Is B2B SaaS A Winner-Take-All Market?
In developing your marketing strategy, it's useful to evaluate it in the context of recognizing whether or not you are in a winner-take-all vertical.
Many verticals in the B2B SaaS sector can be considered winner-take-all all markets, but it's important to understand what this means. In a winner-take-all market, a single product or service will dominate roughly 90 percent of sales in the category.
This doesn't mean there can't be competitors, but it does mean that direct competitors will consist of one very successful company that has solidly captured a few important barriers to entry, and several much smaller competitors that compete on distinguishing characteristics.
What's important to understand is that even in a winner-take-all market, it is possible to have a high ROI business that isn't "the winner." So while some B2B SaaS companies may prefer to innovate by solving new problems and discovering new winner-take-all markets, this is not the only path forward.
Here are some reasons why B2B SaaS includes many winner-take-all markets, and how you can still be successful.
- High fixed costs and low marginal costs: SaaS thrives on investing a great deal in creating the product, while, aside from marketing costs, expansion is often cheap or nearly free. To find opportunities, look for the things that can't be expanded with low marginal costs.
- Direct network effects: The value of especially communication-based SaaS relies on the number of people who are using it, making otherwise more useful communication technologies effectively useless. In existing communications markets, opportunities are most plentiful for varieties of communication that don't require many people or even benefit from limiting the number of people on the platform.
- Big Data: SaaS giants capture a great deal of information from users, allowing them to hone their product, segment users, and upsell them better than competitors. Even so, a SaaS giant is limited in how much they can segment their product and maintain brand coherence at the same time, and their are islands of optimization for different types of users that they can't reach without releasing a new product.
Once you know whether your B2B SaaS product is for a winner-take-all market, you can use that information to inform your go-to-market strategy.
Go-To-Market Strategies For B2B SaaS Companies
A go-to-market strategy is the plan for how a business acquires customers at the highest level. It isn't about specific tactics, but about more fundamental questions such as who the target markets are and what will motivate them to choose your SaaS over a competitor.
Any given customer will choose a service over another one (or over none) if it either solves their problem better, or it solves it cheaper or faster. The intersection between these two leads to three fundamental go-to-market strategies for B2B SaaS companies:
- Differentiated: This strategy offers customers a more expensive or time consuming solution that solves their problem better. This strategy pursues customers who are underserved. A B2B SaaS can accomplish this by targeting a specific industry with features that cater to them better, or by offering a more powerful feature set. Often, this will be a SaaS that replaces the need for several distinct software tools or the need for a company to develop its own internal software.
- Disruptive: These solve the problem "worse" but do so more quickly or cheaply. This targets customers who are over-served, who are either paying too much for services they don't need, or not using any available option because it is too expensive. Almost any SaaS that attempts to replace a full time employee or team falls under this category. By automating something that used to be done manually, the work gets done faster or at a lower cost, but without the adaptive capabilities of a professional human workforce. For B2B SaaS, it can also be done by offering a cheaper and less specialized SaaS to a wider variety of professionals.
- Dominant: This solves the problem better as well as faster or cheaper. This is ideal since it will win all customers, but it is also very difficult to achieve. Generally, you can only achieve this by entering a new B2B sector with a service that has never been automated before, and where automation can solve the problem better than a human workforce.
Once you've chosen your basic go-to-market strategy, it's time to get more detailed with your marketing plan.
A Marketing Plan Template
Use this starting template to begin planning how you will market your B2B SaaS. Remember to be fluid with it. Templates are useful primarily because they help structure your ideas and make sure you don't forget essentials, but creativity is a crucial part of successful marketing.
This template is built off of the "7 P's of Marketing" created by E. Jerome McCarthy, applied specifically to the B2B SaaS markets:
- Product: With B2B SaaS product marketing, the principle question to ask about your product is whether it is something you would release today based on market demand. If it isn't, it needs to be revamped. Consider how your target industries are being impacted by technological and cultural shifts, changes in the popularity of similar SaaS platforms, and use cases for your platform that you didn't anticipate. Part of the reason SaaS is a service at all is because it is expected to be updated and adapted to changing climates. That's why a changelog with your new features or product updates is a central part of your product marketing strategy.
- Price: The most obvious question to ask about price is whether it is a good fit for demand. However, there are other questions to ask, such as how many pricing tiers you should offer. Should you offer a freemium version of your SaaS? Is there an amateur market for your platform that you aren't reaching because of pricing tiers. Can you offer a full service pricing tier for Enterprise level businesses that includes custom work and management by human professionals in addition to the software?
- Place: Where is your SaaS being sold? The obvious answer is "online" but that isn't enough. Are there marketplaces you could be selling your SaaS when you are only selling through your website? Should you expand into mobile App stores? Are there industry publications where you should be advertising or doing content marketing? Should you reevaluate the channels we discussed in an earlier section? Are purchases happening on your website, in email marketing forms, on the phone, through text messages and push notifications, and are there other places to sell that you haven't considered? Are there ways to better optimize sales in each of these locations?
- Packaging: Does your brand and platform have a uniform aesthetic? Are there different aesthetics you could experiment with for different personas in different B2B industries? Does your brand's aesthetic match your brand's vision and mission? Is it up to date? Is it memorable? Does it accurately represent how people feel when they use the platform? Does the platform itself embody the aesthetic? Which places will the aesthetic have the most impact and require the most attention?
- Positioning: This is about how customers distinguish your SaaS in comparison to alternatives. Is it easier? Faster? More powerful? Cheaper? More ethical? More adaptable? More specialized? Positioning is one of the most important things to get right in the beginning, because positioning is very, very difficult to change compared to other elements of the marketing mix. First impressions leave a lasting impression that is hard to shake.
- People: Some of the most important changes you can make to your marketing mix are who you are marketing to and who is actually implementing your marketing plans. Could you hire people better suited to jobs? Do you need to change your workforce to implement some of the changes in your marketing strategy? Are there people at different levels of the organizations you are selling to that you could be targeting?
- Promotion: We tend to overemphasize promotion in our marketing plans in that we often think of it as what makes up all of marketing. Instead, we should be thinking of promotion within the context of the other 6 P's. Who are you promoting to? Where are they? What positioning will you promote? What aspects of the product need to be promoted, and which are most easily promoted? Which pricing tiers should your promote most? What aesthetic should your promotion embody? It's important to constantly experiment with the messaging and placement of your promotional strategy.
What Is The Size Of The B2B SaaS Market?
Your go-to-market strategy and plan will impact the size of your market.
RevOps estimated that in 2018 the Total Addressable Market (TAM) for B2B SaaS was about $134 billion. By far the largest section of this was IaaS, which took up $84 billion. Sales was second largest at $34 billion. Marketing technologies were in third at $5.7 billion. Financial tech, HR tech, and Mobile and IoT made up the remainder. The coronavirus crises may accelerate growth in the market in 2020 as more companies move to working from home, but this is difficult to determine.
Determining the size of your target market, however, is a different question, since B2B SaaS need not necessarily target services that are already being performed with SaaS or IaaS. Determining that will require estimating the size of a service industry in the B2B sector, estimating how much of it could be automated with SaaS, and estimating what portion of the market can be reached through which marketing efforts.
How much of that market you will be able to reach will depend on how you approach marketing channels.
According to research by Sprout Social, social media channels break down like this among various demographics:
Since the target market for B2B SaaS tends to skew towards those in middle and upper management, tech professionals, and other high earners, we can look at the $75,000 plus demographic for a good proxy of what channels our target audiences are using.
The first thing that should be clear is that high income earners are more active on all of the platforms than the general population, with the exception of Snapchat.
LinkedIn is an obvious marketing channel for the B2B industry, given the inherent relevance of the entire channel to business concerns. High earners are also nearly twice as active on the platform as the general population.
The most popular platform among high earners is the platform most popular with all adults: YouTube. This channel is also heavily neglected by many marketers, so remember to take full advantage. Eight-three percent of high earners are on the platform. Since users search YouTube or are recommended videos based on viewing history, video content is a good way to reach a targeted audience.
Facebook is the second most popular platform among high earners and the general population, which can make it a useful platform, but it's important to remember that it is less likely to be relevant, since users are generally using the platform to escape from work. That said, there are many users who can only be reached through Facebook, so if scale is an important goal, it's an important channel.
Another platform that is significantly more popular with high earners than the general population is Pinterest, with 41 percent of high earners using the platform. The platform is most popular with women, 42 percent of which use the platform, while only 15 percent of men do. Gender is only a proxy for topical relevancy, of course, but this can help inform your decisions about how to engage with the platform.
What isn't listed in the chart is of course search engines, which have almost universal use. Users who are specifically looking for products or services related to your SaaS should find it in search results if they look for it, and that makes SEO an incredibly important channel.
Industry relevant publications and blogs are of course another important channel, as are any groups on social media and other discussion groups relevant to your target industries.
Email is also missing from the chart, which has a very high conversion rate. It is an important channel, but rarely good as a first touch channel, and it relies heavily on market segmentation to work well in the B2B SaaS industry.
The important thing to takeaway from this chart is that, despite the popularity of social media channels, the channels capable of sending traffic that results in sales are much less flashy. Search engines, email, repeat visitors, and referrals from industry websites are the best source of traffic that will spend money in most cases.
The Role Of Campaigns
The phrases "marketing strategy" and "marketing campaign" are often used interchangeably, and while there aren't really any universal definitions, I believe it's useful to differentiate between the two.
A marketing strategy or plan is broad. It is about things like your go-to-market approach and the 7 P's and other big questions and approaches.
A marketing campaign is focused. It is one chunk of your marketing strategy. Here are some attributes of a marketing campaign that make it useful to keep in mind as a distinct concept:
- It is focused on selling a specific product to a specific target audience using a specific funnel over a specific channel or channels
- It has a limited budget (although that may be recurring and revisable on periodic basis)
- It is designed in such a way that the results can be as easily measured as possible
- It is designed not only to generate ROI but to test an idea and learn something from it even if it fails
You have a good marketing strategy if your campaigns fit together in a strategic way, each of them reinforcing one another and the brand as a whole.
Without considering your strategy as made up of campaigns, however, your strategy can become unkempt, things that work can be forgotten, elements of your strategy can atrophy, or you can get hung up on maintaining things without launching new campaigns or experimenting with new ideas.
When it comes to the B2B SaaS industry, campaigns will usually consist of:
- One of your pricing tiers
- A target audience for that pricing tier
- A landing page that sells your target audience on that pricing tier
- The channels you use to connect your target audience to the landing page, whether that be instantly or by warming them up first
With each channel, it's useful to consider benchmark spending.
What Is The Marketing Spend In The B2B SaaS Industry?
How does a typical B2B SaaS marketing budget break down? According to benchmarks from Insight Partners looking at the SaaS industry with a B2B focus:
- Marketing makes up 29 percent of the Marketing and Sales spending
- 51 percent of the marketing spend goes toward the campaigns themselves, 37 percent to the people working on them, and 12 percent into other marketing costs
- Campaigns break down into 36 percent digital, 36 percent events, 8 percent content, and 21 percent other techniques
- Roughly 55 percent of marketing spending goes toward generating new business, 13 percent to sales enablement, 10 percent to upselling and cross-selling, 6 percent to renewal, and 16 percent to branding.
Is Affiliate Marketing A Good Fit?
Affiliate marketing can work for some firms in the B2B SaaS industry, but it isn't always a good fit. Here are some questions to ask before deciding whether to invest in this channel.
- Is the size of your target audience a good fit? Affiliate marketers will be considering scalability when they decide if they want to market your SaaS. If your target audience is small and high touch, they aren't likely to invest in you. This is especially true if the affiliate marketing program you're using only rewards same day sales.
- Can you profit off of paying for free trials? In the SaaS industry you pretty much need to rely on free trials to be competitive, with very few exceptions. Affiliate marketers will want some assurance that they will get paid if their referrals convert, and they will be more willing if they get rewarded for free trials rather than relying on accurate tracking all the way from initial referral to the customer's first payment.
- Will your affiliates just sell your own customers back to you? It's not uncommon for companies to discover that their affiliate programs are just tagging people who would have made a purchase anyway. An effective affiliate program brings in new business. To avoid this, incentives and affiliate membership need to rely on creating new business, not creating affiliate marketers who compete with you over your own customers.
- Can you afford to ask what the most is you can pay affiliates, rather than the least? In line with the last question, creating new business requires effort. If you want affiliates to create new business rather than capture searches for your own brand name and sell them back to you, you need to pay them enough for it to be worth the effort. If that isn't in your budget, it's not a sound investment.
Affiliate marketing can be helpful, but generally speaking, inbound marketing should make up the bulk of marketing efforts for companies in the B2B SaaS sector.
Inbound Marketing For B2B SaaS Companies
Most inbound marketing advice isn't offered with the Software as a Service industry in mind. The distinctions between a B2B inbound strategy and a B2C one are also frequently ignored.
One of the biggest mismatches between general inbound marketing advice and inbound marketing as it applies to SaaS is with the lead magnet.
A lead magnet is something of value that a lead exchanges their email address or contact information for. In exchange for something of value, they become a contact that you can market to in a carefully targeted way.
Most inbound marketing guides will suggest using an ebook or whitepaper as your lead magnet. While this is certainly worth experimenting with for a SaaS company, it's not the most natural fit.
A much more natural fit is a software tool that is directly related to the purpose of your core SaaS tool, or even a freemium version of it. An inbound marketing strategy that doesn't make software central to its lead generation strategy will usually be a poor fit.
If anything, most inbound marketing guides already skew toward the B2B sector, so much of the advice is a good fit. However, inbound marketing guides that centralize consumer social media channels like Twitter and Facebook are often a poor fit.
While a good inbound marketing strategy is comprehensive and embraces any channels your customers will use, industry publications tend to be a much more valuable traffic source for the B2B sector.
Choosing A B2B SaaS Marketing Agency
When selecting an agency to assist you with marketing your B2B SaaS product, there are a few things you should know.
First, an agency doesn't need to specialize entirely in B2B SaaS to meet your needs, and simply because an agency says it is a B2B SaaS marketing agency, this doesn't mean they are qualified. What qualifies an agency is whether or not they have worked with B2B and SaaS clients in the past with positive results. Very few agencies that are skilled at serving B2B and SaaS clients will restrict themselves to only serving the B2B SaaS niche specifically.
Second, the agency you hire should be chosen with your go-to-market strategy in mind. While many marketing agencies can handle both disruptive and differentiated marketing strategies, most are better at one or the other. Regardless, the agency you hire should have experience with the particular go-to-market strategy you intend to use. In particular, a differentiated strategy tends to rely more on sales, while a disruptive strategy tends to rely more on marketing automation.
Finally, the agency should have extensive experience with the channels that best connect you to your target audience. Generally speaking, most SaaS sales will come from, or at least start with, search engines, which makes SEO very important. At the same time, B2B social channels and tech outlets can be relevant sources, as well as any industry publications.
If you're in need of an agency now, consider us as your SaaS marketing agency.