Here’s the one thing small SaaS businesses can do to stand out from the crowd
It’s tough being a small business, as any founder will tell you. Even more so when you’re a small business listed on the ASX and relying on a lot of public money.
As the development of technological infrastructure gallops along in leaps and bounds, it’s no surprise that we have seen a boon in small tech companies, particularly those offering a particular type of product — software as a service, often abbreviated to ‘SaaS’.
SaaS is a software licensing and delivery model in which software is licensed on a subscription basis and is hosted by another party. Basically, it’s a company providing software, but also the service aspects of that software, which might include chat bots, data scraping, payment solutions, customer service operations and a host of other back-end tools.
The ASX is home to 40 or so stocks offering exposure to SaaS. One research house has global SaaS revenues reaching $122 billion this year.
But there is one element to life as a SaaS business that experts reckon is under-appreciated, and that’s something called ‘customer success’. Amelia Hayson, co-founder of Success Society, a 1,200-strong member body dedicated to improving customer success practices among SaaS companies in the APAC region, and Darren Chait, COO and co-founder of connected meeting notes SaaS tool Hugo, explain why.
Stockhead: It doesn’t sound like it should be a ‘new’ trend – so what is ‘customer success’?
Amelia: Customer success is about people and people are driven by two motivators – their needs and their experiences. In meeting these drivers, a SaaS business can create loyal customers, who continue to use their product, despite the barriers to cancelling subscriptions being virtually non-existent. In a competitive market, it is no longer sufficient for the customer experience to just be smooth and simple – it should WOW.
Darren: While, to your point, customer success really isn’t a new concept, it’s a relatively new function that’s followed SaaS’ massive global growth over the past decade. As software vendors have switched from only having to think about their customer up until point of sale and then contract renewal years later, to the current SaaS model, which is sustained by continuous customer engagement, customers now have the ultimate flexibility when it comes to software.
Today, if a customer is no longer engaging with or drawing value from your product, they’ll stop using it and stop paying for it within as little as a month’s time. Customer Success is a new kind of workforce in SaaS companies, committed to ensuring continuous customer value and enabling those companies to keep customers engaged and ‘renewing’ every month.
What trends are you seeing in the SaaS industry at the moment? What do you foresee happening in the long term?
AH: In 2018 the role ‘Customer Success Manager’ was listed as number 1 in LinkedIn’s top five emerging jobs in Australia.
Start-ups have already begun to adopt customer success as part of their DNA and I can see this approach continuing and becoming increasingly driven as a top-down approach. Long-term this will lead to a shift from talking about customer success as a separate function, to simply ‘this is how we do business’.
However, one of the biggest misconceptions I see unfolding is the perception that customer success is just a new name for customer support or account management. It’s important not to confuse these business functions with customer success. Support and account management services are typically reactive, while customer success adopts a more proactive approach.
DC: At this point in its maturity, customers are generally pretty comfortable using SaaS. In fact, the average organisation today uses more than 120 different SaaS-based tools. A resulting trend we’re beginning to see now is a general feeling of fatigue among businesses and customers, which can get in the way of businesses adding and adopting new tools. In particular, the incremental costs associated with onboarding, data fragmentation, per-seat pricing and data management that come with SaaS appear to be adding up. This is definitely driving some resistance among customers in the industry to expand their SaaS spend.
Because of this, I think something we’re going to see over time are an increasing number of horizontal SaaS solutions – the Slacks of the world, who come in and build value for everyone across the organisation.
Those are the tools that are going to have the biggest impact on our engagement, productivity and ultimately team and organisational culture. Atlassian is a great example of this.
What can small cap Australian SaaS companies do in a crowded market to set themselves apart from competitors?
AH: SaaS businesses are reliant on the ability to retain customers through renewal, while avoiding churn. What gives an edge over the competition is the knowledge that, while churn is inevitable, it can be balanced out.
To set themselves apart, I would encourage businesses to look at customer success as so much more than a standalone function — it enables sales, empowers marketing and informs product.