What business model most suits saturated markets?
Information is power, and wisdom is the ability to apply logic and judgment to using this power properly and to its fullest potential for positive benefit. In any professional industry, one finds that there is an absolutely innumerable value to information, advice and input from the already experienced and learned professionals which precede us. To seek their advice, their experience and their wisdom is in and of itself one of the wisest things to do.
This is true in any industry, but it’s definitely truest of all in an unpredictable industry like SaaS in its current form. Thus I took the opportunity recently to consult several of the great minds in Saas, and hear their invaluable input on an important topic. I asked them, what business model most suits a startup trying to introduce itself in a saturated markets?
Anthony Eden is a 12-year veteran of the domain industry CEO of DNSimple.com
http://dnsimple.com/ explains that if a market is saturated it probably already has several major players and a lot of smaller players. The major players probably have the broad market already figured out and are marketing to them on a regular basis. Within this context it would take a large amount of cash to play along, and unless
you are doing something truly innovative within the market then getting
that cash is going to be tough. On the other hand, according to Eden it makes a lot more sense to target a small niche and grow organically. This lends itself wall to a
bootstrapped business providing a subscription service as opposed to a VC
funded business using some other model (like a freemium model).
As a side benefit, bootstrapping tends to force you to keep your organization small
and to focus on automating as much as possible, both of which will help you
while you chip away at other players in the market.
Mr. Eden raises an interesting point about the money. It does always boil down to the almighty dollar, and in a pond with many fish, there are bound to be a few big ones. Out-competing them isn’t really going to work unless you’re a wealthy startup.
On the other hand, his comments about bootstrapping have promise, and we have seen this technique work for SaaS startups ourselves in the past. Eden doesn’t think all is lost in this scenario and we agree.
On the other hand, while not arguing against there being hope, Mike Kennedy Technical Evangelist and Dir. of Marketing Talent Analytics www.talentanalytics.com offers an interesting strategy that works well for their business.
Kennedy said that Talent Analytics uses a channel approach and license our SaaS software through business partners, who leverage Talent Analytics data to help their customers solve performance-oriented business challenges. But that’s very specific to the business of Talent Analytics and may not work for all startups.
Mr. Kennedy is right that this may not work for all industries, but many SaaS services could work this way, especially in the private sector. Engineering this towards multi-distributor entertainment providers could be a boon to YouTube and uprising video providers, as well as make a lot more sense out of what goes where. It also means more outreach.
Still, it is a limited application but a strategy to keep an eye on.
Next, I heard from someone who brought new vigor into our view of the tried but true freemium model, and just how well it can work for a startup.
Danny Boice is co-founder and CTO of Speek. A company that is attempting to disrupt the conference call market with their SaaS product.
Boice claims that a Freemium model works best most of the time. The “Free” side eliminates barriers to virality and allows you to grab traction quickly. The “Premium” piece allows you to upgrade or otherwise convert your free users in exchange for revenue or viral promotions where they get free months of premium service in exchange for referring their friends and co-workers (viral).
It would seem that freemium is a good model to chase in the upstart world. Of course it goes without mentioning that freemium requires some starting funds due to a framework needing to be established to a higher point than with other strategies we’ve heard about so far. Still, Boice has given us a new respect for freemium, something we weren’t sure was wise for startups to try. Yet, others would say, if it isn’t broken, don’t fix it.
Chris O’Halloran Founder of Striking Project Management and the co-founder of pimovation.com – an online SaaS startup that is developing the latest in Cloud based Project Management Software. O’Halloran says that “In terms of business models, there is no reason to change something if there is not reason to and with the case of saas, the market expects to see low cost monthly charges for the services over higher priced annual licensing. If you are segmenting a market, you just want to slightly divide out your share, not alienate your product from the rest of the market, baby steps.”
This has a point. Sometimes slow and steady, down the beaten path does win the race. If you have a solid marketing plan and a framework in place, just standing your ground, maybe with some committed revenue plans in place, and you can eventually carve out a niche alongside the big fish.
Perhaps using this along with bootstrapping would be good.
Finally, right on cue, we were reminded of a simple and sound order of approaching things with the right priorities. Seeing as how we’d overlooked it ourselves, it’s almost certain others do, so this wasn’t said too soon.
C. Robert DiLoreto Managing Partner at Chasm Innovations recommends to begin with a strategic, relationship-oriented model first, and then exploit your brand and success, customer references/testimonials, etc. After that stage, startups should get into Pricing and Plans, HubSpot solutions, etc.
We should all stop and pay close attention to what we’re told here, because it may just make us rethink how to approach immerging SaaS provisions in a market as crowded as this one. It may even make us veterans think twice about how we market our established niche as well.
I discussed about trying a couple clever strategies such as bootstrapping and leveraging through channels, but have not pointed out the importance of priorities.
It’s always crucial to see that your strategy establishes good working relationships.
Never rush things, and keep the goals prioritized by ability to accomplish and interdependence. Coming from professionals who know their SaaS, this is the real deal, and I can’t argue against any of the points they make here. We have seen this advice improve our own experiences through new thinking, so how can it not help a startup get the foot in the door?