Swipe Files - 📂 The ROI of good design

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Today's newsletter is written by my Conversion Factory cofounder, Zach Stevens.

He's the best designer I know and has deep experience with SaaS.

I’m not a numbers guy, clearly.

I went to school for graphic design and the last legitimate math class I took (unless you want to count “Number Systems of Elementary School Mathematics” from my sophomore year at SDSU, which I didn’t even open the book for and still got a B+) was over 10 years ago.

BUT, I’m keen on quantifying impact. Specifically, the impact branding has on a SaaS company’s performance.

I came across an article from Webflow that listed out 8 SaaS metrics that founders should be monitoring closely. All of them are relevant to the health of a SaaS brand, but I’m going to call out the top three that I believe a good brand identity will have an impact on.

Customer Acquisition Cost (CAC)

Customer acquisition cost is a calculation of the total share of marketing costs divided by how many customers actually sign up for your product.

Some quick dummy math:

($10,000 spent on a marketing campaign) / (100 new users from campaign) = $100 CAC

How does branding impact this metric? The purpose of brand identity design is to establish trust and to do it fast. If a prospective user clicks on an ad, goes to your site, and everything is a jumbled pile of crap they are not going to trust you and will not buy from you.

Sure, they might buy later after hearing that your product is actually worth it, but that takes time and someone with influence over this user to be your advocate.

As a result, you spend more on ads, more on outbound marketing, and more on sales only to have a user get to the base of your funnel and pass.

That’s wasted money and time.

Building a strong, intentional brand identity and applying it to all touchpoints makes your SaaS look legit, organized, and worthy of trust from the first impression. Increased trust means less resistance in buying decisions and therefore, a decreased CAC.

Churn

Churn is the rate at which customers leave your service. Expectedly, there is a healthy range that a SaaS will experience (5-6% according to Webflow), but anything over 10% is a red flag.

Now, we can’t address the subject of churn without first talking about the abundance of choice users have in software products, which is only getting bigger (with 30% YoY market growth).

Users have no shortage of replacements for you and unless you connect with them emotionally, they will resort to choosing products based on other factors like price.

Developing a strong brand identity means that you have crafted a personality that your users cannot find anywhere else. Sure, they might find a product with similar features, but if they’re a stick in the mud and you’re awesome, they have more incentive to choose your brand.

It’s a lot like finding a spouse. There are billions of options, but there is only one person who makes you feel the way your significant other does.

Your brand is no different. Users will show loyalty to brands that not only satisfy their needs, but delight them.

Which is a perfect segue into the last metric.

Customer Lifetime Value (CLV)

Customer lifetime value will tell you how much revenue your business will gain from the entirety of an average customer’s time paying for your service.

The impact of this metric cannot be understated because it’s the best demonstration of brand loyalty and the revenue derived from it.

More dummy math:

($100 annual subscription) x (5 years of subscription) = $500 CLV per user

And a personal example:

I’ve been an Adobe Creative Cloud subscriber since I was 20 years old. Over the course of my 8 years using the software, they have netted $2,500 from me in subscription fees and I’m just one user.

Conservatively, if they continued supplying me this service for the next 30 years, they’d get a total of $14,500 over the course of my career. And because they have developed a brand with devout users who love their products, it’s safe to say they’ll get it.

More importantly, I recommend their software to new designers and others who want to level up their design game from Powerpoint or Canva. Which is not something I would do unless I actually liked their brand.

It’s important to recognize the difference between users “sticking with you,” and being “stuck with you,” on this subject. Unless you have a brand that users want to keep in their life, you run the risk of letting a competitor eat your lunch and letting low-hanging fruit (like referrals) splat all over ground.

Core Takeaway

It’s easy to look for factors that are further downstream when it comes to these metrics.

You can look at where you are running ads, do A/B testing on your landing pages, examine the user experience of your product, and many others.

Or you can go upstream and see if there is something more strategic (cough, your brand, cough) that is tainting the entire flow.

Because the truth is, none of those downstream efforts are going to work well unless they are all unified by an intentional, differentiated brand identity that your users enjoy.

What did you think?

—Corey

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