Software-as-a-service, by definition, provides 24/7 accessibility to its customers. The success of the erstwhile on-premise business software was dependent upon the number of licenses sold, SaaS is helping drive the change that success is now dependent on usage and hence linked closer to ‘value’ provided. Hence the growth in the SaaS world is moving away from trying to convince someone to buy the application, but rather, in ensuring that customers and users… continue to regularly use it!
Engagement levels of users vary significantly among the B2C and B2B worlds. In the B2C realm, businesses are trying hard to imitate the Facebook and YouTube models to ensure as much usage as possible (though recent reports would strongly suggest any ‘addiction’ driving approach to be misguided). This cannot be said for the B2B SaaS world though, as reports indicate that only the large businesses are maximizing gains from SaaS usage and this reflects in their market share, growth, and revenue.
Do the rest of the SaaS companies in the B2B sector, particularly the SMBs care enough to go about systematically tracking user engagement? Do they track areas like product usage, duration of usage, product performance, feature heat maps, etc., which is critical to product success? Is the paucity in self-evaluation leading to user apathy? Finally, where is this trend leading?
Future of SaaS
A recent post by Gartner points out that SaaS will likely remain the largest market segment among the Cloud derivatives, and the forecast is that it should grow to about $116 billion in 2020 due to scalability of the software (details below).
The Cloud managed service landscape has heated up significantly in the last few years. The article notes that by 2022, up to 60% of organizations will use an external service provider’s cloud-managed service offering, which is double the percentage of organizations from 2018. This is not surprising, considering that SaaS has several inherent benefits that helps attract customers and boost services by reducing infrastructure and administrative costs.
SaaS has successfully found application in several industries, specifically in the areas of marketing, sales, task management, project management, customer support, and customer success. Therefore, maturing cloud-managed service strategies will continue to be a top priority in the years to come. Considering this projection, it will be judicious for the business strategies, especially the SMBs, to take note of the engagement level of their SaaS users.
SaaS in the B2B sector
Let us also examine the adoption rate of applications run in cloud. Notwithstanding the absolute popularity of SaaS, the graph below indicates that except for websites and emails, the adoption rate can do with a lot of improvement in a host of other areas.
Do these areas represent domains that are clamouring for better and improved experiences? Or, are they not fulfilling the needs of users? Furthermore, the following statistics show that smaller customers churn at higher rates.
From these existing surveys on adoption and churn rates, it is evident that the B2B sector of SaaS comprises of immense potential and growth, yet there are areas that demand better attention, especially the ones concerning small and mid-sized companies.
B2C Apps influences expectations from B2B Apps
“The success of an app is often measured by the extent to which it introduces a new habit”, said app developer Peter Mezyk in an interview with Business Insider, where Mezyk equates attention to currency. The more time one spends on social media sites, the more advertising revenue the companies earn. Social media apps like Facebook and Instagram have been often called out for deliberately conditioning users to use it like drug. In 2018, an estimated 2.65 billion people were using social media worldwide, a number projected to increase to almost 3.1 billion in 2021.
The “Fogg behaviour” model established by B.J. Fogg, elaborates on the three criteria for a habit to be formed: sufficient motivation, an action, and a trigger. This is the three-pronged approach that is now standard among consumer app developers.
Even though the functionality and usage pattern of B2B product is fundamentally different, SaaS companies need to take note of the success of B2C apps in gaining user engagement, and also about the high expectations users carry on design and ease of use, due to constant exposure to these high engagement consumer apps.
This is important now more than ever because companies investing in SaaS rely on usage metrics to determine the success of the product. Which means renewals of the subscription is directly linked to usage. The more time users spend on the products, the more the companies providing the SaaS solution can claim about ‘value’ provided by their product, thereby providing them an opportunity to upsell to their customers by adding more accounts and extending subscriptions.
So, what’s the way forward?
“The times, they are a-changin’” – BOB DYLAN.
For SaaS companies to do well in the B2B space, it is imperative that they start ensuring that usage does not slip soon after the implementation/integration is over. There are 5 things that the founding and executive teams need to ensure, to drive appropriate growth and success.
1. Start by Measuring Usage: Trying to gather product analytics using Google Analytics is no longer going to cut it. Google Analytics (or Firebase) were built for website and mobile app analytics and are not too useful for creating insights for B2B SaaS apps. Top performing companies focus on getting the right product analytics tools to craft the best experience for not only their customers but also the end-users. One should consider using solutions like Heap, or even SmartKarrot’s own suite of Product Success tools.
2. Invest in Design Thinking: Enough has been written about the need
for inculcating Design Thinking into all parts of a Product organization,
starting with the executive team. More
and more product companies are realizing that when it comes to taking a big step
forward with an innovative strategy, a design thinking framework is required to
appropriately evaluate product and business strategy direction.
3. Excel at On-boarding: Having a proper onboarding strategy (for both customers and end-users) in place is crucial to achieving higher customer retention. When you improve onboarding by creating an appropriate playbook custom to your business, you get massive leverage that provides a lift throughout your entire retention curve. To achieve this, you have to identify the point where your customers first get value from your product – where they first start to achieve their goals?
4. Continued focus on Product Adoption: It is dangerous to assume that software products that have gained wide market acceptance will also naturally gain user acceptance inside customer organizations. The Product Adoption process needs a dedicated strategy. Again enough has been written about this already, CrazyEgg’s article “7 Ways to accelerate product adoption” explains the nuances pretty well.
5. Automate Analytics to be part of Customer Success: Recently, some thought leaders are beginning to talk about the need to integrate Product Success and Customer Success. Not making product analytics easily (and automatically) available to your Customer Success managers, or having them compile it from segregated systems is a folly that will rapidly impediment them from being successful, apart from killing efficiencies. Finding synergy between the two will help firms grow their subscriptions and revenue exponentially and build a more loyal and passionate customer base at the same time.
In conclusion: As highlighted in this post (Six keys to Customer Success) by Boston Consulting Group, when companies move to a subscription-based model, the risk of adopting the product successfully moves from the buyer to the seller.
Instead of being complacent just by generating subscription orders, SaaS companies now need to imbibe a more dynamic approach: evaluate and appropriate—that will hopefully lead to win-win for both SaaS companies and their customers.
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