Successful SaaS businesses are driven by three things: customer acquisition, customer retention, and monetization.
If we know that’s the case, why do so many companies focus so much on customer acquisition, and spend significantly less on retention and growth? Growth without retention is not growth.
A Flawed Business Model
The business model is flawed for the reality of SaaS today. It’s time to usher in a new era of product, sales, and marketing strategy. Go-to-market strategy is still relevant, but without a go-to-customer strategy you will not succeed.
The SaaS world has left it’s awkward teen years. SaaS 1.0 was cost effective service delivery, replacing on-premise apps. SaaS 2.0 was about interoperability with existing solutions, while still delivering high value at low cost. As SaaS has largely become the defacto delivery model, and every organization worth anything takes an API-driven approach, what’s next for SaaS?
Business model evolution. Product, sales, and marketing changes will be abundant in this era.
Jason Green, Founder and general partner at Emergence Capital Partners, writes:
“Today, with the ability for end users to easily search, try and buy applications independently, the amount spent on the front of the sales process has been reduced dramatically. Sales now plays less of a role convincing end users and more of a role in satisfying IT on security, compliance and administrative control and in supporting early customer success and adoption.
In this new product-driven era, finding ways to simplify the value proposition and enable customers to get up and running quickly and easily and reducing any friction involved in the purchase is critical.”
So how does a SaaS company drive growth in this new era?
- Product-driven experiences
- Re-calibrating the sales & marketing model
- Go-to-customer strategy
Product-driven experiences throw out the old marketing-qualified lead (MQL) model, and usher in product-qualified leads (PQLs). The rub? The freemium experience has to be awesome. Sales does not touch these people until they’re actively using the product for free. The product has to do all the work: show business value to and qualify the leads.
The re-calibration of the sales and marketing model is a natural extension in the product-driven world. Atlassian went from $0 to $100M without sales people. Sales teams should be kept lean in early days, and utilized for larger deals with longer sales cycles that involve getting buy-in from multiple stakeholders. How competitive your market is also affects the timing of hiring a sales rep.
As the marketing model moves to optimize for PQLs, we’re seeing the rise of the growth marketer. Growth Marketers don’t just care about prospects, they care about following prospects straight through the funnel to renewal. When building the Top of the Funnel (TOFU) they need to have a killer content strategy that flanks the product experience with helpful, credible content. As the prospect comes into the free program, they are driving and measuring conversion to paid. They are then focused on driving product usage, cross-sell/upsell, and hitting retention & customer growth targets.
They are 100% data-driven on metrics for the TOFU → PQL → Customer → Renewal → Customer Growth.
That’s the ideal, but we’re not quite there, and growth marketers need a framework for how to better focus on customers, because relationship marketing is here to stay. Growing through customers is lower cost and higher impact.
Enter the Go-To-Customer (GTC) Strategy
Go-To-Market (GTM) Strategy is still important, but it’s missing customers. It’s about new customer acquisition. Whether that’s momentum-selling by industry, targeting a net new roles, geographic expanstion, etc.; It’s about acquiring net new customers.
PS. We’re actively researching the state of go-to-customer strategy if you want to participate in the survey.
What is the Go-To-Customer Strategy?
It’s a focused product, marketing, and sales strategy that drives product usage, measures satisfaction, ensures renewals, and grows from within the customer base. It’s a net new approach to being highly relevant with every customer at every point in time, and scaling customer intimacy. It puts the relationship first, removes the ability to have irrelevant conversations, and removes the ability to build bad products.
Check out the full deck on SlideShare for a much more thorough explanation, along with the team, framework, and success measurements.