Demand Generation

Blog Post

A Beginners Guide to the Software-as-a-Service (SaaS) Business Model

Software-as-a-Service (SaaS) is a software delivery method where the solution is owned and managed by a company, hosted on a cloud that a third party provides, and delivered to customers on a subscription basis via the internet.

This article will help you understand the fundamentals of the SaaS business model, including its strengths and weaknesses.

The Four Pillars of The SaaS Business Model

1. Centralized Ownership

The Application Service Providers (ASPs) retain ownership over and maintain the SaaS product. Instead of permanent licenses, they sell the solution via subscriptions and provide everything else their customers require, such as support and maintenance.

This helps with keeping costs low and enables companies with limited budgets to adopt newer technologies.

2. Cloud-based Hosting

Most SaaS companies use cloud hosting solutions such as AWS, Microsoft Azure, and GCP to deploy their applications. This makes it easier for them to scale fast while retaining the quality of performance when it comes to delivering the promised value to their customers.

Generally, SaaS platform developers use microservice architecture, which keeps costs lower and makes the solution easy to operate, modify, upgrade, and maintain.

3. The Subscription Pricing Model

As we briefly touched upon earlier in this article, SaaS companies bill their customers periodically (weekly, monthly, or annually). This subscription-based pricing renews customer access to the solution at a specified service level.

The nature of the tiered pricing model varies from company to company. For instance, some SaaS solutions charge based on features used, while others charge based on the number of users.

4. Internet-based Delivery 

Customers have web access to SaaS products through their local machines. However, the data is stored and processed on servers of the cloud hosting solution used by the SaaS company, usually located elsewhere.

This cost-effective, scalable, and versatile approach helps SaaS companies adapt with time while continuing to deliver world-class services to their existing customers.

SaaS vs. PaaS. vs. IaaS

SaaS

SaaS (Software-as-a-Service) utilizes cloud hosting solutions managed by third parties to host software. Businesses then use the internet to deliver it to their target audience. The advantage of the SaaS application is that it can be accessed via a web browser, making its adoption simple.

Examples of popular SaaS applications include G Suite, Dropbox, and Slack.

PaaS

PaaS (Platform-as-a-Service) delivers a framework for developers that is used to build applications. The servers for storage, processing, and networking of data centers are managed by third-party service providers — also known as Cloud Platform Services (CPS).

AWS Elastic Beanstalk, Windows Azure, and Heroku are some of the most prominent PaaS solutions.

IaaS

IaaS (Infrastructure-as-a-Service) helps its users to monitor and maintain their IT infrastructure while giving them the freedom to scale up or out as per their requirements. IaaS keeps hardware costs low.

Google Compute Engine (GCE), Microsoft Azure, and DigitalOcean are some examples of IaaS solutions.

Source: BMC. Differences between IaaS, PaaS, and SaaS

Strengths of the SaaS Business Model

Scalable Solution

As the SaaS solution is hosted on the cloud, there are no limits on how many customers a SaaS company can serve. Furthermore, selling the solution in every country is possible, provided the legal requirements are taken care of.

The cloud hosting solution in use will take care of the new storage and processing requirements while accommodating new users in real-time.

Easily Accessible

In the olden days, customers had to purchase enterprise software, upgrade their local machine to match the recommended specifications of the software, and install it before they could start getting any value. 

Now, all they need is a computer with a stable internet connection and a license to a cloud-based tool.

Automatic Updates

SaaS solutions have made the “software update” button and waiting for it to complete before starting your work obsolete. SaaS vendors deploy new updates on the cloud, and they will be reflected in real-time on customers’ devices.

Customization and Customer Relationship Management

SaaS Providers can create multiple pricing plans to target customers of different requirements in the same or similar domains. This assists them in having a wider potential customer base while delivering economical and personalized solutions to each of them. 

Predictable Costs

The pay-as-you-use linear pricing model makes it easier for SaaS businesses to predict how much working capital is required to hit the SaaS market. This makes it easier to maintain finances and scale up in the future, as well as increase the platform's average customer lifetime value.

Weaknesses of the SaaS Business Model

Cybersecurity

It is challenging for both the business and their users to store their sensitive data on third-party servers. It is crucial for businesses to carefully go through the privacy policies before choosing a cloud hosting solution.

Longer Sales Cycle and a High Customer Acquisition Cost

The journey that transforms a prospect into a paying customer is quite long. SaaS businesses often have to spend a lot on marketing strategies for the entire sales funnel to ensure it resonates with the audience. 

High Competition

The strengths of the SaaS model make it easier to develop such a solution even with a strict budget. Due to this, every domain in the SaaS industry has a lot of players, big and small.

eCommerce, SaaS, and Matter Made

The SaaS business model is scalable, accessible, affordable, and easy to maintain. These advantages make it a great opportunity but also make it competitive at the same time.

The one thing that will set a SaaS brand apart from its competition is its marketing strategy — as it will relay its value to its target audience, motivating them to sign up for a trial.

Matter Made helps SaaS platforms achieve this objective through a strategic blend of demand generation, decision-maker marketing, paid media, and product-led growth.

Interested?

Schedule a chat with us today.

Demand Generation

Blog Post

5 Tips For Creating Demand Before Capturing It

Building and launching a new product is exciting, especially if your research suggests there aren’t many great alternatives on the market.

But even with the right audience research and product-market fit, creating genuine "I can’t wait to try this thing" interest in your product is a tall order. Particularly for B2B SaaS, wherein your brand and its latest solution need to be compelling enough to a bunch of decision makers.

That’s where demand generation comes in — while lead generation is all about converting an audience that’s already aware of their problem and are actively hunting for solutions, B2B demand generation helps you create a buzz for your brand and its offerings by educating buyers about their challenges and your unique ability to solve them better than anyone else.

While there’s plenty you can do to generate leads for your new product, in this post, let’s look at the top five things you can do to generate demand for your B2B product before capturing it.

#1. Craft Educational Content to Build Brand Awareness and Authority

The first step to generating demand for your product is to create great content meant to introduce and inform people about a problem they’re facing.

Educate your audience in the three key stages of their buyer’s journey:

  • Stage 1. Non-aware. People that don't even realize they have a problem. Make them aware of the problem, its consequences, and available solutions with Top-of-the-Funnel (ToF) content such as:

  • Long-form guides
  • Blog posts
  • Infographics
  • Podcasts
  • Videos

  • Stage 2. Problem-aware. People that know they have a problem but no solution. Guide them through potential options and show them how your solution outperforms the rest with Middle-of-the-Funnel (MoF) content such as:

  • White papers
  • E-books
  • Case studies
  • Webinars

  • Stage 3. Solution aware. People that know the kind of solution needed to solve their problem and wish to finalize a product. Showcase your product in action and prove its benefits with Bottom-of-the-Funnel (BoF) content such as:

  • Case studies
  • Success stories
  • Demos
  • Free trials

Source: Content Marketing Institute. A table showing how effective each marketing channel is for each buyer stage.

#2. Focus On The Pain Point 

To generate demand in a space where your prospects are largely unaware of the snags your product addresses, you must concentrate all your content marketing efforts on leading your audience to the "aha!" moment.

It’s the moment your prospects realize that the problems they’re facing are worth investing good money in solving.

You can make this moment happen by following the PAS model: Illustrate the problem, agitate its pain with real-life examples and data (such as the % loss in productivity or revenue), and showcase your solution as the go-to one. So, put simply, find and understand your audience's biggest pain point and position your product as the solution to that problem.

#3. Promote User-Generated Content (UGC)

There aren’t many better ways to create demand for your new product than letting your initial, satisfied customers do the talking.

While not B2B, one of the best examples of UGC done right is GoPro. The renowned action camera company doesn’t rely on fancy big-budget marketing campaigns, but rather leverages handpicked content created by customers actively using their products. No hard sell.

Source: GoPro on Instagram. A screenshot of a post from GoPro's Instagram.

You can take a leaf out of their book by promoting your product’s good reviews and highlighting your happiest customers with testimonial videos.

All in all, UGC is the most authentic way to prove your solution’s effectiveness without the fluff. 

#4. Leverage Customer Feedback

Continuing along similar lines, modern buyers won’t even think about signing up unless they see positive reviews from happy customers. Word of mouth will always be the best way to create magnetic demand for your product.

The other side of that coin is to capture feedback from your happy customers and act on it.

After launching the pilot version of your SaaS product, quickly switch your focus to gathering honest and detailed feedback from your initial users. Then, add new features, content, pricing points, etc. to enhance your offering based on customer feedback.

By consistently acting on user feedback and showcasing your efforts publicly (on your social channels and via blog updates), you build trust and credibility for your brand and thus drive more demand for your product.

#5. Set Your Brand Apart

As innovative or revolutionary as your new product may be, odds are your prospective buyers still have options to pick from.

When your competition is offering a similar product as yours, your goal is to set yourself apart by pinpointing exactly what you offer that is different.

You can do this by:

  • Identifying your Unique Selling Proposition (USP) and relaying it throughout your brand messaging.
  • Keeping an eye on your competitors’ product updates, social media content, and user reviews to identify their customers’ most pressing pain points and address them iteratively in your product.

And although it’s a risky strategy, don't be afraid to be a bit bold or controversial in your content to stand out as a brand. This helps build a community of like-minded customers who’ll champion your product and filter out prospects who don’t share your brand’s outlook.

Content Creation and Demand Generation Walk Hand-in-Hand

Sure, investing in paid media helps drive immediate demand and leads for your new product. But, as cliché as it sounds, content is indeed king when it comes to generating inbound, non-intrusive interest in your B2B SaaS.

If you follow the strategies in this article you can fuel a sustainable (and growing!) demand for your product.

And if you wish to drive hockey-stick growth for your new product, you’re in the right place. Make Matter Made your partner in product-led growth and content-led demand generation to meet your most ambitious MRR targets fast.

Ready to drive efficient demand?

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