Jun 10, 2021
At PeakSpan, we have several software themes which have bounced around the proverbial whiteboard for years. These are distinct from our BluePrint themes (traditional software categories / vertical end markets like “Sales Tech”), and instead are themes that we believe are relevant across all verticals. In enterprise software, we have a theme which we call “Less for Less.” This is shorthand for “less software for less money.” The concept is simple. Contrary to the traditional enterprise software sale involving long sales cycles, high contract values, multiple stakeholders engaging/signing off, heavy implementations, etc. – companies pursuing the “less for less” model strive to sell as little software as possible to as few stakeholders as possible and at the lowest possible pricing. The result? Rapid logo acquisition in large enterprise (perhaps an oxymoron?). The story doesn’t end there though, if executed – the opportunity to expand throughout the enterprise can be immense. Let’s unpack this theme across a few core attributes:
User Interface (UI): UI needs to be consumer-esque, in many cases, you aren’t selling to IT, or a manager. Most often, you are selling a more-narrow solution to a single user to make that person’s life easier. Taking expenses as example, if you sell a solution for employees to expense business-related items online, it should look and feel like Amazon! The “user” not the “Company” is the one being sold on the solution value and thus they need to be the primary beneficiary (but not to say the Company can’t ALSO benefit – which would be the case in expense tracking).
User Experience (UX): let’s be honest, no one LOVES using business software. Business software, especially in the less-for-less context, is all about making someone’s life easier. Using bug tracking as an example, Trello isn’t successful because it’s the most powerful technology platform out there, developers love it because it’s intuitive and allows them to get in and get out, communicate with other stakeholder groups, etc. Developers love creatingsoftware, using business software in their day-to-day is a necessary evil. The easier and quicker the better.
Pricing Structure: in less for less, the pricing needs to be low and it needs to be visible. The user needs to be able to take out their corporate Amex, punch in the details and start using. Freemium models can also be highly effective. Slack or Zoom are perhaps the strongest form examples of less-for-less. The goal with these solutions is to reduce time to value significantly and get as many users as possible using (and loving) the platform. Pricing strategy in a less-for-less setting is uber important.
Sales Cycle: virtually no sales cycle but once some base level of mass is reached at an enterprise, the key is up-leveling the collection of small engagements into an enterprise-wide contact. We don’t have great data on average time from first user to an enterprise deal but we surmise it could be around the same as traditional enterprise SaaS (12 months), but would depend on the virality of the product amongst co-workers. Important to highlight that the account is still a profitable account during the time period it’s being spread throughout the enterprise. For example, it can be a $10/month account on day one and a $10k/month account by month six due to user growth. Try calculating that net retention rate! During that time, it’s easy for the marketing team to know what to do. If Zoom has 10 users within a 1,000 person Company, that means there are 990 prospects to start targeting.
Sales Strategy: this is a tricky one and will vary based on a number of factors. Typically in a less-for-less world as we define it – the initial user acquisition will need to be hyper efficient. In the extreme, it can be a touchless user acquisition model (Zoom, Slack, etc.), but otherwise, it can be an inbound-driven inside sales motion. The real magic of this model is then introduced when an enterprise sales rep or enterprise account manager takes over and starts working the logo “top down.” When some level of critical mass is reached at the account, this enterprise-minded individual can now go make the case to upper level execs (with loads of data!) around the value being brought to the organization. If you can tell a C-suite executive that half his company is already loving the product, the over half feels like an easy sale to me! (although we suspect our enterprise sales peers will beg to differ…)
CAC / Retention: customer acquisition cost can be evaluated in two different ways. First, on a cohort level where you see self-sign ups from hundreds of users at hundreds of different organizations. Spending $1k in a month to acquire 100 customers (different logos) at $10/customers is a solid trade, especially as those 100 logos can turn into millions of ACV over time. However, the real magic comes in once one of those customers expand their own seat license from 1 to 1000. In these scenarios, we would not necessarily look at cohort retention (as it may be 8000%+). Instead, we would look at the cost to acquire that enterprise logo in aggregate. In other words, digital sales and marketing spend can be better tied to driving the acquisition of a cohort of individual users, whereas and enterprise sale is more driven by the cost of account management. In any case, if executed – the sales efficiency can be insane which is why we <3 less-for-less.
Implementation: similar to sales strategy, it can depend – but most traditionally a “less-for-less” strategy would require immediate sign-up and simultaneous go-live. The “swipe your credit card and start using” model as we would say. Very rarely would there be any integration / implementation unless it can be easily facilitated by the user. A good example of this is Zapier, but even Slack/Zoom have self-serve integration capabilities.
Onboarding: onboarding is initially “self-onboarding” as mentioned above but as accounts start morphing into and expanding into enterprise accounts, the vendor then becomes well served to treat the account as such through running training sessions, carrying out quarterly reviews, etc. At PeakSpan, we started using a product called LogoIntern. In this case, four of our users signed up separately through word of mouth. We eventually ran out of free credits and needed to upgrade to the 5+ user enterprise account. When that occurred, we were immediately given an account manager who offered to not only help us set up, but also gave our interns free licenses, offered to set up a training session, etc. This must be what it feels like to be landed and expanded!
Customer Success and Account Management: The CS function is critical in nearly every enterprise software business but becomes even more critical when pursuing a less for less strategy. In a non-less-for-less enterprise setting, we typically see sales representatives selling multi-year, six/seven figure deals. These are contractual commitments regardless of usage. Of course, usage might be reviewed each year or at a QBR, but at the end of the day, the enterprise and the vendor are agreeing on an initial level of spend and are both “bought in” (and at a high price). In the less-for-less world, the success of the solution is dependent upon the underlying user growth and retention at each account which in the case of companies like Slack or Zoom, might be “product-led.” If not a PLG (“product-led-growth”) story, then we find that customer success and account management become central to overall growth given they are most well positioning to drive user adoption.
The Incumbency: the beauty of less-for-less is that you don’t have to “displace” any one vendor at first. The makes less-for-less a real threat if you are a traditional enterprise software platform – you will never see it coming! To use an example that will hit close to home for all of us. If the Company has a relationship with Cisco (where WebEx is an option for video conferencing), but employees at this company slowly start to use and love Zoom, then Zoom is well positioned to eventually win that potentially revenue from Cisco. There will be no RFP, just a slow non-hostile takeover…
As enterprise segments continue to grow more crowded and as SaaS GTM strategy continues to mature, we see less-for-less models as a strong path that next-gen scaleups can and should take to disrupt legacy enterprise software vendors.