E-mail marketing platform.
Vero has 250-300 customers.
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How They Built Email Marketing SaaS Companies On $500/Month Customers
Your pricing decisions play a major role in your company’s success. Giants like Amazon.com take a low price approach to earn market share. Private SaaS companies rarely have that luxury. Express Pigeon and Vero, two high growth email marketing SaaS companies, are both winning charging $500-$1,000 per month.
What Do Their Revenue Numbers Look Like?
Founded in 2013, Express Pigeon has an estimated ARR of approximately $500,000. In contrast, Vero, established in 2012, has reached an MRR of $150,000. How do they achieve those revenue levels?
Start with Express Pigeon. Their core offering – email marketing services – are similar to well-known brands like Mailchimp and Aweber. Express Pigeon currently offers a free tier (0-500 subscribers) and paid tiers that range from $10 to $6800 per month depending on subscribers and total emails. Despite that wide range, most Express Pigeon customers are paying $500 to $1,000 per month. Express Pigeon also offers custom development and professional services to help customers implement their campaigns.
How does Vero compare? Like Express Pigeon, their average customer pays around $500 per month. That’s where the similarities end. Vero does not have a free tier, and the company’s pricing tiers range from $99 to $1049 per month. The lack of a free tier probably means that the company does not worry about attracting small budget-minded customers.
The main use case for Vero lies in retention and engagement – a way to maintain relationships. This positioning makes Vero closer to CRM than traditional email marketing. Vero’s feature set includes standard options like scheduled newsletters and HTML templates. More importantly, the company has partnered with provided like SendGrid and Rackspace’s Mailgun to improve deliverability. Your email marketing only matters if recipients receive those messages.
Customer Acquisition Cost: Pure Content Marketing vs. Paid Marketing
How do these compare when it comes to acquiring new customers? It’s interesting to compare them because they have a similar customer base – both have fewer than 1,000 customers as of their interview on The Top podcast. Vero manages to get by with just two staff dedicated to sales and marketing – impressive when you consider the company bootstrapped for five years (2012-2017). How do they do it?
“We’ve had a content marketing driven approach with two people dedicated to marketing. We’re also working on improving our SEO. Right now, we don’t have any paid marketing,” explains Chris Hexton, co-founder and CEO of Vero on his June 2018 interview on The Top podcast. What does Vero’s content marketing program look like? Their blog has three categories: product updates, How To’s and Case Studies. A notable content marketing win for the company was a guide to writing better emails (i.e. 40 Tips for Dramatically Better Emails) which attracted over 100,000 views. Classic how-to content works! Unfortunately, most of the company’s 2018 content has focused on product news and updates which tends to attract less engagement.
Express Pigeon takes a different approach – they emphasize sales and paid marketing. “We have one sales person on our team. We’re using ZoomInfo, CRM and lots of sales calls. At most, we’ve spent about $3,000 to $4,000 a month in paid marketing. Our larger customers take time to acquire – closing one of our largest companies took 18 months to close,” Igor Polevoy, President of ExpressPigeon, explained in his June 2018 interview on The Top podcast. Working the phones, cold emails and old school methods are still proven ways to sell software even in 2018.
From a revenue standpoint, ExpressPigeon faces one significant risk. The company has some large customers: “A few customers make up over 10% of our total revenue, and that’s troubling,” Polevoy commented. These large customers make it more difficult to understand the company’s 4% monthly logo churn. What if a few of those disproportionately large customers left? That could do significant damage to the company’s growth rate.
Does It Make Sense To Spend Months of Sales Time To Close $5,000/Year Customers?
That 18-month deal was with a company that sends millions of emails per month and formerly used Mailchimp. I’m sure that was an extreme example, but it is a worrying sign nonetheless. Taking over a year to land a customer might be fine if you’re selling jets, but it may not be sustainable for a private SaaS company especially when an annual customer value is only $6,000 to $12,000.
Other marketing software companies can charge higher prices. Take TrackMaven for example – the average customer pays $25,000 per year, and the average contract value is growing year over year according to Allen Gannett, founder, and CEO of TrackMaven. At that price point, achieving positive ROI on a small sales team is almost easy, even if you have a long sales cycle.
For email marketing companies, long sales cycles to close $5000 per year customers may not make much sense. Think of it like this: if you a two person sales team that costs $200,000 per year, how many deals do they need to bring in to sustain a positive ROI? For a $5,000 per year customer, you are looking at more than 40 deals per year. Bringing the sales cycle time down to a matter of months or faster is one way to improve growth for these companies.
Building A $1 Million ARR Company With Under 1,000 Customers?
What does it take to achieve $1 MM ARR? When you are building a brand new product, that prospect may feel distant. In fact, achieving that revenue level is straightforward when you are earning $6,000 per year with each customer. At that level, less than two hundred customers delivers a million dollar business. Continuing to grow after that point is a different story. If you keep your payback period on CAC at a reasonable level – such as 6-12 months – you can keep growing. Even better if that growth mainly relies on paid advertising and self-serve sales. If you require a sales interaction for each sale, scaling will require expertise in building a good sales