With advent of SaaS and cloud based applications in the market, trend is pretty much evident that most of the business applications will be based on SaaS (Software as-a-service). SaaS marketplace is expected to become more and more crowded.
What does it mean by typical SaaS product company ?
- Pricing mechanism is $ x per unit of time , either monthly, yearly, quarterly.
- Software is hosted on cloud.
- Software functionalities are mostly standardized , with minimal customizations for clients.
- Acquire customers based on ‘networking’ effect and typically very lean – in terms of management/product development team.
Point no. 4 is very interesting for today’s topic.
Consider you are SaaS company based out of India/Germany or even US. Yours is very lean company in terms of product development/marketing teams.
How do you acquire customers – first or even tenth customer ?
You simply can not have luxury to build elaborate marketing teams like ‘boots on ground’.
Let us discuss key players in SaaS marketplace.
- SaaS vendors – Let us consider that it’s ‘Your Company’ for the moment.
- SaaS buyers – Typically end customers of your product e.g. If you are in healthcare domain, then they are typically doctors/physicians/hospitals based on your target market.
- SaaS resellers – They act like ‘middlemen’ who can pitch your products for a commission. They act as ancillary to your marketing department.
Let us find out these parties interact in the marketplace (or even get to know each other ?).
SaaS vendors typically rely on media advertising (digital as well as non-digital) to publish their work. They try to reach out to buyers directly or either via re-sellers. Buyers start with ‘need’ of the product, then use their network (in traditional terms ‘Word of Mouth’) to validate/try SaaS products. Resellers use their network/influence to sell it to the Buyers.
Now, the question is –
If you are launching SaaS product, how do you know that you have connected to right re-sellers/buyers ? If you are making product applicable across geographies, then you will have added complexity around building such networks.
It partly answers why typical SaaS companies take long time(2-3 years in general) to reach from $10 MN ARR to $100 MN ARR. It takes same amount of time to build mature/scalable marketing model.
Here are some of the ideas to expedite that process.
- Start early. You should ideally start thinking about marketing plan as you outline business case – much before you write the first line of code.
- Study competition. Know their marketing model. How are they reaching the customers.
- Its all about ‘Word of Mouth’ – still most sales happen when you have that ‘reference’ customer. Put him upfront of your sales pitch documentation.
- Consider networking effect – if you have 10 customers today for $10 MN ARR, you should either have $20 MN revenue from same customers or have 50 customers on-board. Its very important that you consider ‘upsell’ or ‘multiply’ strategies.
- Finally, watch out for your churn in customer population – who comes in and who leaves (& why).