I am now in the sixth law in Bessemer’s Top 10 Computing Laws with an emphasis in identifying the prospects that you are going to sell to. The old-fashioned way of selling software is changing in a fundamental way and this also reflects how you view software channels like I described in my previous blog entry and that reflects to Bessemer’s forth law (Law #4) of forgetting what you have learned of software channels. Let’s look at what this fourth law really means for SaaS companies.
Law #6: By definition, your sales prospects are online – Savvy online marketing is a core competence (sometimes the only one) of every successful Cloud business.
The reality in today’s world is that people are searching for products and services using search engines and making their buying decisions based on not only the information in the Internet, but also how other people are rating your product/service. Ten years ago when we were selling software for hundreds of thousands of dollars’ worth, CIOs and decision makers of the buying process did not necessarily go to the Internet and search for your track record of delivery and other key factors that are part of the decision making. I remember vividly that some our clients called organizations such as IDC, Gartner and Forrester to ask about the quality of our product as the digital footprint of a typical software vendor was very minimal.
This trend towards lead generation using search engine optimization (SEO), viral marketing, search engine marketing (SEM), email marketing are things that B2B marketers have been using for a while and traditional software vendors are only now trying to figure out to leverage it. Bessemer refers to organizations such as IBM, SAP, Oracle and their traditional ways of sales and how smaller challengers have a better opportunity to achieve visibility when compared to the large players. There are lots of good books about how the marketing and PR is changing like David MeerMan Scott and his book The New Rules of Marketing and PR: How to Use News Releases, Blogs, Podcasting, Viral Marketing and Online Media to Reach Buyers Directly.
What is changing is also that your web-site is no longer about your great looking graphics, but more about the content and relevancy to your audience. What really matters is what you have to say on your web-site and what type of action the site gives for the prospects that have an interest in your solution. Does your site let the prospect to take action? Based on some studies, even some SaaS companies are failing to lead the prospect to take action or even have something to act upon. This is amazing to me and one wonders if these companies just do not have the DNA of a SaaS company and therefore rather just execute on the traditional enterprise software sales methods. These companies will not survive in the long run and need to get new people onboard that have the right type of mentality.
Even email marketing is in a flux and during the last couple of years, I have seen people getting upset with email blasts that are not relevant to them and this will result in recipients becoming angry at your brand. Some people just do not get it, especially if your email addresses are not based on opt-in policy. This morning I was cleaning my email box from a person that seems to be sending crap to me every second day about topics that I do not care about. What gives him the right to do it? I have never requested him to send me anything and neither have I opted in to any of his web-sites. I hope he reads this blog entry and maybe shifts his thinking about his email marketing strategy.
Is email marketing dead? Probably not, but it is changing as we speak. Email marketing companies such as Exact Target and Constant Contact are acquiring social media solution providers to enhance their solutions with social aspects. Exact Target has acquired CoTweet and Constant Contact acquired NutshellMail. I personally believe that this is not only necessary, but it has to happen as the traditional email marketing needs to evolve to something that benefits the recipient and gives readers the ability to opt-in in a way that they want to such as using Twitter “follow” functionality.
Sales in the SaaS world have to do with getting your brand known in the social media space. That is where you are most likely going to be finding your new leads and that is where you need to convince your leads that your company and your solution/brand is something that they need to be paying attention to. Also, due to the change in revenue model in the software world, SaaS companies can no longer afford expensive inside sales teams like I discussed in my blog entry about sales learning curve and also about the financials in my blog entry of the top 6 financial metrics in the SaaS world that you have to be paying attention to.
Finally, the new way of marketing and creating awareness for your company gives you a tremendous opportunity even if you are a small player. Large companies just aren’t there yet with their social media strategies and if you are small and nimble, you can really make it big. Your SaaS sales have to be high from get-go, you have to generate leads and the old marketing methods are just too slow, so you might want to adjust to the new world of using social media.
Summary of our findings in respect to Business Model Canvas
Like in my previous blog entries in the Bessemer’s Top 10 Cloud Computing Laws, my objective is to relate this current law to Dr. Osterwalder’s Business Model Canvas.
When reviewing the nine (9) building blocks in the Business Model Canvas, the most obvious impact that the new sales models in the SaaS world has to do with Key Resources (KR), Key Activities (KA), Cost Structure (CS) and Revenue Streams (RS) but also indirectly on Channels (C) and Customer Relationships (CR). Let me explain my logic behind this.
First of all, the company has to look at their own core competences and if the Key Activities (KA) and Key Resources (KR) do not reflect the new world of SaaS and DNA of SaaS (like I stated in my blog entry), the company will not be able to drive leads using the Internet as a vehicle. You can’t externalize social media to outsiders as each individual in the company have to be carrying the message in the cyberspace of the product. The old-fashioned way of “giving the authority to somebody else” is gone and these types of individuals will sooner or later realize that they are out-of-sync from the rest of the world. This might sound very radical, but it is already happening, you might want to look around that see if for yourself.
With the renewed approach to market using social media, it will have an immediate impact on Cost Structure (CS) as some of the more expensive traditional marketing methods such as having a booth at a conference, press, TV and other outbound activities are less appealing and effective for companies and inbound marketing is getting more relevant. It is not to say that SaaS marketing is free as can be seen in the financial results of companies such as Salesforce.com.
With effective sales and marketing online, the company will see an impact on Revenue Streams (RS) as expected, but the point is more about whether the company has really understood that SaaS sales has different impact on the annual financial results than in former world; a deal closed in February looks radically different from earnings perspective than a deal closed on November for the specific financial year. This is something that is hard to understand if you have only been in traditional software business.
When you are successful in driving leads, this will have an impact on your Channels (C) as well as they might expect you to be part of providing leads for them (if it supports your sales model). The Channel (C) will be different in the SaaS world and most probably you will be looking at organizations that provide domain-specific skills to the solution and these types of organizations might not have an interest in the recurring revenue that the solution generates, but more in providing consulting services.
Finally, the Customer Relationship (CR) is the key to your success and if your target segment is known not to be online users, then you have to take this into consideration as well. However, I would argue that the new generation of users is also changing this landscape where you can’t really ignore any vertical/market from your online sales initiatives. It is just a matter of time when it will happen and you will have to be prepared to cater your Customer Relationship (CR) the way they expect you to do.