There has been an explosion in the number of B2B Software-as-a-Service (SaaS) startups offering innovative solutions to niche verticals. A large number of these markets are pretty immature in terms of adoption - we are very much in the ‘early adopter’ phase for B2B SaaS to paraphrase Geoffrey Moore from Crossing the Chasm.
However, As barriers to entry continue to fall, competition in most B2B SaaS verticals is intensifying as categories emerge and various market entrants compete. We are also witnessing an increase in new market entrants who seek to replace several disparate apps bringing them all under one-roof placing them in competition with a number of other competitive solutions.
Running marketing campaigns targeting switchers rather than relying solely on trying to persuade targets to buy a new software solution for the first time becomes important.
When to Consider A Switching Campaign?
A switching campaign refers to the creation of a specific marketing campaign targeting your competitor’s customers i.e. where your target has a competitive solution in place. In part 1, we explored some of the challenges associated with seeking to target your competitor’s customers. In this second part, we now explore when to use a switching campaign and how to execute it successfully?
1/ Perceived Switching Costs Are Low
Firstly, it is clear that the user has identified a pain and it must have been significant enough to warrant a software solution. By dint of them using a competitive solution, they are also signalling that they have been educated as to the benefits of software to help them solve their problem. For bigger ticket items they have also secured a budget so it is now a line item in the P&L. Your marketing efforts thus becomes less about convincing them that they have a pain that your SaaS solution can resolve and more about how your solution trumps all others or is better suited to their needs (be it more affordable, or more aligned with their specific requirements). It may be that after you assess the likely strength of lock-in that it is low enough to not be a major factor.
2/ Your Solution is Significantly Better
Many early-stage SaaS applications can vary considerably in terms of product maturity. Thus if a competitive offering appears to have some product challenges then existing users are likely to have an incentive to switch. As mentioned earlier, one way to gauge this is to analyse negative reviews on the likes of Get App, Capterra, G2 Crowd and Software Advice if your category of solution is featuring there. Identifying opportunities to win disgruntled customers may be a narrow window, given the competitor will be working hard to remove any product related deficiencies in the next sprint.
3/ You Identify a Viable Niche
Software companies can compete on many different grounds other than price or feature-set. Perhaps they are targeting particular industry sectors, or are looking to move up-market or down-market. Depending on these shifts you may feel your offering is a better match for certain customers and thus you are looking to entice them away. For example, after companies raise significant VC funds, they are often encouraged to move upmarket to increase their revenue ceding less profitable customers. Or perhaps they lack local support and you want to have access to support in your time zone.
“One of our investment theses is that a 1% of Salesforce is a unicorn. What we mean by that is, if you were to find a dissatisfied segment of the Salesforce population and build a better product for that segment whose size of the customer population was 1%, and you were able to capture them, you would have a $1 billion business. I think we’re going to start to see, and are already seeing, some companies going after those bigger businesses and picking off customer segments or product lines that haven’t received the love and attention they deserve. People are just going to start ripping out those revenue streams from big businesses.” Tom Tunguz, RedPoint
4/ You Have Raised a Lot of Cash
Perhaps you have closed a major fundraising round and the addressable market is limited given the market is young and immature. Winning business from competitors weakens their position while strengthening yours. Thus allocating some marketing budget to switching campaigns is something worth exploring. As before, your ability to win will be linked to how strong or not the factors listed previously are for your category. Perhaps your investors believe that there are winner-take-all characteristics in your category and they are less worried about the unit economics and acquisition costs and are more interested in a land grab at all costs.
5/ The Size of the Prize is Sufficient
Finally, it is worth noting that all this extra effort needs to be aligned with a sufficiently high Life Time Value (LTV) as otherwise, you are layering on costs without a big enough prize being attainable.
While this list is not exhaustive it does give some indications as to when a Switcher Campaign is appropriate. Now it’s a case of putting a plan into place.
7 Key Strategies to Facilitate a Switch
1/ Strategy: Remove Friction from the Switching Process
Once you have undertaken the analysis above you need to ensure that you are trying to remove any objections that you are likely to encounter. Nathan Barry from ConvertKit is a great example of someone who has identified the need to remove all associated friction to overcome the main objection they encountered relating to switching pain.
“It’s too much work. Sorry. Ouch. No matter how much convincing I did I wasn’t able to overcome that objection. That is until I offered to do the full switch for them for free. That meant getting their account access, moving every form, copying and pasting every sequence email, exporting and importing their subscribers, and so much more! It was terribly unprofitable to do that for a $79/month customer. But early on that was how we got momentum. Every customer matters.” Nathan Barry, ConvertKit
2/ Marketing: Concentrate on Niches where the Ties are likely to be Weaker
There will always be areas which you can target when you have done your competitive analysis. It may be that you identify a key US player does not offer local support in Europe so the time difference is naturally going to be an issue. Signalling that you offer free/immediate local support will appeal to certain segments. Perhaps the industry is dominated by legacy providers who built their application on a codebase that is no longer as fit for purpose as it once was. Price points represent another area that can offer areas to target. Certain categories of software are subject to regular price increases as the leading participants seek to extract more revenue. At some point the total cost of ownership means smaller more price-conscious customers may look to downgrade to applications better suited to their needs.
3/ Sales: Use Battlecards to Ensure Sales Reps are Clear on How You Compare
In some categories where there is a sales cycle, the question will likely come up as to how you compare with solution X? Sales staff must have access to Battle Cards, or one-page snap-shots that clearly outline the differences between the competitive solution and your own. This is not about disparaging competitors, but more about ensuring front line sales-people are sufficiently equipped to articulate the key differences when trying to encourage a switch.
4/ Product: Don’t Try and Engineer Lock-In
Increasing the switching cost away from your product is a retention tactic where you are explicitly targeting your current customer base, not prospects. You want to ensure that the primary motivation for people not switching is the strength of the value proposition. Artificially locking users in when they are not deriving value is not just bad business but is something that customers are increasingly aware of. So from a product development perspective it is best to eschew this tactic.
“Efforts to increase switching costs are not likely to escape the notice of prospective customers, who will fear hold-up in the form of a “low then high” pricing strategy. The anticipation of lock-in can represent a significant barrier to adoption for a new product.” Tom Eisenmann, Harvard Business School
5/ Product: Ensure Your Product is Easy to Use
It may seem like an obvious statement to make but the reality is somewhat different. Many resource-constrained SaaS startups do not have dedicated UI/ UX support in the early years. More and more features are layered on as every new sprint addresses an ever-increasing list of customer requirements. But at what cost? As features converge in most mature SaaS categories the basis for differentiation will narrow to elements like pricing, competitive positioning, brand and usability. It is thus important to use familiar UX patterns in your product and to allocate sufficient resources to this area in the early days. Those who neglect it increase the likelihood of someone switching while they also increase the odds that a switcher perceives that the learning curve may be too steep.
6/ Marketing: Craft an Advertising Campaign that Addresses the Forces at Play
Ensuring your marketing switcher campaign addresses the various issues at play is of critical importance. At the recent SaaStock event in Dublin, Ireland (October 2019) Des Traynor, the Co-Founder and Chief Strategy Officer of Intercom outlined a process to ensure you address the forces at play:
“ Most people who are trying to switch to your product are switching from something else. The Rewired Group identified four forces at play. Two of them are on your side, and two work against you:
Traynor went on to argue that you need to assess the following:
You can manipulate these four forces with advertising. Specifically, you can:
1/ Increase the push away: Show how bad their existing product is.
2/ Increase your product magnetism: Promote how well your product solves their problems.
3/ Decrease the fear and uncertainty of change: Assure consumers that switching is quick and easy.
4/ Decrease their attachment to the status quo: Remove consumers irrational attachment to their current situation.
If you can get the forces on top to be greater than the forces on the bottom, a customer will switch to using your product. But it’s worth saying you should be targeting product work against every single one of those forces. Maximize what’s working for you, and minimize what’s working against you.” Des Traynor, Intercom
7/ Win the Business Day 1
Of course, if all of the above seems like hard work ensuring you are considered at the decision-making point for a purchase is also key. This can mean several things ranging from ensuring that your review site listings are in great shape through to bidding on the competitor brand names in Google Ads, through to creating dedicated comparison pages where prospects can evaluate your solution compared to the competitor.
Summary
In summary, trying to win business from customers is a key strategy for all SaaS businesses. However, it is not a sensible strategy for all. Assessing the likely cost to switch represents a key activity. While you are never going to be privy to your competitor’s data you can make educated guesses as to the likely strength or otherwise of the existing solution, as well as the likely level of resistance to change, as well as an assessment as to the size of the ultimate prize. Only once you have evaluated all of the above should you look to put a campaign in place to target customers of competitors with appropriate messaging.
About Alan Gleeson
Alan Gleeson is a B2B SaaS Marketing Consultant based in London with a passion for helping B2B businesses to grow.
Follow Alan Gleeson on Twitter or visit Work With Agility to learn more.
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