Is Your Business Model Built for the Long Haul?
Public statements notwithstanding, more business plans in Silicon Valley are built around technology than around customer relationships. It's just the way it is; we're talking about technology companies, right? The problem is that, given time, all technology either becomes obsolete or a commodity. With the increasing pace of technological change, this is happening sooner rather than later. The risk in building on technology rather than customer relationships is that you are never more than a wrong turn or two away from putting your business survival at risk. Customer relationships provide your business with more options, and strong relationships can be very forgiving of the occasional misstep, meaning your business is more resilient and your plans can be bolder. Further--and perhaps even more important--technology-centric business models limit your offerings and growth potential, so they are associated with lower valuations over the long term.
See Rubicon at SoftLetter's Marketing and Selling SaaS Seminar
October 23, 2008 - 10:00 AM
, San Mateo, CA
Online Reviews Second Only to Word of Mouth as Purchase Influencer in US
A broader investigation into how business can exploit online community underlines the importance of online information in driving purchase decisions, but the most influential information is beyond the direct control of companies selling products and services. Courting the small fraction of Internet users who write online reviews and comments is a very important task for many companies, but one they often neglect.
Many companies downplay the importance of online communities because only a few percent of all Internet users contribute to them heavily. What they don’t understand is that most other Internet users read those reviews and rely on them heavily when making purchase decisions. Taking good care of online communities can be a huge money-saver for companies trying to get more marketing impact from limited budgets.
Dear Rubi
An advice column on business and strategy.
Today’s Question
How is the role of marketing changing in the SaaS 2.0 world? By SaaS 2.0, I mean new generation SaaS offerings that are adopting Web 2.0 marketing strategies…
submitted by: Tony N, CEO
Rubi Says…
Dear Tony:
Let’s step back to SaaS 1.0 for a moment. The big challenge for vendors is that customers have been sold on SaaS as a way of reducing deployment costs and appealing to smaller customers via a lower cost of entry. The problem is that irregardless of the cost of actually delivering the application as a service, vendors have not found a way to reduce the cost of sales, so they spend a lot to capture a relatively small revenue stream. On top of this, customers get to pay in small installments rather than all up front so the smaller total revenue is spread out over several years. All this puts a big squeeze on vendors’ ability to actually earn a profit.
Now if we consider the so-called SaaS 2.0, how does this all change? SaaS 2.0 promises to focus on business results rather than cost of deployment. At a minimum this provides an opening for vendors to better tie the application to various types of business value beyond deployment cost. SaaS 2.0 also promises to allow interactions between various parties and applications which creates another opportunity to deliver value. Both of these aim value at the top line. Top line value is good in that it is theoretically unbounded, although it is also conceptual, so it is more expensive to communicate as you need better sales and marketing.
Is there anything about SaaS 2.0 which makes it cheaper to acquire a new customer? If not, SaaS 2.0 vendors are going to find themselves in the same pinch as SaaS 1.0 vendors unless they charge more for SaaS 2.0 applications. SaaS 2.0 promises greater top line value, so it is really up to marketing to communicate this additional value and sales to capture it during the sales process. Of course, you also need smart competitors that want to be around for a while so they don’t teach the market that all this value comes at no cost.
Sincerely,
Rubi