return On Marketing Investment (ROMI) explicitly. Incremental ROMI isolates the value added from additional spend in a channel compared to your baseline performance.
Example: With the increased budget of $12,500, SmartCRM generates an incremental revenue increase of $30,000.
How to Calculate Incremental ROMI:
Incremental ROMI = (Incremental Revenue - Incremental Expenses - Incremental Marketing Expense) / Incremental Marketing Expense
Example: ($30,000 incremental revenue - $10,000 incremental expenses - $2,500 incremental marketing expense) / $2,500 incremental marketing expense = 7x incremental ROMI
Incremental expenses include costs directly tied to sales (e.g., cost of goods sold, operational expenses, shipping, etc.) that would not occur without the new transactions.
Evaluate whether each additional dollar spent continues to provide a positive incremental return.
Step 4: Test into Expansion Opportunities
Testing new opportunities within proven channels can uncover additional growth. For instance:
Example: SmartCRM tests video ads on LinkedIn, comparing performance against existing image ads.
- Paid Advertising: Test new audience segments or creative variations.
- Content Marketing: Experiment with different content formats (e.g., video, long-form guides, podcasts).
- SEO: Expand keyword strategy into adjacent areas to capture additional organic traffic.
Run controlled A/B tests to quantify performance and scale only the winning experiments.
Step 5: Weigh Against Other Initiatives
Growth in your top channel shouldn’t be evaluated in isolation. Compare performance against other marketing initiatives to ensure you’re always allocating budget to the highest return opportunities.
Example: SmartCRM finds their new LinkedIn video ads outperform their Google Search ads significantly, prompting a shift of some budget from Google to LinkedIn.
- Use performance dashboards to regularly evaluate all channels.
- Reallocate budgets dynamically, shifting funds from lower-performing areas to higher-performing, scalable initiatives.
Putting It All Together
Successful SaaS marketing requires continuous refinement and strategic scaling. By carefully investing in your winning channels, measuring incremental ROMI, and systematically testing new opportunities, you’ll achieve predictable growth and maintain a high-performing marketing funnel.
