As more and more services firms launch SaaS products, we look at some of the meaningful challenges they, and incumbents, will face in the 2H of 2020.
When the economy froze in place across much of the U.S. in the second quarter of 2020, a lot of business media and investors shined a spotlight on SaaS business models. While many consulting firms that rely heavily on shipping high-priced experts around the country saw themselves ground to a halt, revenue for many SaaS firms held steady or even climbed as more and more business was getting done digitally and remotely. Investors gushed and money poured into clear winners (Zoom) and new IPOs (ZoomInfo). Despite all that, as we look ahead at the 2H of 2020 we see 4 challenges that SaaS marketing and growth leaders should be planning and accounting for:
- Expect New Entrants
- Renewal Rates May Decline
- User Attrition May Increase
- Thought Leadership Plans Need Retooled
#1 – Expect New Entrants
As most readers of this blog know, Rattleback provides growth consulting and marketing services to a range of professional services firms (training firms like The RBL Group, consulting firms like TBM, A/E firms like Woodard & Curran, M&A firms like Quantive, IT services firms like Infosys). We’ve also provided consulting and marketing services to SaaS companies that serve services firms (Knowledge Architecture, Axomic, Clearview Software, EastNets). And, now we’re frequently being asked to provide marketing guidance on SaaS platforms being spawned from consulting firm’s IP (Dploy Solutions being one). Over the last 3 months we’re seeing this last one as a significant rising trend. More and more professional services firms are looking at new paths to revenue that incorporate their IP outside the construct of a traditional consulting relationship. We’re consulting some clients on new revenue streams and actively working with one a pre-revenue SaaS solution. We’ve also had two other services firms talk to us about similar new SaaS ventures in the past 2-3 weeks. For SaaS firms this means the introduction of a new layer of competitors that bring deep categorical expertise on how clients think about the problems they face and experience designing solutions that will solve them.
#2 – Renewal Rates May Decline
Virtually every industry across the Fortune 500 has seen an earnings decline as a result of the pandemic. Most companies have pulled back on capital investments. Worse yet, many large companies aren’t even offering investors 2020 earnings guidance. In short, leaders are simply uncertain about how their business is going to recover—on what timeline and at what pace. As a result corporate managers are being forced to reconcile their expenses in relation to largely uncertain revenue forecasts. Many are being asked to cut costs and some are eyeing their SaaS subscriptions on a continuum from “must keep” to “nice to have.” Many of those decisions have probably already been made for annual renewals that will be coming up in the second half of the year.
At this point, the best strategy is to work with your account service teams to be as proactive as possible with clients 45-60 days in advance of their renewals. Talk to customers about the state of their business and how the software is working for them. Try to understand what features they value most and what’s blocking them from getting the most out of the platform they can. Be prepared to offer some alternate payment or subscription terms to retain customers. One of the solutions we classified as “nice to have” and planned to cut in Q2 offered to split our annual renewal into semi-annual payments to retain our business. Another offered to give us 2 months free. Be creative in finding ways to retain customers that are on the fence.
#3 – User Attrition May Increase
In some situations customer churn may not change at all. Maybe your product is classified by most customers as “must keep.” For a lot of marketers, CRM and marketing automation have fallen into these categories. They’ve become such critical technologies to the day-to-day operation of the marketing unit that operating without them feels virtually impossible. That said, many platforms like these are priced by the user and many business functions have reduced their headcount. Suddenly, a firm may not need 30 full sales users on their CRM license. Maybe they only need 20. Talk to a reasonable sampling of your clients and account for this in your 2H revenue model. Adjust your client acquisition targets to meet your annual revenue goals accordingly.
#4 – Thought Leadership Plans Need Retooled
Whatever your firm had planned at the start of 2020 was likely thrown into a complete headspin in March. Every major research or content initiative was paused and the entire editorial team was spun into overdrive to stand up new COVID-19-related programs. In the early days of the pandemic I described this process as an “insert and shift.” Essentially I was telling clients to insert new COVID-19-related content for 2-3 months and shift everything in the calendar to the right. That was largely predicated on a belief that we could get control of the virus spread and employ a phased reopening. Unfortunately, the pandemic in the United States has not followed the trajectory of some other countries, and it appears it will stunt economic activity through the end of 2020. So, the questions marketers have to ask themselves now are what, if anything, in that original editorial plan is still valid? What, of the new things we’ve introduced over the last 3 months, need to continue? And what can be slowly phased down?
A good example is the investment Salesforce has made to stand up the Work.com hub and its Leading Through Change content program. They’ve involved leading external voices (like Mark Cuban) and Salesforce partners (like Accenture, Deloitte, and Huron) in the initiative. Should this program continue to take precedence over prior programs (like its “State Of…” research series)? Or should those programs be folded back in?
Regardless, now is a good time to take another hard look at your editorial plans. Are your research and content initiatives aligned with clients most pressing problems right now? Do they ladder up to the features and benefits of your software that will be most valuable to clients in solving those problems? Are they delivering the audience and lead activity you’d like? If not, why now? What might you do differently in the second half of the year to change course?
Adjust Your Marketing and Editorial Plans Now
If you haven’t already, now is a good time to revisit the assumptions associated with your annual revenue targets. Is customer retention going to change significantly? Are you seeing a decline in revenue per customer? Do you need to adjust your customer acquisition and lead generation targets to hit your revenue goals? Do you need to adjust your editorial plans as a result of these changes or the other significant changes everyone is facing in the marketplace?
