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Archive for the category: SaaS Blog

The Software as a Service Sales and Marketing Machine

Here is a picture I find myself drawing often. It is closely related my last B2B SaaS post regarding old enterprise habits, but it is actually much more general. Most Web application / Software-as-a-Service companies will find themselves spending up to 50% of revenue on sales and marketing. But, how much should you spend on sales vs. marketing. And, how tightly integrated do these two functions need to be? Of course it is common wisdom that sales and marketing need to work together, but this need is acute for most Software-as-a-Service companies. In enterprise software, where the price point is $100-500K per transaction, the marketing organization is only loosely coupled to revenue through lead generation, messaging /collateral / website, and generating awareness through events and PR. Contrast this with a consumer application, where the tables are turned completely and what sales does exist typically takes the form of partnering and business development—which may be revenue generating, but is not aimed at closing revenue directly, i.e., getting more users.

Software as a Service Sales and Marketing

Most B2B SaaS offerings and B2B2C Web applications (e.g., email marketing, Gadget platforms, online survey research, customer and channel support, etc.) tend to fall right in the middle of this graph. One reason for this is subscription/transaction- based pricing (as opposed to a three year, 1000 user enterprise agreement), as well as the general expectation of a Web or SaaS application to cost significantly less than software. The result is that SaaS companies must continually strive for reduced selling costs, increased marketing efficiency and tighter sales-marketing integration to create a revenue-generating machine—often by leveraging technology to automate as much of the sales cycle as possible from awareness to trial to acquisition and even through to support and add-on selling.

Crossing the Chasm in Software as a Service

Most software executives are familiar with the concepts of using the “bowling alley” strategy to usher a new product through early adoption to market acceptance as presented by Geoffrey Moore in his book Crossing the Chasm. However, they may not be aware that this strategy has unique pitfalls when it comes to launching an on demand Web application. When you introduce a new product, the initial design often needs minor (or major) adjustments to gain general market acceptance. In addition, target customers may have requirements that are unique to their segment or that conflict between segments. In order to resolve these issues, a vendor will enter a number of iterative cycles of trial, feedback and revision of the offering with representative customers. Moreover, in order to “cross the chasm” it becomes critical to capture reference customers to begin the process of dominating each “bowling pin” segment.

In these early stages, the company must engage in strategies and behaviors that are the exact opposite of the ideals required to achieve the highly efficient, low cost, high volume, commodity-oriented execution required to deliver a successful on demand application. Read more »

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