Marketing is the most critical growth lever in the early days—sub-$1M ARR especially. But once you stabilize? It’s not your best lever anymore.
And I think this is a really hard concept for especially first-time CEOs and founders of SaaS companies to wrap their minds around. Because it doesn’t seem like it should be true. But it absolutely is.
It doesn’t matter how much money you put towards marketing. You can dump as much as you want. But if it’s not good, if it doesn’t solve the problem, if people don’t love it, don’t stay, don’t want to pay? None of that matters.
All that money you spent on marketing? You basically just lit it on fire.
This is especially true once you cross the $1M ARR threshold. Marketing becomes a player on your team. But it’s not the captain anymore.
Let me break down why—and what you should be looking at instead.
From the boiler room to the captain’s deck
I want you to imagine you’re in the boiler room of a cruise ship. You’re shoveling coal, pulling levers, turning cranks. You’re sweating, you’re running between all the different stations. That’s you up until your first million in ARR.
By the time you get to that first million, now you’re in the captain’s deck. You’re at the top, and you’re looking out at everything. Hopefully by now you’ve got people helping you—crew filling the boiler room, helping customers (your cruisers, so to speak), making sure the experience is what you want it to be.
Some founders I think get stuck in the boiler room. They never make it out of the hustle space. They never make it out of operating purely on founder mojo and vibes—which is very highly intuitive, very gut-based. That’s what you should be doing in the early stages.
But there has to be that transition moment. When that happens, you almost have to look at the boiler room as: okay, there are parts of a system here. And it’s not just going to be the one thing. It’s going to be several things to make the ship go in the direction that we want—and to provide the experience that we want.
You have to have crew. You have to have staff. There are people in the kitchens. There are people cleaning the aisles, swabbing the deck, making sure everything is efficient and timely. All of those things contribute to the experience for your customers.
When it comes to marketing and customer acquisition, shoveling more coal in the boiler room will certainly make you go faster. But that doesn’t necessarily mean you’re going to end up at the destination that you want—especially if no one’s driving the wheel. Especially if no one’s thinking about: great, we can put all our resources here, but your passengers are on the Lido deck asking, “where’s the entertainment? What am I here for again?” And they’re looking at the other ship across the way thinking, “man, they look like they’re having a lot of fun.”
The seven growth levers you need to understand
Once you get to that captain’s deck moment, your job is: okay, I can see all the levers. Which ones are on fire? And if they’re not on fire, what do we need to do? Which one do we pull to expand and grow the way we want to?
Here are the seven growth levers in a SaaS business:
1. Customer Acquisition (Marketing & Sales)
This is what we traditionally think of as “growth.” Getting people to buy tickets to your cruise ship.
2. Activation
Now that they’re on the cruise ship, how do you get them to take advantage of all the really cool things you’re going to offer them—to give them the experience that they want?
It’s not enough to just be like, “okay, great, you got your ticket, bye.” No. You need to get them to the bar, to the show, to see the special guest comedian. That’s what activation actually is.
And here’s what’s important: Product is ultimately what you’re offering. Activation is the process of them experiencing the product and getting the value to start.
3. Retention
They want to come back on your ship, or they want to stay on your ship. (Yes, there are some people who just live on cruise ships—that’s all they do.) But how do you get them to stay? You’ve got to ensure they activate, you’ve got to ensure they get the value, that it’s in alignment with them, and that it’s so great they want to keep doing it and do it again.
4. Monetization (Pricing)
This is what you’ve charged them to gain access to your product.
5. Expansion
Once they’ve paid, if they would like more value and that’s in alignment with them, how do we get them to pay more? You can’t force everyone to pay more. But based on that person’s needs—do their needs grow over time? And if so, how do we make sure to meet those needs and potentially have them pay more for them?
6. Operations
How do we as a business deliver value to our customers while also ensuring that we’re staying afloat? How do we do both?
This goes all the way down to: What meetings are we running? How do we run the meetings? How do we work together as a team? How do marketing, product, sales, customer success, engineering, and support work together? Who makes decisions? How do we make decisions? Who’s responsible for what? All of that’s ops.
7. People
Who do we have doing these things to help us deliver value to our customers? There’s hiring, culture—all of those things go into your value delivery mechanism.
So there are five growth levers that are SaaS PLG-specific (acquisition, activation, retention, expansion, monetization), and two others (operations, people).
This is where you go from boiler room to captain’s deck. Your job now is: I can see all the levers. Which ones are on fire? And if they’re not on fire, which one do we pull to get the greatest possible outcome?
Three reasons over-investing in marketing doesn’t work
Once you understand these seven levers, here’s why you can’t just throw more money at marketing and expect it to solve everything:
1. The market never moves as fast as you move
The market is slow—it moves in almost this spiritual way.
Just because you dump a million into ads doesn’t mean people will buy and adopt as fast as you’re putting it out there.
Over-investing in marketing does not net out the same result. For companies at that $1M to $5M mark, the more they spend on marketing, the more they’re just burning resources. It doesn’t actually make things go faster.
The only time I find this isn’t true is when marketing was on fire for a long time. But if it’s not actively on fire, investing more probably isn’t going to get you what you want.
2. You have a limited addressable market
Your market is limited based on product. Your product is only going to be applicable to so many people.
There’s TAM, SAM, and SOM:
- TAM (Total Addressable Market): All the people you could possibly sell to ever. That’s the ethereal, magical number we don’t really know.
- SAM (Serviceable Addressable Market): People who could use your product out of the TAM. A little bit more applied and direct.
- SOM (Serviceable Obtainable Market): People who can literally use the product right now. That’s a fraction of SAM.
Only 5% of the market is actually ready to buy right now. Slightly more could buy right now.
There are only so many people who can buy right now. The only option is to expand your SOM. But SOM can’t expand unless product expands.
That’s why over-investing in marketing doesn’t make sense. Where it does make sense is if marketing is on fire, customer acquisition is on fire, and that’s a clear lever to address. Then yes, invest in it. But investing more after it’s stabilized or after it’s healthy and working? That’s a TBD situation—unless your product has grown enough where you can invest even more in marketing to attract more buyers, more different types of people.
3. All channels have diminishing returns
Literally all marketing channels have diminishing returns.
Sending more emails doesn’t necessarily get you more customers—unless it’s to more different customers. Running more ads doesn’t necessarily work. Running more ads to the same group of people definitely doesn’t work. Sending more emails to the same group of people definitely doesn’t work.
Doing more doesn’t make sense. That’s why you’ve got to look at other levers. It can’t all come from marketing.
Marketing and product: two sides of the same coin
Marketing and product are so intricately linked, they literally can’t do more without each other.
Marketing can’t do more without product growing. But product can’t grow unless marketing works—unless you’re actually acquiring customers.
To be fair, I think it’s a different type of weight. Marketing depends more on product than product depends on marketing.
Because marketing alone is not the thing that gets people to buy. It’s also pricing. It’s also activation. And it’s inherently product. You can’t put lipstick on a pig—and that’s extremely true.
The center of the universe for a SaaS company, especially a PLG SaaS company, is going to be product. There are certainly companies that have become successful with sales or engineering at the center. But for most PLG SaaS businesses, product is going to be—or should be—the center of the universe.
What I mean: it’s the foundational core of how the business exists. Everything has to work together and around it to support it.
The vice versa is also true. If product is not strong, then it doesn’t matter what levers you pull. It’s lipstick on a pig. And if people don’t want the pig, they’re not going to buy it.
Where to spend your energy when you’re in the captain’s deck
If you are in the captain’s deck and you’re looking out at all seven growth levers, here’s how to think about it:
Sometimes when you’re in the captain’s deck, you look out and you’re like, “activation is on fire. This isn’t converting as well as it should. We know that for a fact. This isn’t working. It’s making everything else inefficient.” It’s really clear: we’ve got to go fix that.
But sometimes you’re in the captain’s deck and nothing’s really on fire. And you have to ask yourself two questions:
- Is that because you just don’t know?
- Or is it because it’s true—and it’s really more about: if you were to unlock any one of these, which one would give you the greatest possible outcome? Which one would help you move the needle the most?
The best way to understand that is through hiring and working with experienced people. It’s either a consultant (could be someone like us), it could be asking your own internal leadership, it could be asking a mentor or an advisor to help you suss out and understand.
It could also be through your own education. There are plenty of resources—as CEO, especially first-time, part of your job is to learn as much as possible. As you learn more, you might realize: at first I was in the captain’s deck and none of this seemed on fire. But now that I’m learning more, actually we don’t have the right people on deck. Or actually our retention could be better. Our monthly churn is fine, but maybe net revenue retention isn’t great.
That’s the process. But what I will say is that’s impossible to do if you’re still in the boiler room. You can’t do that if you’re in the boiler room, because you don’t even see the Lido deck. You’re so focused on putting out fires down below that you don’t have the bandwidth or capacity to do that.
If you’re more than a million and you’re still in the boiler room, we’ve got to rethink some things. Because there’s a good chance that there are tasks and jobs you’re doing that could be someone else’s responsibility—and get you back in the captain’s deck so you can oversee the whole thing and see what’s going on.
The bottom line
Marketing is critical in the early days. You’ve got to figure out customer acquisition when you’re sub-$1M ARR. None of the other levers matter if you don’t have customers.
But once you stabilize and cross that million threshold, marketing becomes a player on your team. It’s not the captain anymore.
You’ve got seven growth levers to think about: acquisition, activation, retention, expansion, monetization, operations, and people. Your job as CEO is to get out of the boiler room, get into the captain’s deck, and figure out which of those levers is going to give you the greatest possible outcome when you pull it.
Over-investing in marketing doesn’t work because: the market doesn’t move as fast as you do, you have a limited addressable market, and all channels have diminishing returns. Marketing and product are intricately linked—you can’t grow one without the other.
So if you’re stuck and your first instinct is “we need more marketing,” pause. Look at all seven levers. Figure out what’s actually on fire. And then go fix that.
Thinking about your growth strategy and not sure which levers to pull? That’s something we help with at DemandMaven. Let’s talk.