Why a Channel is Critical to Your SaaS Company
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Why a Channel is Critical to Your SaaS Company 5 Reasons a Channel is a SaaS Go-to-Market Must 5 Ways a SaaS Channel is Different 5 Things Saas Companies Must do to Stay Ahead
THE 555 Why a Channel is Critical to Your SaaS Company Saas Market Opportunity SaaS businesses are here to stay and growing rapidly. Gartner (Visual 1) reports that out of the $186B spending projected in 2018 in the worldwide public cloud services market, SaaS revenue will top $73B. If you have any doubt about that number, look at your own tech stack. SaaS applications are prolific. From top applications like Box and Slack to up and coming tools like AppCues and Clearbit, the common denominator is growth. With the Rule of 40 (Visual 2) being a guide for most VC firms, SaaS companies are reaching for growth rates of 40% or higher, but they can’t go it alone. Healthy SaaS companies needs partners to succeed.
But where does a channel fit in a direct-to-paid subscription model? The answer? Everywhere. Critical as the channel is for SaaS companies, the differences are key. This eBook is designed to help SaaS business leaders understand why a channel is so important, how it’s different and what they need to do to stay ahead.
Worldwide Public Cloud Service Revenue Forecast (Billions of U.S. Dollars) 2017
Cloud Business Process Services (BPaaS)
Cloud Application Infrastructure Services (PaaS)
Cloud Application Services (SaaS)
Cloud Management and Security Services Cloud System Infrastructure Services (IaaS) Total Market
BPaaS = business process as a service; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a service | Note: Totals may not add up due to rounding. Source: Gartner (April 2018) Visual 1
THE 40% RULE: Growth rate plus profit should add up to 40%
So... If you’re growing at 20% If you’re growing at 30% If you’re growing at 50%
You should generate 20% profit You should generate 10% profit You you can lose 10% profit
If you are doing better than the 40% rule, You are doing AWESOME.
THE 555 Why a Channel is Critical to Your SaaS Company Five Reasons a Channel is a SaaS Go-to-Market Must
Partners amplify growth
Partners attract buyers
Partners fill product gaps
Similar to your favorite goat yoga picture getting a million views on Facebook, most SaaS applications are looking for and building ways to exponentially amplify their market awareness and position. From share and refer functionality to creating communities around their technology, virality is the goal and a network of partners who have a vested interest in your success help to drive that expansion is key. Consider Hubspot. A quarter after introducing its reseller program into the market, the program was driving 42% of new customers and 22% of revenue.
SaaS companies are changing the customer journey and AchieveUnite: Our experience at a the sales experience. With the advent of freemium recent SaaS e-commerce client models, free trials and direct-to-paid models, customers company showed a large % of leads can self-serve their technology purchase from any role in coming from an affiliate program manned by a single employee and the company. No longer are companies marketing to the extending reach through a network CIO or CTO, instead buyers become ubiquitous across an of over 500 partners. organization. With buying patterns changing, 60% of purchase decisions happen online without ever engaging the vendor. That means anything that amplifies search results, amplifies growth. Partners that are referring and reviewing your service (think affiliate marketing), have large social footprints, or are engaging in thought leadership that gets SEO traction are essential parts of an acquisition strategy.
Ever heard the expression, “there’s an app for that”? Well, it’s true. Search just about any need and you will find an app to solve that problem. Need an AI bot for your support page? Check. Need to add review functionality to your software? Check. The list goes on. With niche and expert code available, SaaS companies can stay focused on their core technology and partner to provide the rest. In fact, whether built as an integration or embedded in product, technology app partners are essential to SaaS product roadmaps and growth.
THE 555 Why a Channel is Critical to Your SaaS Company
Partners drive increased value Businesses have many opportunities to adopt SaaS products and find partners who offer services to onboard, manage and integrate these offerings. This solves a critical business need. By being thought leaders and providing the bridge between multiple SaaS offerings, partners become invaluable to the customer, increasing customer satisfaction. As a result, customer churn decreases. With lower churn, customer loyalty increases and lifetime value increases. Mary Meeker’s Internet Trends report for 2017 (Visual 3) shows the average number of cloud apps used by an enterprise is around 1000
Mary Meeker’s latest Internet Trends report for 2017 (slide 190)
Finance / Accounting
CRM / Sales
IT Service / App Management
Average Cloud Services Used per Enterprise
Average # of Cloud Apps Used by Vertical, Global, April 2017
Healthcare and Live Sciences
Technology and IT Services
800 600 400 200 0 Retail, Restaurants, & Hospitality
Financial Services, Banking, & Insurance
Partners validate your solution Learning new technologies requires an investment in time and resources. When partners believe in your solution enough to learn the technology, how to sell it, and commit valuable resources to discussing it with their customers, it validates the solution for you and for their customers. If you capitalize on their investment with social posts, thought leadership, and co-marketing, the undeniable value is proven to your next customers as well. By extending your partners’ engagement and success through your marketing efforts, you create momentum around a successful tool that demonstrates the solution and attracts new customers.
THE 555 Why a Channel is Critical to Your SaaS Company 5 Ways a SaaS Channel is Different
The model is different From affiliate to referral to technology partners, SaaS ecosystems look a little different. The traditional margin-based partner programs look different too. Affiliate programs pay a one-time bounty on closed deals tracked primarily through cookied links from the partner websites. These programs are most commonly identified as a marketing channel and are typically housed in the marketing organization responsible for top of funnel growth through digital acquisition. Many times, they are outsourced to a 3rd party affiliate company like Impact Radius. Referral programs most resemble a traditional channel model with a few distinctions. Like a traditional reseller model, partners mostly own the relationship with the company and have some influence in the purchase of the solution. However, partners may identify the opportunity, then the customer could go direct-to-paid with their credit card to purchase the SaaS offering and therefore, traditional margin-based programs don’t work. A common practice in SaaS is to pay partners a percentage-based referral fee for the life of the customer on monthly recurring revenue. The percentages may be aligned to points or tiers based on engagement, willingness to co-market, revenue, number of customers, size of transactions and other factors. Technology partner programs are for partners who build apps, connectors, and other code to enhance an offering and are essential to a SaaS product’s success. By having integrations with multiple products that are part of a customer’s journey, SaaS products become stickier, creating longer lifetime value. Think of Quickbooks: their app marketplace boasts 500+ partner integrations organized across the entire lifecycle of the company. Partner rankings around reviews and downloads drive preferred placement. Often technology partners are not compensated. Instead, they use these marketplaces as a demand generation source to drive business. Business models vary here depending on individual company value proposition and partnership combined value. Technology partners are not alone. Marketplaces are a cornerstone to creating demand for SaaS offerings. From vendor marketplaces like AWS, to referral sites like Capterra and G2Crowd, marketplaces and the technology partners within them are a key channel. Organizational structure is also a key differentiator in the world of SaaS. With a direct-to-paid model, many times companies fail to organize their channel and partners around a central leadership structure. Sometimes, different partner channels sit in different organizations which creates challenges. Siloed organizations limit the ability to create economies of scale and traction across channels.
THE 555 Why a Channel is Critical to Your SaaS Company
The marketing is different The fundamental difference in marketing a SaaS offering is that instead of acquiring and nurturing a prospect until they build a relationship with a salesperson, you are acquiring and nurturing a prospect to build a relationship with the product. The recipe is simple: demand generation and social strategies bring a customer to the app or product, content and nurturing encourage them to try it out, web pricing strategies compel them to buy, and onboarding and customer engagement strategies create loyal and long-term advocates of your product that continue to invest. The customer experience through this process is paramount to success.
Where do partners fit? Partners come in all shapes and sizes – from those focused on customer acquisition, to driving strategic value, providing access to a vertical market, filling a product gap, and beyond. Partners will exist throughout your customer lifecycle journey and they must be armed to become your best advocates. Self-serve marketing tools that are accessible at the speed of their customers are necessary. From training to co-marketing assets, sales enablement to onboarding tools, ready resources will allow partners to scale and grow your business.
The sales motion is different In a subscription-based model where freemium offerings and free trials are a large percentage of the demand generation funnel, direct-to-pay is common. Sales will engage further down the funnel (Visual 4), and VOLUME is the name of the game. Now is the time for your sales process to evolve. With 60% of purchases happening without a sales rep involved, and customer churn being a metric to watch, sales organizations must move beyond the traditional structure of hunter/farmer to build a SaaS ready sales organization.
The New Marketing & Sales Funnel THEN...
Interest Consideration Intent Marketing
Evaluation Sales Visual 4
THE 555 Why a Channel is Critical to Your SaaS Company What’s different?
Sales have become more specialized with reps aligned along the funnel to drive conversion, upsell and even retention. Marketing and product play a key role in delivering a large volume of self-serve or direct-to-paid customers to the funnel. (Visual 5) SaaS companies have the opportunity to sell across a range of customers, based on the motion. This means partners of all sizes can contribute to success.
Upsell, Retain Close high value deals
MDR Outbound Self Services / Internet Sales Marketing Led, Self Serve, Chat SDR = Sales Development Rep MDR = Market Development Rep AE = Account Executive SM = Sales Manager
ONB = Onboarder CSM = Customer Success Manager AM = Account Manager
Consumer or very small business
Self-service sales that are low cost and scalable
Partner Play: Affiliate partners may drive demand, technology partners provide ready solutions, strategic partners could have solution embedded in the product
Sold by an inside sales team, highly trained in high volume online
Partner Play: Referral partners might work side by side with the inside team to close a prospect; the inside team may identify customers that need a partner to close the deal
Mid-Market / Enterprise
Senior sales reps skilled in more complex sales that are measured on big customer wins
Partner Play: Most large companies’ opportunities have a partner engaged throughout the sales cycle
The tools are different Go to any technology event and at least one presenter will be up on stage discussing their stack. With SaaS driven solutions on the rise, there are more options than ever to help you solve today’s business problems. Stackshare.io has built a business showcasing technology stacks for startups. Partner tools are no different. The best-in-class tech stacks will always include a tool designed to support their partner business. (Visual 6) Tech Stack Application & Data
THE 555 Why a Channel is Critical to Your SaaS Company
The “gotchas” are different With all this change in building a SaaS Channel, there is an increase in complexity which can create some sticky situations. At the top of the list is partner conflict. In a recent client engagement, AchieveUnite saw deals where multiple partners were engaged in a single deal: a design agency referred the opportunity around a technology, a strategic technology partner’s core technology was embedded in the solution and a services partner was needed to build an integration to a homegrown in-house system. In the case above, it is a convoluted line between who gets credit and who gets paid. Complexities like this require: • defined rules of engagement • open and transparent conversations with partners • an advanced and integrated partner relationship management system to keep it all straight, customers happy and partners paid Billing can also be tricky. In a direct-to-paid model, customers often use their credit cards to pay for a SaaS subscription. Sometimes, partners will pay on behalf of their customers. Regardless of the procurement direction, if onboarding or set up is required and is completed by a partner, billing complexities ensue. From needing parent-child account structures that allow a partner to manage the technical aspects but not be exposed to billing, to transitioning billing from partner to customer at some point in the cycle, flexible billing tools and practices are necessary. Support responsibility stays with the product owner. In traditional channel programs, favorable pricing is given in return for level 1 or 2 support from the partner. Most SaaS products have highly trained and robust onboarding and support organizations providing customers access to support in product and chat. Partners no longer are the first line of defense for customer support calls. Many times, partners themselves need help with the product as well. Building a routing Product protocol that recognizes a partner’s customers or recognizes a partner’s book of business and levels them up in the support queue are conversations that partners should undertake and SaaS companies should implement.
Product, marketing and sales are more interdependent than ever before. Building app trial pages that ask the right questions to route to the right sales nurture while optimizing the customer experience through testing is just one example that requires aggressive collaboration and clear swim lanes. Never has the sandbox been so crowded in delivering on customer and revenue expectations. Organizational silos are the enemy of a good customer experience.
THE 555 Why a Channel is Critical to Your SaaS Company 5 Things Saas Companies Must do to Stay Ahead
Forget about the past
Hang out with your accountant
To make a SaaS channel truly work, forget everything you thought you knew about channel ecosystems. You must be willing to define partners and programs differently to thrive in SaaS. Your best partners may come from the most unlikely places and take you places that you have never been before. Key takeaway: consider affiliate channels, marketplaces and key technology providers as “must haves” for your program strategy.
No, seriously. Talk to your accountant or lawyer or design agency or whomever is in the position to advise the end customer. Any trusted advisors to your customers are in the position to refer your solution or services. They are key to the partner ecosystem. Ensure you know where they play, what events they attend, where they meet their new customers and be there. Forget the idea that there is a place where your partners come together to discuss channel things. They are going where their customers are and learning about their business. Go there, and hang out with them. Key takeaway: Hire or partner with key advisors to your customers to help build thought leadership, create credibility, and drive growth in key verticals.
Get your millennial on Want to see how purchase decisions can be made throughout the organization? Learn how social footprints impact customer acquisition? See how fast technology can be discarded if it fails to meet expectations? Or, learn how a loyal customer can create virality for your product? Learn from the largest generation of adults. Millennials, at 75+ million strong with spending power of $200 billion today and with aggregate annual income expected to surpass $4 trillion by 2030. These folks are digital pioneers with expectations. Understanding these expectations will allow you to skate to where the puck is going as you define the makeup and needs of your partner ecosystem, your product and your customers. Key takeaway: Patterns of technology consumption are changing with every generation and every technological advancement. Be sure to stay abreast - and ahead - of these trends through the lens of those using the technology natively.
THE 555 Why a Channel is Critical to Your SaaS Company
Aggressively automate tech stacks From your PRM to your marketing tech stack, technology is the key to success. Companies that consume technology to accelerate their revenue engine will be at the front of the pack and partners are a critical part of that engine. Key takeaway: Automate early in your partner program development. With the right infrastructure in place, you will be poised to scale rapidly.
Do it or lose it
Companies using Impartner’s PRM solution increase channel revenue an average of 31%.
SaaS companies can spring up overnight, making the window small to take advantage of your strong first-mover advantage. Choosing only one path to market can quickly leave you behind the inevitable competitors who will quickly follow suit. Or, if you’re the company who is following on, use the channel to outpace those without the power of a channel. Two paths to market are more nimble than one.
THE 555 Why a Channel is Critical to Your SaaS Company About Achieve Unite Achieve Unite is dedicated to helping high-tech vendors and service providers achieve measurable growth by delivering state-of-the-art partner performance programs. We work with companies at all stages of channel development, helping them create and execute the best channel strategy possible for their organizations and improve their vendor/partner relationships. We also develop individual and organizational skills within the business by delivering advanced thought leadership and research that helps future-proof the company. Schedule a no-obligation assessment and learn more about us at achieveunite.com.
About Impartner Impartner helps companies worldwide transform the performance of their indirect sales, increasing revenue an average of 31 percent and reduce administrative costs as much as 23 percent in the first year of use alone. Impartner’s SaaS-based Partner Relationship Management (PRM) software is the best-selling, most award-winning pure-play solution on the market and can be up and running in as few as 14 days. For more information on Impartner, which is based in Utah’s tech hotbed, the Silicon Slopes, visit www.impartner.com, or in the United States call +1 801 501 7000, for EMEA general call +33 1 40 90 31 20, for London call +44 0 20 3283 4465, and for LATAM call +1 954 364 7883. Follow Impartner on LinkedIn, Twitter and Facebook.