First, what accelerated the development of the domestic SaaS industry? As the country vigorously pursues digital construction, more and more companies are investing in SaaS BI (Business Intelligence) products, using their tools to make strategic decisions about business operations. On the other hand, the desire of SMEs to reduce costs and increase efficiency in the state of the epidemic is becoming more and more urgent, and the recognition of the value of SaaS products by business users is also increasing, and the degree of acceptance has reached a mature point, etc., a series of environmental factors have driven the development of the SaaS industry.
At the same time, SaaS unique business model, making its recent discussion of the topic of no less than the SaaS business model and the traditional software model is the biggest difference is that the traditional software: product development - marketing - sales - - after-sales, while SaaS model: product development - marketing - sales - - after-sales, while SaaS model: product development - marketing - sales - - after-sales. The biggest difference between the SaaS business model and the traditional software model is that traditional software: product development - marketing - sales - after-sales, and SaaS model: customer acquisition - retention - growth path. Traditional software transactions there are many uncertainties, and the transaction cycle is relatively long and costly, once put into use, failed to meet production expectations, then the IT procurement team must pay a terrible price for this. SaaS software, the trial and error cost is small, can be quickly delivered and used, we signed a cooperation with the customer, only means that we get the opportunity to provide product services. With more and more domestic Internet companies running to the United States to go public, as well as in the post-epidemic state, small and medium-sized enterprises to reduce costs and efficiency of the desire to become more and more urgent, but also to promote the development of the SaaS industry. I believe that in the next 5 years, the degree of this difference will drop to hover around 6 times.
Second, why most of the domestic SaaS enterprises are not profitable? Usually, most domestic SaaS companies are faced with: is this an enterprise software business or SaaS business? In the past, the Internet software companies are keen to sell software or custom project development, once you choose to transform the SaaS, still using the past to sell software in the way of SaaS product sales, and SaaS business is not the main income from a one-time project deployment and research and development, but the user continues to subscribe. Using the traditional software sales method approach, in terms of customer acquisition SaaS companies have to use advertising to attract new users of the free trial, and then through the sales staff for conversion. To a large extent this approach is to make money, but it does not allow SaaS companies to complete the growth and scale of replication.
1. The cost of acquisition is too high, and SaaS sales acquisition lacks a systematic strategy There is a difference in mindset between selling SaaS products and selling traditional enterprise software: the former sells software and makes a transaction; the latter sells a service and gets the opportunity to provide it. Selling SaaS is about pursuing the LTV (lifetime value) of the customer, which is why many SaaS companies parallel CSM (customer success) with sales and marketing. To date, this mindset shift is the main problem most Chinese SaaS startups face - selling SaaS products the same way they sell traditional enterprise software.
In order to survive, many SaaS companies have had to hire some salespeople to generate the revenue they expect. But essentially, SaaS competition is ultimately about agile development and delivery and the ability to upsell by discovering and meeting new customer needs, not customer acquisition.
2. Lack of innovation in SaaS products Domestic SaaS faces significant challenges in customer retention, most notably because products are too homogenized. More and more SaaS companies are borrowing and copying each other's products to provide similar solutions and user business scenarios. Another reason is that the product solution is too single, the business scenarios failed to go deeper, and the problem solving is not thorough enough. The median annual customer churn rate of U.S. SaaS companies is 7%, but the annual customer churn rate of domestic SaaS companies averages 30%, which is a terrible sign. When I do information technology and digitalization landing consulting services to the outside world, I often ask enterprise CEOs a few core questions: what problem do you want to solve when you come to me? How much do you know about this problem? Why we must solve this problem, do not solve the problem?
Usually the first reaction of CEOs is that I spend money to invite you over to let you help me solve the problem, give me the answer, rather than letting you come to me to raise the issue. But, then after thinking about it, he will say to me: you're a few questions raised really good, I'm already clear where the problem is, and then how we should carry out the solution to the ground. The reason for these questions, but also hope that all SaaS practitioners seriously think about it: the cost of enterprise SaaS (not necessarily refers to the cost) is very high, if our SaaS can not provide "disruptive innovation", then the enterprise users to choose where the motivation for it? If there are no significant differences between existing and new offerings, why would customers want to replace the systems they are already using? At the same time, the success of business applications is highly dependent on relevant domain knowledge. Currently in the domestic market, multiple SaaS companies are competing in the same market segment, thus focusing more on marketing than product innovation, which ultimately creates a vicious cycle.
3. Domestic business users have diverse and complex needs, difficult to scale There is a real case, a friend will SaaS products sold to two enterprises of the same industry nature, the same set of solutions deployed to use, a few months later, the two companies responsible for the person to find him again, are asked to customize the development of the entire business scenarios and business processes appeared to be differentiated. Do customization, the cost may not hold, do not do may face the problem of customer turnover. This is why more and more people are complaining and complaining that SaaS vendors fail to meet the needs of customers in a real sense, is this the lack of SaaS vendors' ability to innovate their products, or is the customer's demand too diverse? Because the domestic market demand is more diverse and complex, it is very difficult to apply one product to meet the needs of all customers and scale.
Third, the future of SaaS entrepreneurs dilemma how to break? Many domestic SaaS practitioners very much like to take the U.S. SaaS and domestic SaaS comparison, on the one hand, the U.S. SaaS development is mature, the market size, on the other hand, SaaS product business model is more advanced. Many domestic SaaS practitioners compete for imitation, in an attempt to realize the business landing of SaaS products through product or business model copying and borrowing. After years of development, domestic SaaS practitioners gradually understand that just by imitating foreign products or business models, it is not necessarily safe to land. Indeed, the essence of business is a trading transaction, you and your customers are trading *** with the cognitive value of the product, rather than a bunch of good-looking Ui interface.
SaaS entrepreneurs, before you start product design, you must first understand why your target business users want to use SaaS, as well as how the use of SaaS products can be realized to solve the problem, which is very important. When facing competition in the market, SaaS startups need to answer the following three questions: Are you targeting small and medium-sized businesses or large enterprise customers? Do you offer a standard product or a customized service? Are you targeting multiple industries in general or specific verticals? Even though we already had some preferences when we initially defined our business.
What should be prioritized is how to build a core competency in customer success: how your customers can achieve their goals with your SaaS service and become loyal customers, leading to sustainable subscription revenues and up-sell margins.
1. How do you think about standardization and customization? The core difference between standardization and customization is whether the labor costs of a SaaS business increase as the business scales. In project customization, the customer pays the project cost fees as well as labor costs in the implementation delivery of the project. Each project is customized differently, and most of the system features and scenarios can't be applied directly to other customers over and over again. Of course, at this stage, most of the Internet software vendors will be past some of the product project modularization package for secondary development and delivery. The standardization of SaaS products enables product-driven growth and scale replication, making recurring revenue MRR or ARR more sustainable. The longer the users are served, the more value they generate.
For the majority of SaaS startups, the answer is never one or the other, whether to go custom or standardized. Survival is the primary issue for SaaS startups, and we can do some translation between customization and standardization. In the service of customized projects, we can go deeper to understand the needs of customers, by digging deeper into the business scenarios and industry issues, some of the core solutions used to improve our SaaS products, which is a well-established way. SaaS companies can continue to explore the experience of custom projects, embedded into the product logic and standardization can be translated into the field, so that the SaaS product solutions will be more able to withstand the test of customers and the market. That's why most of the founders of mature SaaS in more and more verticals are y committed to the industry for many years.
2. The industry supply ecosystem matters Typically, customers encounter a variety of business problems in the course of their business operations, and what they need to solve is not one of them. What is needed is a comprehensive solution, and the business solution needs to have agility and a certain elasticity to adapt to the space, those large/complex and not flexible enough software system, in the SME community will be preferred to be abandoned. Industry SaaS products are designed to focus on solving specific business problems in vertical industry sectors. As mentioned above, customers want a comprehensive solution, not just a solution to a business problem. Therefore, in an organization, there are many different SaaS that are used to solve day-to-day business problems. For example, an enterprise customer may use an ERP system to solve supply chain inventory issues, and a CRM system to manage customer data and other business issues.
The use of multiple different SaaS will inevitably lead to the problem of "information silos". Breaking the "information silos" and accelerating the collaboration of internal information flow is the highest priority for SMB customers to choose SaaS products. Decentralization is essential to SaaS development, which requires an ecosystem approach. The future of your SaaS with how much can be compatible with the upstream and downstream business chain SaaS capabilities, determines whether your SaaS product can get a long development and future. Domestic SaaS if you want to build an ecosystem, you have to learn to embrace the group, the vendors need to do a good job between the business boundaries and the distribution of benefits.
Currently in China, the biggest obstacle to the development of SaaS applications is the lack of "ecosystem thinking" - the majority of SaaS players, regardless of size, according to their own rules in accordance with their own protocols to build and expand. This loses the meaning of ecosystem.