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B2B SaaS Flies in the Ointment – Not enough leads – Part 1

There are many roadblocks that can get in the way of getting leads in the door. But, before we consider these, ask yourself this: “Is my market really big enough?” You would be surprised at the number of vendors jumping on the SaaS bandwagon without a real handle on the size of the market they are really addressing, or the impact market size will have on their ability to deliver their service profitably.

Given that most of the Fortune 1000 IT departments are still trying to swallow the alphabet soup of enterprise software (ERP, CRM, BI, RDBMS, WMS, RFID, ASP, .NET, J2EE, etc.) they have purchased over the last fifteen years, you are unlikely to make much headway with this group as early adopters. For this reason, most B2B SaaS vendors have been honing in on the small to medium-sized business (SMB) market and small, independent functional groups within larger companies. This is the tried and true model of the companies that have been successful securing customers, such as salesforce.com and NetSuite. However, many SaaS applications are not as generic as CRM or ERP, and even these applications can have dramatically different requirements across SMB segments.

Most SMB’s do not consider themselves “SMB’s,” but instead identify closely with a specific, and generally highly fragmented industry sector such as retail fashion, toys, food distribution, hospitality, moving and storage, plumbing, HVAC, instruments manufacturing, and software startups to name just a few. Therefore, careful market segmentation analysis is often required to identify those customers with sufficient business need-ROI and business process-product function alignment with your SaaS offering to drive a purchase at a low enough acquisition cost that is profitable for your business model. In addition, all these “sweet-spot” segments must add up to a big enough mass market for you to achieve the inherent cost advantage of SaaS. It is your cost advantage that ultimately will motivate your prospects to switch over to your SaaS from their current way of doing things, be it manual processes, simple desktop applications, or a traditional enterprise application.

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