This post is by Jason Lemkin from SaaStr
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A common VC-ism is that You Always Have Competition. This probably is mostly true, especially since 70% of the top SaaS companies are really just new versions of old, established categories.
But sometimes, you really are something new. Or so different, that it’s basically new. Or a new version of a solution in a market that used to be small, so many customers never considered it until now. So for them, it’s new.
OK let’s stipulate you may not actually have any direct competition. The type that is in every deal with you, duking it out.
But then you still have at least 2 other types of competition. DIfferent, but even fiercer competition. That is hard to see, but real. Headspace and Budget.
Headspace is probably the biggest competition . In the enterprise, CIOs are getting fatigued on the soft costs to train employees on new apps that don’t absolutely need to learn. And for SMBs, it’s tiring to try out … yet another app. The novelty is gone. Beyond the direct costs of an app, the headspace to learn it; integrate it; deploy it; and in many cases, force your team to use it every day — is a big burden.
If nothing else, do anything you possibly can to minimize the burden of headspace:
- Make free trials seamless. The easier it is to start, the less headspace it takes. Do you really want to force a credit card? To require the world’s most complicated passwords? A forced set of invitations to others in the org?
- Use Google and other identities. Let folks use Google, Github, whatever they want to log-in.
- Support OKTA and other solutions in the enterprise so your app works with their log-ins and identity systems out-of-the-box.
- Integrate natively into Salesforce, Shopify, Talkdesk, Zendesk, Gorgias, whatever other “core app” you can so your app feels just like part of an app they already use. Yes, this may make you almost invisible. That is a good thing. It virtually eliminates the headspace burden.
- Make your app feel like other apps folks already use.
- Make your app fun (maybe not cute, but fun) so the headspace is disguised.
- Relentlessly take the friction out of the pre-trial, trial and onboarding experiences.
- Only send emails and communications that add value. If you send 20+ emails attempting to force an upgrade, that just adds to the headspace headache.
Make your own list here with the team to minimize the burden of your app adding more … headspace to your customers’ overload. The average company uses 60-100+ SaaS apps already. There just isn’t mental mindshare to spend the time to get to know yet another schema, workflow, dashboard, log-in, etc.
Budget is always your … competition. You’ll hear seasoned sales reps ask in their discovery calls, “is this project budgeted?” You might cringe the first time you hear this, as it sort of sounds like a pricing game. But it really isn’t. It’s more to learn what type of sales process will be necessary. If the project is already budgeted, then it’s a question of which vendor they will choose. But if it isn’t budgeted, and the price tag is anything more than trivial, sales has to start with competing for budget. For budget with the other 60-200 apps they already use, and the 10-20 new ones they are already planning to add. For whatever is left this year that isn’t already allocated.
Budges are fixed, from SMBs to the largest companies. There almost always is some additional discretionary budget, which is where you’ll often enter in the early days. But even that is fixed. When I was a VP in the Fortune 500, I had a $500k discretionary annual budget. That sounds like a lot, but it’s not that much for a huge company. Not that much given the overall headcount I nominally had assigned to me. And when it was gone, it was gone.
And ultimately, to grow your deal size, you’ll need to move from the smaller discretionary budgets that you may start inside of, to the larger fixed budgets. And there again, you’ll be competing. With all the other apps looking to do the same. Even if what they do is seemingly very different.
So what can you do to compete with and for budget? There’s no silver bullet, but a few obvious points:
- Show up. The vendors that come in person, and talk about the customer’s issues and challenges, wins more deals.
- Learn their business processes cold. If you don’t know 100% for sure how your Top 25% customers use your product, that’s a failure. Fix that now. You can’t become a core, budgeted app unless you are truly solving a big problem. At least a piece of it.
- Ask what you can do to be more valuable. Do this at least quarterly. Then go build some of this stuff.
- Learn who all the stakeholders are. You have to do this, to win real budget. You have to build relationships with all the key stakeholders at your customer, not just the one the rep is talking to on the phone.
- Be their Hero App. Each year, every company brings in 1 or 2 new apps that make such an impact, the buyer is a Hero. Be that app.
Competition. It’s always something.
The post The Competition You Always Have: Headspace and Budget appeared first on SaaStr.