Now a question for SaaS startups: you started a project, well done, but do you understand that you need to create demand for your services for several years before it may appear? Or have you found an existing source of demand and want to appropriate it, squeezing it out from a competitor in a tough fight? Do you understand it? Great, but did you forget to include the costs of these long and expensive events in your business plan? Haven’t forgotten? That’s cool, but are you really sure the investment is enough to get you through those skinny few years of actively fighting your competition?
A great classic “why?” problem. In 2013, I spoke with dozens of startups related specifically to B2B SaaS, and when asked why you spent time on this, most of the founders nodded their heads and sparkled in their eyes – yes, we don’t know how to do anything else except how to program. The number 2 reason for creating a “startup” is that a client came, asked, did it, put it into production, called it a startup and became fashionable guys. Although, you know, as a result of this approach, solutions get into the “crimson ocean” (a complex busy market in which you can find your niche. For example, we created an email banking solution to notify customers about transactions.
An attentive, but not experienced SaaS reader, will surely have doubts that it takes several years to generate demand. OK, this is a good line of thought, so let’s deal with this issue in more detail.
The first thing to understand is that SaaS is a business of building a pipeline that produces very inexpensive and uniform services. The low price deprives you of two important opportunities for successful sales. First, you don’t have the money to customize the service for each client. Second, you do not have the opportunity to mess with the client, personally teaching him how to work with your solution. In the end, all you can offer to the client is to build a unified service with a trendy user interface design, a template-driven sales force, and not the highest paid support desk.
My thesis is that SaaS is not a solution, but a solution-based service. The solution may be less functional, like, for example, CRM SalesForce, but the service based on it is much more in demand than, for example, the CRM solution from Siebel.
We go further. The second thing to understand is that the elasticity of demand in B2C is fundamentally different from the elasticity of demand in B2B. If it is not difficult for a person personally to slightly change their habits in order to use a SaaS service, then for a company, even for the smallest one, such a change is a difficult task. Therefore, as soon as you bring a mega-cool B2B service to the market, if in order to use it requires changes in business processes for your customers, you will inevitably be disappointed. Companies will either blow the brains out of your salespeople, but never reach a deal, or will churn after 1-2-3 months, as soon as they understand what your service is forcing the company to do. And only in the event that the owner of the company realizes that by changing the company, he will earn more money, he will find the strength and time to change the established order of things so that it matches the one that your service imposes.
start selling solutions to employees or departments? So, by the way, many ISV SaaS do – amoCRM, Megaplan.
These companies work for B2B. Business changes slowly. These companies are trying to enter the company through individual employees. It’s right. However, after the sale, if the business is not ready to use the solutions, changing for them, then these customers will churn.
We move on. The third thing to understand is that micro businesses, the main consumers of SaaS services, are changing quite quickly, so you must constantly be aware of how the needs of your target audience are changing. In other words, if you have found and digitized the need, but it took you 9-10 months to implement the service, it is not at all a fact that when you offer it, it will be in demand – people will live with completely different problems. Therefore, you need to prepare for this state of affairs: quickly make a prototype of the service and test it on your potential customers. It may be necessary to conduct a series of development/testing iterations to find real needs. It’s expensive, yes, but it’s one of the few things that will help you create a service that customers really want.
All ISVs attach the SMB label to their decisions, and few have seen this SMB, and most of them live in the belief that the SMB is the statistics of the State Statistics Committee. Of the controversial – the price of the issue can range from $ 3 to $ 100 per month, and this even more affects the elasticity and will eventually lead to “industry collusion” of developers. Those. is there an answer how much a relatively massive SaaS service should cost. To reduce the price, I will add that the functionality is not all strongly needed by micro-businesses. I already wrote about this in my first part of the SaaS saga – for example, why does a team of 10 people need access rights – they know each other and the degree of trust in such teams is super high.
But let’s move on. We take out popcorn and swallow the third portion. After we talked about such non-obvious things as “SaaS business is a low-margin pipeline”, “SaaS / B2B has inelastic demand” and “businesses quickly change in terms of their needs”, it is time to talk about such a phenomenon as the “demand gap”.
A fairly well-known analytical company, Garnter, releases a bunch of all kinds of waste literature every quarter. Often, this literature is replete with the so-called Garnter Hype Cycle on various types of innovative products. My free translation of the name of these diagrams is “the trajectory of “sobering up” expectations”. Garnter Hype Cycle charts are based on the well-known pattern of ups and downs in demand for any innovative product. To make it clear what I’m talking about, I found Hype Cycle on the Web, dedicated to family relationships. It is based on the same pattern as the Garnter Hype Cycle, i.e. has the same stages and form, for this reason it can be understood even by you, Alexey…