The state of SaaS
Lead Consultant, Amanda Holmes, explores why it’s time for SaaS companies to take their heads out of the cloud.
Like everything today, SaaS brands are having to adapt to stay ahead. They need to offer their users more benefits than ever before. So has SaaS got its sass back? Or is there a storm brewing in the cloud? Here are my thoughts.
The highs, the lows and the new normal
After years of record highs the tech sector, like so many industries, has been shaken to its core by high interest rates, inflation, colossal layoffs, changes in customer demands, and general market turbulence.
The result: between 2022 and 2023, everyone from investors to buyers tightened their purse strings. Sales cycles also became longer and more complex, due to the influx of stakeholders within the buying process.
This wasn’t a microeconomic concern, it was macroeconomics. I’m talking global. Such was the impact that SaaS companies had to react and adapt their strategies to stay relevant.
Time for a rethink
Despite the widespread economic turmoil, it’s not all doom and gloom. In fact, the SaaS market is growing at a rapid rate, jumping from $237 billion in 2022 to $273 billion in 2023. As for the rest of the decade, it’s projected to reach a whopping $908.21 billion by 2030.
2023 became the year of efficiency, with profitable growth seen to be far more valuable than the previous mindset of growth-at-all-costs. And this somewhat healthier approach to business is paying off, with nearly two-thirds of the 2023 Cloud 100 being cash flow breakeven or profitable by the end of 2024.
Taking a long-term view, we’ve seen that cloud markets have consistently outperformed other broader markets. And if you need further proof of the power of the business model, the value of today’s public cloud market still sits above pre-pandemic levels.
The real impact of artificial intelligence
We can’t really talk about SaaS in 2023 without mentioning AI, can we?
AI, and particularly Generative AI (Gen AI), has already started to transform the SaaS landscape – opening the doors for exciting additional features, product enhancements and new software development.
And here’s a couple of facts for you: 82% of cloud companies currently have AI-driven features in their products. And 100% of collaboration and design and enterprise software company respondents plan to launch new AI products this year. Without doubt, AI is here to stay, and who knows where it’ll take us next.
How it’s shaping up for 2024
It’s clear the appeal of B2B SaaS isn’t fading. In fact, it’s poised to build on its popularity as vendors and customers seek better innovation and collaboration. In 2024 we expect to see late adopters of enterprise software finally move to SaaS, with only 25% predicted to stay on the sidelines.
Overall, the market view for 2024 is looking more optimistic. But don’t think we’re suddenly going to return to the heady days of blanket growth.
In many ways, the shift in SaaS companies from growth-at-any-cost to profitability is simply the world that most businesses operate in. Which is a sign that the SaaS industry is maturing as it transitions to a more sustainable, long-term growth model.
So what does this mean for us marketing folk?
Brand building and demand gen
The top ranking challenge among SaaS companies is setting competitive differentiation in their product and go-to-market strategies.
In this new era of sustainable growth, marketers need to remember the value of brand building. While demand gen will always be a crucial part of the SaaS marketing playbook, the deep focus on it has led to an over-reliance on feature specification and short-term gains.
SaaS companies will need to evolve their marketing and invest in brand development. It’s essential they build their brand presences and speak to buyers before going to market. The end goal must be to create long-term awareness and boost credibility with their Total Addressable Markets (TAM).
And if you think you can take a generic approach and mimic your competitors, forget about it. It’s all about your unique difference. Remember, it’s a crowded industry and whatever you put out there must be true to you – and your customers.
As part of the continued demand gen engine, it’s also important to take a wider view on opportunities. No more thinking your job’s done when a deal closes. For example, there are renewals to consider. That means continuing to build customer relationships with your brand to ensure they remain loyal subscribers. It’s about justifying renewals and upselling to reduce churn and increase customer value over time.
Sales and marketing need to cosy up
With the tightening of the old purse strings, marketing budgets will continue to be scrutinised. That means marketeers need to show their boards the value marketing can bring to their bottom line.
While Marketing Qualified Leads (MQLs) aren’t going anywhere anytime soon, total revenue and marketing-influenced revenue are gaining traction as the top marketing metrics used today. To achieve this, it’s crucial that there’s a clear alignment between sales and marketing. In fact, according to the 2023 C-Suite Go-to-Market Benchmark Survey it’s the top priority to drive growth.
Increased focus on ABM and buying groups
Account Based Marketing (ABM) has made steady progress over the past few years, but mostly what we’d call ‘ABM-lite’.
ABM-lite targets a group of segmented accounts, rather than taking a true one-to-one marketing approach. With the increased focus on revenue targets, marketers can maximise ROI by concentrating efforts on the most promising accounts, using data analytics to track engagement and adjust strategies in real time. It’s very clever stuff.
The slight hiccup in this approach is that we know software purchasing decisions are rarely made by a single person. Instead, buying groups include multiple stakeholders, all with different priorities and pain points.
So, what’s the answer? I recommend you create personalised content and messaging as part of a successful ABM campaign, and clearly demonstrate how the proposed solutions would meet the individual needs. Or to put it another way, classic B2B marketing for the tech market.
Creating opportunity for global B2B SaaS brands
At Fox Agency we use creativity to get people excited about your proposition. And we channel the good vibes into engagement, conversations, and demand.
Like the sound of that? Then let’s talk SaaS in more detail.