Mostly I write about B2C companies. For a change, I want to focus on B2B and all my learnings over the last few years.
B2B software purchase/ adoption (especially mid tier firms) is governed by the following factors:
1. Learning curve
This is the most important thing which people don’t talk about much. Apart from small startups which can’t afford to have paid SaaS tools, most mid tier enterprise purchase process is influenced by the learning curve required for the purchase decision maker.
In the companies I worked for in the past, here are some of the examples:
a) Analytics Product A
We were paying 1 lakh per month for B at a company I worked for previously. B gave us Push capability, analytics as well as basic attribution features. After a new C suite executive joined, we decided to scrap B even though it was doing an okay job. Why?
Because C suite had worked at Company XYZ before and was a power user of A there. He did not want to be dependent on us for reports. A as an analytics tool is better than B. But was it so much better than B that you would pay 1+ crores/annum (which we paid). I doubt that.
He drove the adoption. Made sure all PMs learnt the tool.
Hence there is a saying in SaaS, it is better to make tools (for tech or sales which directly impact the revenue) instead of auxiliary functions like HR. The people with the company credit card work in the first.
BTW used Redmine (open source) for task management. And cut costs on all front.
So this was unusual.
b) Attribution tool C
We used C for mobile attribution. I had used it at CouponDunia and was familiar with it. Had set it up before and knew the in and outs of it. I did not have to read new Developer docs and could just get a Dev and set it up in a day.
c) Dev Dashboard tool D
My Engineering Head at a previous company loved it and had used it before. I am sure wherever he goes, he will stick at D
d) Chat/Collaboration platform S
For tools you can probably live without, adoption is generally top down. Chat products are one of those. At one of my previous companies, The CTO had made it mandatory for everyone to join S and stop using email.
While judging a SaaS company’s potential I always look at how many decision makers will buy the tool just before they had it used before, and loved it a lot.
Do you love your SaaS product so much that you are pushing everyone you know (including your friends at other companies) to use the same product? Then buy it again for your next company?
If yes, then that SaaS product is golden.
Key Takeaway for Sales: If you are in Sales, you are probably using Salesforce to drive your Sales process, moving your prospect Z across the funnel, till Z ends up purchasing your product. What about maintaining a close relationship with Z and then in her next job too, nudging her to purchase your product?
I would just write a Linkedin Scraper for that. If I see Z changing her job on Linkedin, I would request her to drive adoption for my product at her next company too.
2. Switching cost
a) There is almost 0 switching cost if you want to start using Zoom instead of Skype. There is no data to carry over. Hence so many people instantly jumped to Zoom once they decided it was 10x better than other conferencing tools
b) Chat on the other hand has major switching cost. Other alternatives will import some of your data but not everything. And once people get used to the product they wont move to an alternative which is 1 dollar cheaper unless it is 10X better.
My rule of thumb is that if you are already paying for a SaaS tool, the new paid product has to be 10x better or 1/10 cheaper for you to move to it.
3. 10X better product
a) Free version of GA is decent but not good enough if you are on hyper scale mode. There is no user level tracking even now.
All the alternatives: Mixpanel, Amplitude, etc even though positioned differently, was quite similar. Hence unless the decision maker was using one of these before there are not many other factors to influence the decision.
Hence growth has been similar for both companies. If you ask 10 of your friends who are using a Paid Attribution tool, half of them will be using Amplitude and the other half MixPanel.
There is no clear winner yet.
b) On the other hand, Zoom is a 10X better product. It is the product you use once and rave about it to everyone. And the growth has been phenomenal.
If there is very high switching cost and learning curve people are more likely to stick with their current paid tool. Unless you are at a scale, where a 3 dollar/license difference, will help you save a lot of money. In some cases if you undercut your competitor on pricing and give similar experience, then you can chip away users from your more established competitors.
In the case of Freshdesk, they undercut Zendesk on pricing and gave a similar product which led to their initial growth. Soon though, they launched a bunch of additional products in the same space, created a suite and tried to get a lock in by providing more ROI on each dollar.
Once you have a suite, it is very easy to launch additional products and position yourself as a Swiss army knife. Anything around Customer Support, you have FreshDesk. If you need a cheaper alternative to Google Suite, you have Zoho.
Microsoft can launch a new product inside their Office 365 and reach out to millions of teams instantly. Here the new product does not have to be even have to be 1X of their competitor. Just that fact that it does not have any incremental cost, can lead to a lot of people who are on the edge to use it, till Microsoft gets it to be at par with their competitor.
If you are funded by a YC or a Sequoia, you have access to all their portfolio companies and can easily pitch to them. If you have ever worked for a VC backed company, you would know this.
Think deeply about all of these 5 factors if you are working on a B2B product.
P.S These are just my views. Feel free to discuss/agree/disagree