Is a Software as a Service (SaaS) model right for your organization? Peter Cohen, Managing Partner with SaaS Marketing Strategy Advisors, stops by to discuss the reasons to (and not to) transition your product to SaaS, with details on some of the agile marketing and social media strategies to consider. For more from Peter, visit his blog, Practical Advice on SaaS Marketing, and check out his previous podcast on the top SaaS marketing mistakes to avoid.
Brendan Cournoyer: Hello everyone and welcome to Labcast. In this episode, we’re joined once again by Peter Cohen, Managing Partner of SaaS Marketing Strategy Advisors and publisher of the Practical Advice on SaaS Marketing blog and newsletter. Thank you very much for joining us today Peter.
Peter Cohen: Thanks for having me.
Brendan: So last time you were in, we talked about some of the SaaS marketing mistakes and pitfalls to avoid. Today we’re going to talk a little bit more about some SaaS marketing strategies, and we thought we’d start with the first question: How do you decide whether or not you even want to offer a SaaS solution? How do you come to that conclusion, whether it’s right for your organization?
Peter: Well, first it’s an excellent question, and I have to say sometimes I talk with people who are with companies that are thinking about moving into SaaS and they haven’t asked that question. They sort of get captured by the potential opportunities in SaaS and the fact that it’s a very high profile area these days. But then they start asking me questions like, “How do I continue to sell my existing business and then add on the SaaS solution? Or is there a way for me to structure my SaaS contract so that I still get an upfront payment?”
They started asking these questions, and it began to dawn on me that maybe what they really wanted to do is say, “How do I do this SaaS stuff, without really doing SaaS stuff?” So what I would say to these folks quite frankly is, “Look, there are a lot of good reasons to do SaaS, but they may not necessarily be good reasons for you to do SaaS. And frankly, if you have a very successful on-premise business model and you don’t need to do SaaS, don’t.” There’s nothing mysterious about that or good or bad. If it doesn’t work for you, just don’t do it.
Peter: I do try to help these folks and lay out some reasons like, “What would cause you to do SaaS? Why would you need to do SaaS?” I’ve identified a few reasons that I think people should think through really carefully. One is competitive pressure. Obviously, if your competitors are offering a SaaS solution and you’re losing business to these competitors because prospective customers prefer the SaaS solution over the on-premise or a hosted solution, then clearly that’s a good reason to consider a SaaS solution, adding that to your portfolio. The other and obviously related reason is if customers demand it. If you have customers who are demanding that you sell them your solution on-demand in a SaaS model, always a good idea to listen to the customers.
Peter: It’s kind of a no-brainer. A third reason, this applies primarily to small companies, startups and those folks, if your investors demand it. So, if you’re looking for venture funding, for example, oftentimes venture firms, at least these days, are more eager to invest with companies who are delivering their software as a SaaS model as opposed to a traditional on-premise. So, in those cases, that’s a good reason to do SaaS.
Peter: The final reason is that there maybe things that you can do in a SaaS model, features and functions, that you can offer in a SaaS model that you can’t do in a traditional or are more difficult to do in a traditional, on-premise model. I’m thinking of if you have an application that’s updated frequently and has to be distributed to a remote workforce. I’m thinking about expense report software or something like that or CRM in many cases is a good example, where you have a sales force dispersed around the country or around the globe. That’s the SaaS model, where you access it remotely via any browser. That makes an awful lot of sense for the SaaS model. In other words, it’s just functionality that you really can’t or it would be difficult to deliver in an on-premise model.
So those are four good reasons that people would move to SaaS. I mean, don’t get me wrong. I try not to discourage people from going to SaaS, but think through it really carefully, because the transition, if you have a successful model, on-premise model, the transition going over to SaaS is not painless. So think carefully about it.
Brendan: Well, let’s say that they did think carefully about it. They’ve come to the conclusion that SaaS is the road they want to take. You mentioned before that there are some considerations, particularly involving the Org Chart, how a SaaS model can really change the Org Chart. What exactly did you mean by that? What are some of the things that people should be aware of?
Peter: Yeah, that’s a good example, when I say that transition isn’t painless. There are big changes that have to go on, and one of them that I’ve found is with the organization, within your internal organization as a vendor. When you looked at Org Charts, traditionally they had these nice boxes and they’re well separated and there are lines, and every once in a while if you had sort of a more complex organization, you had dotted lines between these boxes. But basically, the boxes were separate. Well, that whole model of the nicely organized Org Chart kind of breaks down in the SaaS model. As I like to tell people, it sort of takes those nice boxes and it smooshes them all together in a lot of cases. Let me give you some idea as to what I’m talking about
Peter: So, marketing and sales is a traditional one where you used to have the marketing box and you had the sales box. In the SaaS model, you can’t afford to have these two separate boxes where oftentimes they’re sort of sniping back and forth across each other. The marketing guys are saying, “You sales guys are not closing business.” The sales guys are saying, “Your leads are no good.”
Peter: That sort of stuff. You just can’t afford that. The SaaS business model requires really close coordination between marketing and sales, and to have these sort of separate boxes where they work in different organizations, with different objectives is just a failure. So that’s one idea of how these separate boxes get crunched together. A couple that are not quite so obvious is customer support, that organization and the sales organization. It used to be right that the salesperson sold the software. Then they handed it over the wall. Customer support group went and deployed it, and they maintained it and answered all the customer support questions over the lifetime of the software. There wasn’t a whole lot of back and forth or that sort of stuff. There was the one hand-off between sales and customer support and that was it.
Well, in the SaaS model it’s different. In the SaaS model, this customer is under subscription. So they need to renew them, that is sales essentially needs to go resale the existing customer whenever the subscription expires. The business model, in most cases, requires renewal to be successful. So your customer support people, they’ve actually become part of the sales process.
Brendan: Certainly. Yeah.
Peter: If the customer is not happy with support, then they’re not going to renew and you’re going to basically lose that sale of the customer. That’s a second example that I point to a lot, where the boxes get mushed together.
A third one I actually think about, and it took me a while to sort of grasp this, the user experience team and the marketing team. The user experience is those guys who do the great graphics and icons and navigation and all that kind of stuff that they do on the product. The marketing group, they need to be on the same page, and it’s usually helpful if they understand each other. The reason is frankly that . . . let me put it this way. If there is a poorly designed product, it’s really hard to sell, and certainly hard to renew again.
Peter: Remember in the SaaS model, you’ve got to renew it.
Brendan: They’ve tried it.
Peter: Exactly. If they’ve seen it and they go, “Wow, this is really complicated. I don’t get it. There are too many bells and whistles, or there are too many buttons, or the thing is laid out poorly or what have you.” It just makes it really, really hard for the marketing folks and the sales folks for that matter to renew. So, again, the marketing team and the UX team, the user experience team, need to be on the same page and in sync. If they’re not working toward the same goal, then it’s really hard to be successful.
I had some fun one time, just sort of thinking about these boxes smooshing together and the effect on titles. In fact, I heard this one speaker talking about his first hire, he had a SaaS company he was building. His first hire, it wasn’t like the VP of Sales, VP of Marketing. His first hire was as somebody, he called the title Vice President of Customer Experience.
Peter: Yeah. Actually, when you think about it, it makes an awful lot of sense. This person was going to be in charge of delivering a high quality customer experience for those users so that they would renew and make it easier to sell. So, a few others, the Vice President of Customer Support would really kind of morph into the Vice President of Customer Retention, because it’s not just support. It’s kind of a combination of support and sales and marketing. So VP of Customer Retention made a lot of sense for me.
Brendan: So SaaS is just spawning new VP roles it sounds like.
Peter: Exactly, all kinds of new titles. So all the traditional things get tossed out the window.
Brendan: Very cool.
Peter: Yeah. It’s just the ways you think about this stuff that. It’s just an indication of how different the model is and has a pervasive impact throughout the entire organization.
Brendan: Right. When we talked in your last podcast, we talked about how different the model is. We talked about the way the marketing strategy is very different for a SaaS model. So let’s talk a little bit more about some of the marketing strategies and considerations, first about, as far as agile marketing considerations for software as a service.
Peter: Agile marketing, yeah, this is a concept that I sort of borrowed, and some might say stole from the development folks.
Brendan: We’ll say borrowed.
Peter: Borrowed. Okay. So borrowed and adapted – let’s be generous – from the development folks. The development folks, in SaaS organizations in particular, have been moving away from the traditional waterfall approach to this agile development methodology to build software. It’s not like they would build this big honking thing, 18 months, 2 years, 3 years or however long it took to bring this software out. Instead they were doing these agile development scrums and sprints and all these other athletic sounding terms.
Peter: They would be bringing out new enhancements to the product every few weeks in some cases. Not even every few months, but every few weeks they would be bringing out new enhancements to the product. Well, I found that there needed to be some corresponding agile methodology for marketing, just to keep up. In my old days of doing marketing for these traditional organizations, you would gear up organization to have these big launches every 18 months or what have you, and then you’d kind of slow down and you would regroup and then you’d gear yourself up again. Well, you couldn’t follow that same process with a product that you’re updating every six weeks for example. You would just run out of gas. You’d just completely be behind all the time. You’d on the wheel of death, basically. You just couldn’t possibly keep up with that cycle. So you had to get faster. That’s why I like this kind of idea of agile marketing. It really requires you to be much, much faster, not go on a marathon pace, but kind of go on a sprint pace and do stuff really quickly and then kind of go do it again with every enhancement.
The other thing I liked about the agile concept is it’s more flexible. You’re kind of in the mode of let’s try some things, see what works, measure it really, really carefully. If it works do more of it, and if it doesn’t, don’t do it anymore.
Brendan: A lot of quick reevaluation of what happens, right?
Peter: Exactly. It’s almost like trial and error. Although you’re measuring really closely, but don’t be afraid to try stuff. If it doesn’t work, move on.
Peter: The other part that I like about it is it’s sort of like you toss over all the dogma, all the stuff that you thought, well, everybody says this works, so let’s do it. Let’s do direct mail. Let’s do pay-per-click. Let’s do whatever. You pick it. It all sort of like tosses that out of the window. Sure, by all means, try it. Try search marketing, try webinars, try whatever you want to do. But then measure it and find out if it works. It’s so funny. There are examples I’ve found of companies that take the absolute, tried and true, cannot fail search engine marketing or pay-per-click, for example. Then they’ve tried it and they’ve run the numbers, and they say, “Wow, that didn’t work at all. We were paying like $500 to get a customer, and we’re only going to make $200 over the life of that customer. Let’s not do that anymore. Let’s do something else.”
The other thing about flexibility is that you need to do it because not only do some things work for some companies and they don’t work for other companies, but sometimes things that worked yesterday, don’t work today. So keep trying different things, and then go back and revisit them and see, well, does that work anymore. Find out if your numbers are saying, “Yes, this used to work to generate a bunch of leads and convert them into customers, but this year it’s not working so well. So let’s try something else.”
Brendan: Well, as far as trying something else or something new, something that’s new for a lot of companies, even though many have been doing it for a while, is implementing social media as a part of their marketing strategy. We’re talking about like an SEM campaign that didn’t really work. Well, social media is one free way that a lot of organizations are taking advantage of. But it depends a lot on what kind of company you are. For a SaaS model, what are some of the opportunities out there as far as social media is concerned?
Peter: Yeah, sure. Let me confess that I was at first really skeptical about social media in a business context at first. It’s taken me a while to warm up to this, and I’ve tried it in my own business and I found out actually some things do work. So I guess I’m a convert now. Although, I tell people, “Don’t get too excited and try to do everything all the time. Pick one or two of these, a blog or Twitter or Facebook or whichever one you’ve picked, do one or two and do it really, really well.” Then maybe you want to expand it, go beyond that.
Brendan: No, I agree absolutely.
Peter: Pick a few. The things I like about social media as a particularly good fit for SaaS. One is it, because if it’s used well, it can facilitate a good conversation between the company and the customer, so sort of this back and forth. Now, what you’re trying to do in the SaaS model is build this long-term relationship so that people kind of get comfortable with you, they trust you as their provider, and they renew over a long period of time. Renewing customers is kind of the Holy Grail here. So to the extent that you use social media to enable that back and forth conversation, it’s really, really effective. The thing in particular I like about the social media is, in general, it’s interactive. It’s not just company broadcast to customer.
Peter: A company broadcast again to customers. It’s not one way. It’s a back and forth. You can talk back and forth.
Brendan: And it has to be that way for it be really successful.
Peter: Exactly. That’s a relationship as opposed to something else. The other thing, from a communications point of view, that’s interesting is that it’s not just company to customer, sort of back and forth, but it’s side to side. Customers can talk amongst themselves. They can share experiences back and forth, the tips and tricks, and sometimes those experiences extend beyond the conversation about how to use this particular piece of SaaS solution. It might just extend to something else. But it’s kind of a nice media to facilitate that side to side conversation as well as kind of company to customer, which I like.
The other thing that I find really, I guess I’d say, refreshing about social media is it speaks in humanese. It’s like people talking to each other. Generally, as you read these, the good discussions I’ve seen on social media are like people speaking to people and not corporation speak. It’s not corporate speak, which I think again, if your objective is to build a relationship, that’s much more normal.
Brendan: Right. People tend to be more honest too in those situations, when you kind of personalize it and make it a little more informal. You probably get better feedback.
Peter: Exactly. I mean, you really do. You get better feedback, and you sound like you’re making human decisions about how you build the product and why you do what you did. It doesn’t sound like some sort of sterile, antiseptic, big corporate thing. One last thing I will say about social media is the tools are really, really good, but what I end up finding the real value is not just learning how to use the tools well, how to use Twitter and Facebook and other social media well, but also kind of adopting the whole attitude. It’s more than just a technology. It’s really the whole attitude that lets you use these well, and that’s a good lesson I think to take away.
Brendan: Well listen, Peter, thanks very much again for coming in and for providing this insight for us. I’d love to give you this opportunity to tell our listeners how to find more from you on your blog and your newsletter. They can go to your site and check out some more information, correct?
Peter: Sure. Thanks for the opportunity to talk with you and talk with your listeners. To find out more and I write a blog called Practical Advice on SaaS Marketing. If you put that in your search engine, you’ll find it. There’s also a newsletter I do monthly. I talk about the topics, many of these same topics as we talked about today. Or you can find me on my website, which is SaaSMarketingStrategy.com. Again, it’s Peter Cohen from SaaS Marketing Strategy Advisors.
Brendan: Excellent. Well, thanks again for coming again. We appreciate it, and we look forward to doing it again sometime soon.
Peter: That’ll be my pleasure.
Brendan: All right. Have a great day