When it comes to SaaS, you cannot ignore services, and services cannot be separated from subscriptions. Subscription application capabilities determine whether a SaaS startup has a future. The author of this article has analyzed the subscription service of SaaS and shared it with you.
01 SaaS's kernel
In fact, the service subscription is exactly SaaS's kernel . The secret of the high growth of global SaaS enterprises comes from this core. For a mature SaaS company, the concept of subscription model has long been integrated into the company's business behavior and business model.
Unfortunately, there are not many SaaS companies in China that can truly understand the concept of subscription and effectively execute it, which also lays the biggest hidden danger for the failure of SaaS entrepreneurship.
Overseas SaaS enterprises, the concept of subscription has been accompanied by the entire entrepreneurial process from beginning to end. Because to make a SaaS, from market entry point, product design, subscription sales, customer success to revenue model, all must build around subscription logic.
. Many domestic SaaS businesses do not conform to the subscription business logic of SaaS. Even the term subscription itself is rarely discussed, but is more referred to as renewal. Is
renewal not the same as subscription?
is really not. subscription is a business model, and renewal is just a charging feature of the subscription model . In fact, in addition to renewal, the subscription business has many other features, such as service agreement, recurring services, recurring revenue, customer life cycle , subscriber concept, etc. Therefore, there is no need to explain the concept of subscription itself, but what is difficult to understand is the subscription business logic and metric system. They are the key to truly understanding subscription. The
subscription model is not the first to SaaS, but in fact this model has existed for a long time. From car subscriptions, to Apple services, to various media, and various "as-a-service" (XaaS), all adopt the subscription model; while SaaS is only a subscription based on software-providing services.
02 Magic of subscription
From a business perspective, it is better to say that the capital market is optimistic about SaaS than to say that it is optimistic about its subscription model. The reason why SaaS is sought after is that the subscription model may bring about the upgrade of the entire software industry and digital services .
, especially in the context of 's global economy, , and various uncertainties, the certainty brought by the economy, scale and predictability of SaaS can greatly offset the uncertainty.
The global software industry has entered a cold winter, with its compound growth rate hovering below 5% for a long time, while SaaS can reach more than 20%. It is precisely because of global uncertainty that enterprises' investment in software and IT systems has rapidly shrunk. The subscription model of SaaS can enable enterprises to " to use the service more flexible and low-cost without having IT assets."
Unfortunately, many SaaS companies have not fully utilized the advantages of the subscription model and are still living in the product world of the past. Even many MBA courses are instilling in "as long as you can sell more products, increase the price of these products, or reduce the cost of manufacturing these products, your business will be prosperous."
And in the world of service, business logic has become "As long as you can gain more customers, while increasing the value of these customers, and have these customers for a longer time, your business can survive" .
03 subscription model is actually very fragile.
subscription model not only has the advantage of predictable revenue, but also is also a driving factor for scale growth, so that SaaS seems to be a business that is profitable.
is not the case. The subscription model of SaaS actually has a very fragile . The deviation of to business logic and business rules may make growth vague. For example, churn is the number one killer of the subscription model.
In fact, for a SaaS company, what is more fatal than churn is the lack of "subscribe logic" thinking.
subscription logic is a proven system that does not require innovation and reinvention. The only thing has to do is to put the subscription logic through the entire SaaS company.
Unfortunately, many entrepreneurs lack understanding of subscription logic, or still use the transaction logic of traditional software.In fact, both cannot be confused in terms of business logic and measurement indicators.
We only use the classic 4P marketing theory as an example, and you can see that even such a classic theory needs to be redefined in the subscription model.
What most corporate marketing uses is the so-called 4P theory, namely the marketing combination of product, pricing, promotion and channel (Place). Now imagine, if the first P, that is, the product, is turned into "service"; then will the customer still accept the original product pricing results? Are brand and promotional methods still useful? How do the agents who helped you sell goods to sell subscription services?
Many entrepreneurs are busy copying overseas SaaS tracks or products, but do not notice the existence of the subscription logic behind it, and they become an alternative SaaS company that lacks the SaaS kernel.
In fact, deviating from subscription logic is not just a problem of business cognition; the bigger problem is that it is separated from the business rules of subscription business. This will make an organization lose its rules and do what it wants, and then say that starting a SaaS business is too difficult.
does not comply with business laws and regulations, and SaaS entrepreneurship may do incredible things for some purpose or benefit. For example, for the sake of face, we can spend a lot of money on the number of free customers; in order to create a false prosperity of high revenue, when the cost of acquiring customers remains high (or when CAC Ratio is high), we spend all the money raised on marketing and sales; in order to increase revenue or sales commission, we make SaaS an OP project; regardless of the quality of customer acquisition, a large number of short-lived customers are generated... …
Many people have a question: Why don’t overseas SaaS companies do OP projects? Why are they not free? Why do they strictly control SM fees? Why do they reject low-quality customers?
There is only one answer to all questions: the constraints of industry rules are at work, and violating the rules will cost a heavy price . For example, if you sign several large OP projects, the stock price may not rise but fall; because the valuation logic and accounting standards are both based on the subscription model, and no one asks you to do anything other than the rules.
In fact, subscription business logic has penetrated into every business details . The manager of Commercial Law of a company I serve asked me a question: If the customer service is not renewed after it expires, how should the company handle it?
Obviously this is a contract issue and must be agreed before signing the contract. Because SaaS is a subscription business, we see that the main contract of overseas SaaS companies is called Subscription Agreement; while the supply contract format is generally used in China, and the agreed content is different. For example, in the Subscription Agreement, there will be a line: If the customer cannot pay after the subscription expires, the service will be stopped within X days.
Because for subscription business, renewal is the most basic and is also the most likely to default. But I haven't seen anyone in China write this clause into the contract, so what's the point of this contract?
04 written at the end
service subscription is the kernel of SaaS. Understand subscription logic, respect business laws, and organize self-discipline. Only when SaaS entrepreneurship has a future.
is hard to imagine how far a startup that has many loopholes in the logic of subscription business can go.
Author: Dai Ke; Official Account: ToBeSaaS
This article was originally published by @ToBeSaaS on Everyone is a Product Manager. Reproduction is prohibited without permission. The
question picture is from Unsplash and is based on the CC0 protocol.
The views in this article only represent the author himself, 人 are both product managers and only provide information storage space services.
