• To accelerate growth the most valuable companies are adopting SaaS-like (Software as a Service) go-to-market models.
• People associate SaaS to subscriptions or technology but there is much more than that. It’s a way of thinking and managing the go-to-market and customer engagement model.
• Nike and Starbuck are as SaaS as Microsoft and Adobe.
• The SaaS framework is scientific about and obsessed by the end-to-end customer journey.
• Becoming SaaS-like means moving from being Product and Brand-Centric to becoming Customer-Centric organisations.
• SaaS (Software as Service) go-to-market best practices provide a great framework for customer centricity.
• What are the 7 Mantras to follow to become SaaS-like.

*This post was originally published in January 2021 and refreshed with more insights in April 2022 and then December 2023

The SaaS Go-To-Market Framework for the Customer-Centric Growth in Traditional Industries

SaaS is generally associated to technology and subscriptions but it is much more than that. It is a way of thinking and managing.

The pandemic has shown how the transactional model of getting a product to market and selling as many units as possible is fragile.

The future will reward companies that are able to build resilience to shocks and the way forward is to move from being Product and Brand-Centric to becoming Customer-Centric organisations.

SaaS (Software as Service) go-to-market best practices provide a great strategic and operational framework for customer centricity growth.

Nike and Starbucks are as SaaS as Microsoft and Adobe.

Two tech companies, the most iconic lifestyle brand in the world and the biggest chain of coffeehouses.

It is not a coincidence that the 4 companies have a similar evolution of stock valuation in the last few years.

Adobe.

In a few years years Adobe Creative Cloud went from almost no recurring revenue to a virtually 100% subscription model. When Adobe announced the transition its stock was trading at less than 30$. Today Adobe stock is trading at 622.6 $. The vast majority of its revenue is recurring.

Microsoft.

A public company since 1986, Microsoft grew so much especially since 2017-2018 because it decided to become a SaaS (Software as a Service) company with its “Commercial Cloud” business. End 2020 the company announced the acquisition of ZeniMax Media for $7.5 billion. Gamers’ long-awaited fantasy about a “Netflix for gaming” took a step closer to reality. “We are really seeing a pivot in the gaming industry from a device-centric industry to a player-centric industry,” said Phil Spencer, Microsoft’s executive vice president of gaming, in an interview.

Nike.

60% growth since 2019 as Nike which has transitioned from a conventional consumer brand, selling most of its merchandise wholesale to major retailers and operating a few of its own stores, to becoming a brand that’s built around DTC (Direct-To-Consumer), memberships and digital technology, including the acquisition of SaaS businesses through M&A and a high focus on Artificial Intelligence and data science. Nike is getting obsessed with the customer journey.

In 2019 Nike hired the new President and CEO, John J. Donahoe II, from a SaaS company. If you read the transcript of one of the first earning call, you can realise how Nike has started to talk like a SaaS business:

• “product innovation roadmap”
• “app ecosystem”
• “creation of a consistent end-to-end technology platform”
• “vision for the marketplace, a digitally connected experience, where membership is a true differentiator”

Starbucks.

Starbucks has been a non-tech pioneer in learning from Google, Apple, Amazon and the rest of the SaaS industry. What did it learn? First of all, as pointed out in “Subscribed” by Tien Tzuo,  it’s the ID. They all have Dashboards that let them see what their customers are doing, so they can make smarter decisions around where to allocate resources and which new services to spin up – in Starbucks case, maybe it’s how many drink rewards “stars” to give out, or where to open a new store.

The Gmail team has the dashboard, Netflix has it, …, Nike and Starbucks are doing the same. Glo by British American Tobacco as well. Who’s the next: Coke, L’Oréal, Nestlé?

The common thread is to be SaaS-like.

Nike, Starbucks, Adobe, Microsoft and many others have understood how the secret formula today is to follow a set of go-to-market mantras pioneered by the SaaS industry in the last 20+ years.

Companies taking over the world in some of the biggest industries are SaaS companies: Netflix, Linkedin, Spotify and Amazon, just to name a few.

The 7 Mantras of SaaS-like organizations. 

AGE OF CUSTOMER CENTRICITY: You do not sell Product, You sell Experience.

The winners today understand that the competition is not on product, branding and marketing.

SaaS-like Companies start with the Customer.

Customers today expect the Spotify and Netflix experience in all aspects of their life, personally and professionally. They expect that any desired information or service is available, on any appropriate device, in context, at their moment of need.

In the new reality successful businesses like Nike or Starbucks are asking themselves different questions compared to the past:

• What relationship-building efforts have been done and what are we doing to build authentic engagement with each of our end customers?
• What do we know about our individual customers and how they USE and get enjoyment from our product?
• How much is the customer journey “engineered”?
• Are we measuring the right things throughout this journey and being granular enough?
• What do we need to do to deliver ongoing value?

In such a perspective Nike for example has improved customer engagement with tactics like workout programs on the Nike Training Club and Nike Running Club, and Nike Plus member-focused stores like the Nike Live store in Los Angeles and a new one in Guangzhou.

With consumers around the world forced to adjust their daily routines because of the pandemic, including the way they work, shop, and exercise, those relationship-building efforts have paid off: almost 200% growth in demand for the Nike commerce app, with triple-digit growth in monthly active users. This is significant for the brand as it speaks to the increasing consumer adoption of their apps.

As far as Starbucks is concerned, at the end of 2019 there were 17 million people enrolled in Starbucks’ reward program in US and 10 million in China, which now represent a significant part of the company sales. The company has been pushing transactions on its mobile App which tells you when your order will be ready and how long will it take you to arrive at the closest store. It all started with that ID.

Competing on experience is the new frontier of competition.

ACCESSIBILITY: The future is selling access to things. You must focus on the service-level agreement that sits behind the product.

People want the comfort in their homes, not the furniture.

They want the ride, not the car.

The availability of fresh cold food, not the refrigerator.

A well functioning and ergonomic home office, not a chair, a desk, a laptop, a printer and so on.

Today business prosperity depends on the ability to create digitally enhanced products, services and experiences.

BE CONVERSATIONAL

As people are empowered, your company must have an authentic conversation and a bigger reason to exist.

A strong foundational WHY.

Lots of companies are missing it. A bigger reason to exist. They just talk about their WHAT, selling features and assets.

If you have a look at most consumer brands they just focus on product features and discounts.

A SaaS-like Customer-Centric organizations has a tech stack of conversational technologies such as chatbot, live virtual stores and CRM to engage with their prospects and customers.

They start the conversation talking first of all about their foundational WHY. That’s the story you should really be starting with.

You should be able to tell your story in a tweet.

SAAS-LIKE VALUE BASED PRICING

Pricing for a product is pretty straightforward.

Your production expenses and desired margins define your Price.

Of course you have costs that you need to account for, but winners do not price an object, they price an outcome.

Everything is becoming bundled today. This is the model of the future – the Box, that can include physical and digital products/experiences.

Companies should think creatively about their pricing strategy in the new reality.

Customer segmentation has become critical.

Pricing and packaging is one of the most powerful growth level you have and YES –  Subscription is going to become one of the dominant business models although it’s not for everyone.

BE OMNICHANNEL

SaaS-like companies recognize that customers spend their time across many channels, and wherever those customers are, that’s where they should be meeting their customers’ needs.

The company that pioneered online shopping becomes a player with hundreds of physical stores. Why did Amazon buy Whole Foods for $13.4 Billion? Why did Alibaba invest $2.9 Billion in Sun Art Retail Group Limited?

The winning formats today are a mix of content and digital merged with the physical world.

Everything is Omnichannel. The era of the online vs offline silos is over.

Starbucks accelerates its omnichannel transformation. The company was already in the process of transforming the store experience since 2018 as 80 percent of transactions in U.S. company-operated stores were for “on-the-go” orders. And now that the coronavirus has essentially changed the world, Starbucks is wasting no time executing its strategy – in fact, accelerating previous plans. The Board of Starbucks announced in June 2020 the start of a “transformational phase” that will introduce a new store format known as “Starbucks Pickup.” After powering the ID/App usage for the last few years, it’s going a step forward. Closing 400 stores and kicking off the pick-up service.

Companies are taking advantage of online data to inform the design and presentation of their physical stores.

Winning companies are treating retail stores  as an extension of their online stores, as it is becoming obvious that it’s very difficult to be profitable through online sales alone. Or vice versa.

CHANGE THE KPI

SaaS-like companies have different KPIs to measure business performance. Much more customer centric.

The winning companies of the future will move from net sales and COGS to new KPI’s like Monthly Recurring Revenue (MRR), churn, Life Time Value (LTV) and CAC. They are the metrics of the future economy.

LTV (Life Time Value) for example is one of the key metrics regularly mentioned by the CEO of Nike during the earnings call.

When you are SaaS-like “you are not so much selling a product as you are creating annuities with a lifetime value that far exceed whatever you paid to acquire them”. Ben Thompson of Stratechery.

NEW GO-TO-MARKET FUNDAMENTALS: Customer Retention is the New Acquisition. The real work starts after the sales. 

The business model focused on selling more units, increasing the price and decreasing the cost is just over.

SaaS-like Customer-centric models focus on acquiring more customers, increasing the value of those customers and holding on to those customers longer.

There are huge implication of this reality on different levels:

• You want to build a predictable revenue engine and the SaaS industry has developed sophisticated best practices.
• Leads become increasingly irrelevant. Marketing teams need to focus on revenue metrics, not vanity metrics.
• Churn reduction becomes a top metric and business obsession.
• New layers of organization are needed to make sure you acquire more customers in the new reality and that future growth will be more dependent on holding on to your existing customers longer. Have you ever heard what is Customer Success for a SaaS business?
• You need to review your tech stack and there is a lot you can learn from SaaS on how to move to the next level.

CONCLUSIONS

As a Consumer or B2B business the survival and prosperity in the next decade cannot happen without a profound and urgent transformation of business and go-to-market models and postures.

This means moving from a product/feature and brand/marketing focus to becoming a business built around customer centricity, memberships and the merge between digital technologies and the physical world.

Players like Nike, Starbucks and Unilever betting on Dollar Shave Club seem to have already got it right. They are SaaSing it up at full speed and just scratching the surface of what’s possible.

The key here is finally in Donahoe’s words at one of Nike’s earning calls. “Nike’s digital transformation strategy is not easily replicated,” showing he sees it as a competitive advantage. Nike was already the largest sportswear company in the world with a legacy of great products. Add an expanding membership program and a strong digital technology platform, and it’s not surprising that the stock is flourishing even in the midst of the pandemic.

Why have companies like Metro, Media Markt, Fnac or Primark performed poorly in the last few years?

In 2010, Metro AG was the fourth-largest retailer in the world measured by revenues, after Walmart, Carrefour and Tesco.

Ceconomy, like Fnac, is a consumer electronic retailer which operates through the European chains Media Markt and Saturn.

What relationship-building efforts have they done all these years?

What do they know about their individual customers?

What are they doing to build authentic and relevant engagement with their customer?

How long can they go ahead just focusing on brand, product, price and every-day promotions?

What would you do if you were in the shoes of the Board of these companies?

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 is definitely realistic.

If you found the content interesting please share with your network on social media and subscribe to my SaaSification newsletter.

The post How the most valuable consumer brands become SaaS-like “true” Customer-Centric organisations appeared first on Luigi Mallardo.

Sales Hacker Podcast by Sam Jacobs (Founder of Pavilion) is one of the most respected shows on Modern Sales.

Listen the 7 minutes here

Main topics:

• Why all companies are SaaS companies

• How 7 mantras can teach the concept of recurring revenue.

• Even larger than a mantra is… attracting & keeping talent

If you enjoy the podcast, help spread the voice.

Listen to the full version (48 minutes).

If you enjoyed this post, you will also like How the most valuable consumer brands become SaaS-like “true” Customer-Centric organisations. 

If you found the content interesting please share with your network, social media and subscribe to the SaaSification newsletter to get more of my content.

The post 7 Mantras for Recurring Revenue and Customer-Centric growth in any industry appeared first on Luigi Mallardo.

For those who are not familiar with AWS, it’s Amazon business unit providing cloud computing platforms and APIs to individuals, companies, and governments, on a pay-as-you-go basis. It’s SaaS (Software as a Service) and represents roughly 10% of Amazon’s total sales but more than 50% of the company’ operating income.

Why did Bezos appoint the head of AWS instead of appointing the head of Amazon Store or another big e-commerce boss?

What can we expect from the “SaaS guy” of Amazon once he will be heading up the whole business?

Mindset shift.

Jassy will bring the SaaSification perspective to the rest of the Amazon organization, as it pertains to the cloud and infrastructure world he’s been living in for a long time.

With this appointment, the business will accelerate the transition from a transactional model to a brand model that’s built around memberships and digital technology.

This is a natural evolution for the online bookstore which transformed into a mega-retailer with global reach in a slew of different categories from gadgets to groceries to streaming.

Saasification is not about the technology. It’s about the change of the way of thinking and acting of the management.

More subscriptions probably, but that’s not the main point.

Amazon’s subscription revenue accounted for less than 7% of all Amazon revenue in 2019. We can most likely expect an increase in subscriptions after Jassy will take the lead but we shouldn’t expect a huge shift.

The main point is that Amazon could accelerate towards a “reprogramming” of the business and go-to-market playbook in line with the SaaS mentality. Read in a previous post how players like Nike or Starbucks are following the same route (link).

Without having a focus on subscriptions a company like Nike for example hired last year the new President and CEO, John J. Donahoe II, from a SaaS company.

Nike, like Amazon, is executing the same type of game plan that is typical of SaaS:

• Product innovation roadmap.
• App ecosystem.
• Creation of a consistent end-to-end technology platform.
• Vision for the marketplace, a digitally connected experience, where membership is a true differentiator.
• Omnichannel execution.

Channel ecosystem.

Jassy has done an impressive job in developing the partner ecosystem of AWS. It will be exciting to see how it evolves even further moving forward on a global Amazon business perspective.

He’s also an obvious candidate to take over from Bezos, in terms of continuing to lead the organization down that path of tech-driven reinvention and disruption.

Ambitious projects with recurring revenue in the DNA.

The future will reward companies that are able to build resilience to shocks and the way forward is finding opportunities to build recurring revenue. 

Amazon’s most ambitious projects started up under the leadership of Jeff Bezos. They are businesses of recurring revenue generation in their own nature.

Who would be better than Andy Jessy – the Amazon “SaaS guy” – to bring them forward in the appropriate way?

1. Video games. Amazon Game Studios so far has struggled but Jassy said he’s still committed to the gaming business. At the end of 2020 Microsoft announced a major expansion into video gaming through the acquisition of ZeniMax Media with 15 million subscribers. Who is going to become the “Netflix for Gaming”? Link.
2. Groceries. After acquiring Whole Foods Market, Amazon launched a lower-cost grocer, Amazon Fresh. The company is also scaling up its already-booming food delivery operation.
3. Amazon Studios. Amazon has spent billions so far to compete with Netflix for shows and movies. Unlike Bezos, Jassy isn’t known for frequenting industry galas, but like his boss, he recently bought a Los Angeles-area mansion.
4. Health care. Amazon’s official launch of Amazon Pharmacy is bad news for traditional pharmacies. Amazon is now in the business of delivering prescriptions that will be eligible for discounts and two-day shipping under its Prime subscription. Link.
5. Digital helpers. Amazon is working for building home technology devices, rolling out flying home-security cameras, a proprietary low-power wireless network, and, perhaps someday, a home robot.
6. The cloud. Amazon’s cloud division, the source of most of the company’s profit, is expected to reach almost $60 billion in revenue this year, more than four times the total in 2016. Jassy has led the unit since its founding.

More Customer Centric and SaaS-type KPIs

Amazon was born with a Customer Centric mindset in the 90s. Have you watched the visionary TV interview of Jeff Bezos in 1999? Link.

Nevertheless, having been a business with e-commerce roots, the typical KPIs tracked by the management must have been historically focused on product and distribution performance such as:

• Shopping cart abandonment rate.
• Conversions rate.
• Average order value.
• Shipment performance.
• Gross profit margin

Products and categories must be at the core of the business and customer dashboards.

You should login into your personal Amazon account and you will realize how the e-commerce and transactional mindset is still there.  I did it into my family Amazon account, I found the details of our shopping journey in 2020 and they are interesting.

We did 54 purchases in 2020, from toys (we have a young kid), coffee machines (we are Italians ;), books, and other products in a few different categories. I found all the details about the products and the shipments. Nothing else.

I would be so curious to see their internal dashboards and the KPIs they look at.

What should we expect by the SaaS mindset taking the lead in Amazon?

1. Less focus on selling you individual products and more focus on getting the higher possible share of your recurring budget for living expenses (in grocery, toys, home goods, etc).
2. More focus on understanding and maximizing average MRR (monthly recurring revenue) per customer.
3. More focus on Net Retention Rate and how to drive the spent per customer per year. What’s their plan to get my family spend more on Amazon in 2021?
4. Churn obsession and how to avoid the risk of having customers to stop purchasing through their omni channel platform (online Amazon store + offline such as Amazon Fresh, Whole Food, etc).

The winning companies of the future will move from net sales and COGS to new KPI’s like MRR, churn, LTV and CAC. They are the metrics of the future economy.

“You are not so much selling a product as you are creating annuities with a lifetime value that far exceed whatever you paid to acquire them”. Ben Thompson of Stratechery.

CONCLUSIONS

With the appointment of Andy Jassy, Amazon will accelerate the move from an e-commerce focus to becoming a business built around memberships and the merge between digital technologies and the physical world.

The SaaS mindset will take the lead in the whole organization and the focus will be more and more on initiatives that will enable a growing share of predictable recurring revenue streams.

The manager who built Amazon Web Services from scratch will also likely push further on Own Brands.

With AWS, Alexa, Amazon Fresh and other initiatives Amazon is building its own brand portfolio. It seems to be following a similar pattern to global retailers like Tesco, WallMart, Carrefour.

At some point the big retailers of the “old world” decided to build their own Private Label products that as a whole have reached the biggest market share in most consumer brand categories.

Exciting and challenging times ahead.

If you enjoyed this post, you will also like Why the key is SaaSification and not Subscription AND this 7 minute podcast we recorded at Sales Hacker a few weeks before the pandemic exploded. 

If you found the content interesting please share with your network on Linkedin and Twitter.

Featured image by Building Materials Online (BMO) 

The post Why Amazon is accelerating towards SaaSification with the successor of Jeff Bezos appeared first on Luigi Mallardo.

There are many examples from several industries and good market insight available to make the point that today all sort of industries are SaaSing up as they go to market like Spotify, Netflix and the whole SaaS (Software as a Service) industry.

In this 8 minute webinar presentation (or 5 minute reading) you’ll learn from real examples why industries are SaaSing up and what are the commonalities.

I was presenting to an audience of CEOs and senior executives of airline companies but the content is relevant for most industries.

We all know companies like Netflix, Spotify or Linkedin disrupted and became the dominators of big industries.

Not everyone knows they are all SaaS businesses; even Amazon that many people think is just an e-commerce company whilst most of its profit historically came from its SaaS business, AWS (Amazon Web Services).

There is a popular quote Software is Eating the world. It is true but it’s one side of the story.

The other truth is that we are seeing everywhere the SaaSification of non-tech industries.

The male shaving market for example. Unilever bought Dollar Shave Club for 1 billion $ and took the lead in transforming the shaving business into a subscription model. Gillette lost more than 15 points of market share between 2010 and 2016 to then deciding to invest in subscriptions and start to recover. 

Nike hired in January 2020 the new CEO from Service Now, a SaaS company.

There is clearly a shift of go to market playbooks to something different compared to the previous reality and SaaS players have been pioneers of this shift for the last 20 years.

People want the Netflix and Spotify experience in all aspects of their life, personally and professionally.

The Automotive industry is in full transformation.

Between 2014 and 2017  I was SVP in a marketing and sales tech scaleup partnering with marketing leaders of Automotive brands in Europe and US and most manufacturers were already working on a vision of moving part of the business to a “mobility as a service” model.

Volvo’s CEO expects that one out of every five of the Company’s vehicles will be delivered via subscription by 2023.

Appliances is another interesting industry where is  going to happen something similar. It’s not far a moment when we’ll pay a fridge as a service fee, like it happened last year  to Ikea that launched in several countries pilots of furniture as a service for both B2B and B2C customers.

Another example is Peloton that launched an innovative formula of fitness at home as a service with a flat fee 39$ per month and raised more than 1 billion $ in a recent pre-coronavirus IPO.

THIS IS THE NEW REALITY.

There is a New Normal that was happening before the pandemic and what was already in the process of becoming is now going to accelerate.

The 2 most important points here:

First, the winners today understand that the competition is not on product and marketing but it’s on experience. The real work starts after the sales. Building a solid Customer Success organisation is part of the playbook kit needed in the next 10 years in any industry.

Second, we are at the start of the end of the transactional age. The future will reward companies that are able to build resiliency to shocks and the way forward is finding opportunities to build recurring revenue.

Recurring revenue are of higher quality and the value of the equity is much higher.

It doesn’t mean necessarily to move 100% of the business to subscription. Or offer subscriptions at all. Uber doesn’t run subscriptions, it’s pay per use, but if follows the same mantras of the other SaaS companies.

CONCLUSIONS

All companies should go to market like a SaaS business. 

Why?

To build more resilient and valuable businesses

People got spoiled by Netflix, Spotify, Amazon and now they expect the same experience in all aspects of their life, personally and professionally.

How?

Applying the same 7 Mantras and 4 Go-To-Market fundamental that SaaS companies have followed in the last 20 years.

The Airline industry, like many others, need to transform. We do not have yet a Netflix of the Airlines but people are looking for it.

Subscriptions or not subscriptions, the winners post-Covid will be the airlines that will focus on 3 main Mantras:

First, bundle is the model of the future, The Box. Which can include physical and digital products/experiences. How you build your Box is a great opportunity of value generation and differentiation.

Second, 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)?

In the new era of retailing how can airlines get out from the airports and go mainstreet building experience stores to gain a refreshed connection with people. Following the Apple playbook of the showrooms like other industries have been doing.

Finally the last point, go-to-market fundamentals have changed and the business models of the new reality focus on acquiring more customers, increasing the value of those customers and holding on those customers longer.  Like in SaaS.

This is the fundamental difference vs trying just to sell them more tickets.

If you enjoyed this post, you will also like Why the key is SaaSification and not Subscription. Nike, Starbucks, Microsoft and Adobe.

If you found the content interesting please share with your network on Linkedin and Twitter.

The post The World is SaaSing Up in All Industries appeared first on Luigi Mallardo.