SaaSification vs Subscription: objections and questions

SaaSification of Industries · Luigi Mallardo · November 1, 2020

The last post published in this blog showed how everyone wants to do subscriptions now. You should read it. This is going to be one of the dominant business models of the future. Nevertheless the winning businesses should focus on SaaSification before Subscriptions like for example Nike and Starbucks have been doing in the last few years.

The post generated great feedbacks. Most of the comments were really positive  and I received also a few objections and questions. I’m clarifying the main arguments here…

1. What is the exact nature of Saasification – do we need a new term?

Focusing only on subscriptions today is like playing the short game.

It’s like thinking that Amazon won the “planet” just because it was able to build a great e-commerce website and warehouses all over the world.

It’s like thinking that the Facebook Like button was only a cool idea and a design exercise. Behind the Like button there must have been such a high intensity of strategic thoughts about the implications on the business performance and its KPI’s, huge expertise, coding and programming, A/B testing, decision and execution capability.

Behind Subscriptions there must something more profound that I like to call SaaSification.

It’s what Nike and Starbucks have been in the process of doing and all sort of industries are following.

You don’t need necessarily paid subscriptions, although this model represents a great opportunity in several industries.

The key point here is that if you go for subscriptions you need to build a certain “reprogramming” of the fundamentals of the business and a new go-to-market playbook in order to make it work.

This is SaaSification. A profound work behind the scenes of transformation focused on 7 go-to-market mantras.

Such transition from a transactional business model to a model with a higher focus on recurring revenue does not happen overnight.

Setting up a subscription model without a re-thinking of a number of business postures can represent just a shortcut.

Shortcuts never work in business and if they do it only happens for the short term.

You have to play the long game and understand the new rules.

2. The term SaaSification seems something that applies only to tech businesses.

No, it applies to any business.

Tech has been the discriminator in an early stage, during the 90s and the first 15 years of the current century.

Do you still consider Amazon as a tech business now? Nooooo.

Nowadays tech and non-tech are merging. Review the insights we shared in the previous article about Nike and Starbucks.

The winners behave omnichannel and understand that the winning formats are a mix of content and digital merged with the physical world.

Why do you think Amazon bought Whole Food (top retailer in US) and Alibaba bought Sun Art (big retailer in Asia)?

Why do you think Nike is investing so much in technology and digital transformation?

Saasification is not about technology. It’s about the change of the way of thinking and acting of the Management, in all sort of industries.

3. You claim that because of Covid many businesses are late. I think they were already late before.

Yes, you are right!

COVID has been an accelerator of something that was already in the process of becoming.

Many companies are rushing to build subscription offers in a desperate attempt to build recurring revenue streams and get customers back to use  their products again.

That may not be the quick fix many industries need right now.

Nine women cannot have a baby in one month.

4. A lot of the points in the article resonate a lot. Many of the claims are variations of the consumer marketing practices developed in the last 50 years: (1) focus on benefits, not the product (2) focus on relationships, not transactions (3) focus on the whole system, not just customers.

It is true that marketing fundamentals have not changed. They have been the same for the last 50 years. That’s not the point though.

Looking below the surface, the SaaS players who disrupted many historical industries (Amazon, Salesforce, Spotify, Netflix, Uber, Linkedin just to name a few) have followed different rules from the winners of the “previous age”.

The historical winners (Unilever, Coke, P & G to name a few) won by focusing on marketing.

The new winners won by focusing on customer experience.

“If there’s one thing Amazon.com is about it’s obsessive attention to the customer experience, end-to-end”.

Historical winners focus on gaining market share in existing segments.

The new winners do not focus on market share. They compete with the entire planet.

Does Amazon have 40% market share, or 10%? Is it an e-commerce company? Or a retail company? How about the fact they are investing in Insurance businesses and Health as well?

Historical winners focus on Global Brand Development as a key driver of growth.

The new winners get first obsessed by the 7 mantras. Global brand development in the traditional way comes afterwards as an additional layer.

The marketing funnel is different.

Historical winners show their product at the top of the funnel. New winners don’t.

Historical winners deploy promotions in middle and bottom of the funnel. New winners deploy customer stories and testimonials.

It’s a different narrative, marketing activation and customer journey.

 

If you enjoyed this post, you will also like this 7 minute podcast we recorded at Sales Hacker a few weeks before the pandemic exploded. It seemed a bit futuristic at that time but now …

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