Technology Companies' Challenges
Although technology and SaaS companies represent a rapidly growing marketplace, they face many challenges when attempting to acquire new customers, including hyperspecialization, lack of SaaS-specific business solutions, quickly shifting public attention, and failure to invest in brand strategy early on.
Challenge 1: Hyperspecialization
- In addition to market saturation, SaaS companies are struggling with hyperspecialization, a situation that occurs when each individual business function may require multiple products—which are often provided by different vendors. Technology companies that want to address a number of different business processes will likely need a separate product for each, which can be a costly endeavor.
- This problem is further exacerbated by saturation—the vast array of solutions/apps available for any given business function—and is only expected to increase as the market continues to be flooded with new SaaS apps.
- SaaS Mag offers several solutions for acquiring new customers in the face of hyperspecialization, including utilizing public Application Programming Interfaces (APIs). APIs promote value among potential customers by ensuring that SaaS apps are easily integrated with other market solutions.
- Another potential solution is publishing a "Zap"—an automated workflow that facilitates seamless app integration—and submitting it for hosting on the Zapier's Integrations page.
- SaaS Mag further recommends considering which tools customers are likely to use along with a given SaaS app and focusing on ease-of-integration in both the design process and product marketing plan.
Challenge 2: Lack of SaaS-Specific Business Solutions
- Until recently, most up-and-coming SaaS firms have been forced to rely on traditional financial operations, disconnected systems and manual processes (i.e. spreadsheets) in order to manage a subscription model.
- Outdated business operations lead to errors and hinder a company's ability to scale effectively and take on/manage new customers with ease.
- Fortunately, due to the rise of SaaS companies (as of April 2019, roughly 50 top SaaS companies are publicly traded), more modern (and increasingly affordable) solutions are now available that were created specifically to support small and scaling SaaS firms.
- Subscription management software allows SaaS companies to move from time-consuming manual processes to automated systems and improve in a number of areas, including subscription billing and collections, order management, revenue reporting, analytics and metrics.
Challenge 3: Quickly Shifting Public Attention Span
- While there are pitfalls to attempting to scale your SaaS company too quickly, the short attention span of the American public poses an additional problem if firms fail to grow rapidly enough.
- The initial free publicity that many new SaaS apps enjoy can fade rapidly, and if SaaS companies don't have strategies already in place to capitalize on that initial excitement, retain public attention and grow explosively from the onset, continuing to attract the attention of new customers can be difficult as the public moves on to "the next big thing."
- Using ingenuity to continually invest in new and creative means of promotion can help SaaS companies continue to attract new customers even after the initial limelight has faded. For example, in its first two years Dropbox managed to grow by 3900 percent using a simple referral program.
Challenge 4: Failure to Invest in Brand Strategy
- Many SaaS companies, particularly new startups, understandably focus heavily on product development and distribution. However, many fail to properly determine their target market and develop a powerful brand/marketing strategy to reach that market and continually and cost-effectively acquire new customers.
- Particularly over the long term—when competitors may be copying your product—brand strategy and customer experience often become paramount to prospecting and sales tactics. The right branding also helps keep current customers engaged, which not only helps with customer retention but also makes them more likely to refer new users or pay increased prices down the line.
- Ideally, brands should make promises to customers that trigger an emotional connection. Consistently applying this promise through continued brand marketing builds brand equality and improves customer experience.
- These satisfied users can then be incentivized to help acquire new customers through word-of-mouth at a low cost. For example, Yelp recruited its most charismatic users to create a group of community managers known as the Yelp Elite.