Why market maturity is so important when selecting a B2B go-to-market strategy for SaaS companies
Market maturity can make or break the B2B go-to-market strategy for SaaS companies. Learn how to create the right GTM strategy for your market.
Fight-or-flight is an active defense response where you stay or flee. Your heart rate increases, sending oxygen to your major muscles. Your pain perception drops, and your hearing sharpens. These changes help you act appropriately and rapidly.
Many companies have “frozen” their spending, investments and new initiatives as COVID-19 paralyzes people and businesses. As they prepare for their next move, will it be to fight and come out stronger, or run for the hills?
Freezing is fight-or-flight on hold, where you further prepare to protect yourself. It involves similar physiological changes, but instead, you stay completely still and evaluate your next move. Fight-flight-freeze is an automatic, overwhelming reaction, so your body can’t control it.
In this article, we’ll explore the power you do have to respond to a recession with your business strategy. You will learn what we think are good alternatives to inertia in the current challenging environment, and help you "cut the fat” in your plans while minimizing the damage to your Marketing muscle.
“Successful companies do not abandon their marketing strategies in a recession; they adapt them.” - Harvard Business School Professor John Quelch, 3rd March 2008
The most successful companies to come out of a recession are often those that prioritize and execute the right marketing strategies. So how do you know what that right marketing strategy will be?
Some companies will “freeze,” doing nothing for too long, which is almost guaranteed to fail. Some may reduce their prices, becoming a commodity player and devaluing their brand equity, or, worse, loosening their obligation to meeting customer needs. Some companies, however, will “fight", even out of sheer survival instinct, and when the economy picks back up, they’ll leave their competitors in the dust.
If anything, a downturn helps sharpen the focus of your strategy. The past years of “plenty” may have provided the luxury of too many options allowing you to postpone a frugal focus.
Marketing through a recession requires a special focus on things that still work, and more importantly, that will set you up for accelerated growth when the economy improves.
The core fundamentals that underpin marketing don’t change, but in a challenging economic climate, the practical application of these principles do change. When sales slow down, or your funnel shrinks, the direct response is often to cut budgets and resources. What marketing strategies are best to deploy in this environment?
Return of Investment of Marketing spend should still drive most of these choices. Don’t just move your budget for Trade-shows to buy more LinkedIn Ads or Capterra leads. If those were good ROI Marketing channels, you should already have invested in those. The fact that you suddenly have some cash to move does not change that initial analysis.
A good reason to double down on an alternative demand generation channel may be that your horizon to expect returns has shifted and now allows you to make some long term, strategic bets. Is now the time to invest in hard-to-build capabilities that are likely to deliver long term growth? Can you get a competitive advantage that will be hard to challenge by others? Below are some key things to consider during an uncertain time:
These are all considered key to marketing success but are often sacrificed in exchange for the priorities that are right in front of us, like trade-shows or product launches. Now that these latter examples are being canceled left and right due to the Corona virus, can you finally do the important, vs. the urgent?
“A time of turbulence is a dangerous time, but its greatest danger is a temptation to deny reality… [However] a time of turbulence is also one great opportunity for those who can understand, accept and exploit the new realities. It is above all a time of opportunity for leadership” (Drucker, 1980)
While in 2008-2009 many marketing budgets were cut over a longer period of time, the current situation is quite different. Many marketing teams are now 100% reliant on digital marketing due to the overnight loss of many traditional marketing channels, such as trade-shows, live events, business conferences and your atypical sales business drop in.
I’ve spoken to people who are even considering going back to some traditional direct mail tactics. While the “in-person” live “channels” are lost for the immediate and maybe intermediate future, contingencies are available to mitigate this loss of demand gen capacity and replace it with new experiments and alternative channels.
In favorable market conditions, companies can achieve levels of growth that make them believe that their strategies are working, and yet they may never know their abilities to become more profitable had they adopted a different approach. This could very well apply to your strategy of investing in trade-shows and conference sponsorship.
In a recession, the smallest inefficiency could however, result in failure quickly. The right marketing strategies therefore act as an insurance, making your company less vulnerable to the volatility of the economic environment, as well as a competitive marketing tool that uncovers potential opportunities.
When your company sells to Business Customers (B2B), you typically have fewer customers than B2C companies. Your relationships with 20% of your (larger) customers could easily comprise more than 80% of your revenue. If you are relying on in-person events and interactions to manage these valuable relationships, you need to deploy alternative tactics to mitigate risk. In a B2B SaaS business model, it’s even more critical to retain these top customers that drive recurring revenue. So your focus should first and foremost be on retaining your existing customers and partners, before worrying about attracting and winning new ones.
While every company reacts differently to a rough economic climate, the following three “solutions” are usually considered:
In an attempt to generate sales by reducing friction, discounts or promotions are sometimes seen as an easy short-term means of winning sales. Without a solid pricing strategy, however, lowering prices can cut profit margins to fatally low levels. Marketing strategies are of course not unique to the prevailing economic climate. Pricing strategies, such as discounts and special offers to encourage customers to buy, are employed in times of a booming as well as a weak economy. Michael Porter suggested that companies have three strategic options: to differentiate, to compete on cost, or to specialize in meeting the needs of a niche.
While driving sales is crucial during a recession (as it is at any other time), another approach to sustain new booking levels could be to raise prices. Given the smaller pool of buyers, this could be a way to keep revenues at the right level by focusing on the customers that really need what you have to offer, and are willing to pay a premium.
Finally, cutting prices as a knee-jerk reaction as opposed to a long-term strategic response follows the assumption that your customers are price buyers, which is a dangerous trap to fall into.
When profits are at risk, reducing the marketing budget is often an easy mitigation strategy. Many marketing costs are discretionary, like advertising, promotions, market research or sponsorships. Resources like campaign management and content production are sometimes seen as relative commodities. Unfortunately, this leads to the marketing department often being the first to cut costs in an attempt to conserve cash.
Another reason for the Marketing budget to be the first to slash is that it’s just an easier cost-saving vs. customer service, reducing sales reps, or delayed delivery times of the product. To ensure that customer experience stays top-notch, management often has no choice but to cut in discretionary marketing-, contractor- and sometimes employee expenses.
There are of course cuts in Marketing expenses that are exactly the right tool to quickly respond to a crisis and rethink priorities. The challenge is to only cut away the fat, and not the muscle. Marketing capabilities take time to build and deliver results, and when the “engine stops” it can take a while for it to pick up speed again. Thus, as with lowering prices, cutting costs can be fatal if it limits or completely halts the company’s ability to drive demand for its services in the foreseeable future. It is critical to determine which proactive marketing strategies should be sustained throughout the economic woes that will result in profitable outcomes.
Here are some places to start to get your cost under control and optimized:
In my home country, the Netherlands, we have a saying that translates something like this: "You'd better sit still while you're being shaved". This saying is often used to justify inaction when times get tough. While this can be sound advice when investing in the stock market, it does not always apply.To freeze is a natural reaction in the animal kingdom when a threat emerges. Our lizard brain is not only programmed to fight or fly but to freeze as well, depending on the circumstances.
In line with this, some companies choose a relative state of inertia in response to a recession, and don’t seek to counter, or even benefit from the circumstances. Doing nothing can be fatal. There are very few examples of companies that followed this strategy and came out of the downturn stronger. As you can be sure that some of your competitors, or challengers, will not sit still.
With a slow down of market demand, your competition may simply not have the luxury to wait out the storm, thus reacting and innovating as if they have nothing left to lose. Competitive pressures increase in a downturn as everyone tries to maintain or grow their customer base. If you don’t join the fight, you risk failing.
There are a few “no-regret” actions that I believe almost every company can benefit from. I recommend you execute the following projects before you fall into inertia or spend a lot of time on “strategy.”
As your team is “huddling inside,” exercising “social distancing” or even at home during “shelter in place,” you can finally build that great content your customers have been waiting for. A great rule is to follow your customer’s journey (and their buyer’s journey) and confirm you have published content to answer the questions they ask. Here is a framework to get you going. Write a blog about the most common questions your customers have. Budget, ROI guide, buyers guides, etc.
(If you really want to challenge your team, ask everyone in a commercial role to contribute to the content challenge, like here).
Is your team certified in tools like Google, Hubspot, and Semrush? Can they get trained on Outreach.io or do Seth Godin’s Marketing Seminar? Now is the time to challenge them while they work from home to get some of these certifications completed.
Here are more ideas to drive personal development, and a couple of fundamental Marketing Books for every B2B SaaS Marketing Professional.
If you want your company to come out stronger after the dust settles, I suggest you “Fight” and pursue the limited opportunities with extreme focus, or “Flight” to a new part of the market, and as you do so, create a disruption that will prove a fantastic growth lever.
A challenging economic environment can be a game-changer for the businesses that are willing to take on the increased competition.
Louis Pasteur, a French microbiologist and pioneer of the "Germ theory of disease", said:
Dans les champs de l'observation le hasard ne favorise que les esprits préparés.” - Translated into something like “Fortune favors the prepared”
This quote is very appropriate during the current Coronavirus Pandemic, and applicable to how people and businesses can best deal with the challenges. A comprehensive strategy to address the challenges, as opposed to reactive and piecemeal actions, can lead to significant competitive advantages. Let’s explore some marketing strategies that not only can effectively counteract recessionary turbulence, but also reap the benefits from it.
Igor Ansoff suggests driving growth following a two-dimensional model, based on the markets you service, and the service or product you provide. See the below illustration.
At Kalungi, we use the Ansoff Matrix for all our clients as the foundation for their Marketing Growth Strategy. We will use the same model here to discuss strategies and tactics to address the downturn.
Here are some questions to help you draft the skeletons of your updated strategy:
What options do you have to capitalize on the upside of the downturn through new opportunities, while you also mitigate threats?
Let’s discuss your options in more detail for each of the quadrants in Ansoff’s model.
To grow through servicing your existing markets (customers, partners) with your current product and service offerings you can increase market share. You can combine selling more to your current customers or by finding new clients.
Here are some specific actions that you can take to accomplish this strategy:
Following a market penetration strategy is the least risky growth option.
While some competitors might try to recruit your customers by lowering prices, losing some customers that might be costlier to service could be OK. Focus your resources on the most important customers that drive the majority of your revenues with high levels of satisfaction. Once Marketers understand these segments that value our offerings, you double down on them, using, for example, a targeted “Account-Based Marketing” strategy.
Many B2B SaaS companies have had their plates full servicing the markets where they first achieved “Product Market Fit”. An uppercut from the recession is just what the doctor ordered to look at opportunities in adjacent markets that they were ignoring before. Most companies fear change and have a tendency to stick with the familiar, vs. taking some risk and exploring new opportunities.
By focusing on new markets with your existing products and services, you can expand into new industries, and market segments or geographies with limited product/services development. During the downturn potential risks of cannibalization of your current market may be a lower risk than before.
Actions that can be taken to grow new markets:
This strategy is more likely to be successful when:
A great way to execute a Market Development strategy is through an Account-Based Marketing program, supported by an updated messaging framework, refreshed content made for the new ICP and personas.
Here is a detailed template to plan your “Go-To-Market” as you consider expanding the “SAM” (serviceable addressable market) as part of your “TAM” (total addressable market), and a video to explain how it works.
When driving growth in new markets, the “awareness” stage of the funnel becomes critical vs. consideration and conversion. Now is a good time to review the quality of your marketing messaging and its ability to connect with the core drivers of your audience.
Finally, if you don’t have the luxury of retaining a very experienced marketing leader, now might be the time to bring in a pinch hitter, like a Fractional CMO who has led other B2B SaaS companies into new markets or through uncharted territory.
All innovation will become a commodity over time, as your competition copies you and improves your mousetrap. You need to innovate to survive, and there is no better time to do so than during a downturn, where you may get that small window of opportunity where your competition is also on pause for a bit. A downturn is an ideal time to make a quantum leap by focusing on new products. Your competitors are scared, may lack liquidity, and may be afraid of taking risks. Those are great conditions for you to set up your company to take the lead. Product development should always happen and should not be neglected, but rather embraced in times of adversity.
While innovation can be costly, there are ways to obtain speedier cost efficiencies in a recession, such as product development through substitution. Substitutes allow companies to circumvent entry barriers erected by former market leaders, making the new product strategy easier, quicker and cheaper to implement in a downturn.
As you create new products and services targeted at your existing markets to achieve growth, you can also extend the product range available to your existing clients.
Consider the following actions:
Bringing new products into new markets is the final quadrant of the Ansoff matrix. While risky, there are plenty of examples of companies who’ve done a “pivot” during a recession, and had it pay off immensely. If you have the reserves to make the investment, this strategy allows you to drive major disruptions while your competition is distracted. This strategy goes much deeper than just marketing and thus is beyond the scope of this article.
As a B2B SaaS Marketing Agency, our focus is biased towards digital. Given the current COVID-19 situation, this is the logical focus for marketing efforts. The biggest impact though could be to do the basics very well. Update your strategic positioning. Update your messaging to align with your customer needs. Here is an earlier article addressing the specific need for companies who have been dependent on trade shows and conferences.
After 15 years of experience in the Software Marketing Industry, Stijn adopted the SaaS model to launch Kalungi, a marketing agency that specializes in assisting B2B SaaS companies.
Market maturity can make or break the B2B go-to-market strategy for SaaS companies. Learn how to create the right GTM strategy for your market.
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