However, if the SaaS & Cloud computing industry is doing relatively well in this downturn, the recession has severely impacted the sales&marketing productivity of these companies, with longer sales cycle, smaller deal size and limited upsells opportunity. One way to measure this productivity is to look at the Customer Acqusition Cost ratio that I have defined in a previous post. Typically, you want this ratio to be close to 1.0, equivalent to a one year payback on your sales&marketing investment. If the ratio is lower than 0.33 (3 year payback), you really need to rethink your sales process.
The following graph shows the evolution of the median CAC ratio by quarter for the SaaS 13 Index. As you can see, despite the strong recovery in stock value, the productivity has declined sharply in the past quarter and the figures do not show at this point that the bottom has been reached.
However, as the second graphs shows, some companies such as Constant Contact, Vocus or Salesforce do start to show a stabilization or an improvement in their productivity metrics. Just some food for thought as you build your investment portfolio...
The historical CAC trends are now available on the Google Spreadsheet that you can access by clicking on this link and I have also posted a live feed on the CAC ratio trend on the left column of the blog.
