Considerations for SaaS leaders in the era of COVID-19
“There are things we don’t know we don’t know." — Donald Rumsfeld’s
Donald Rumsfeld’s “there are things we don’t know we don’t know” has never rung a truer tone than in the throes of our COVID-19 crisis. Coronavirus is impacting every dimension of our personal and professional lives and, for SaaS leaders, the impact on go-to-market plans is no exception.
Over the past few weeks there have been countless anecdotes about companies adjusting their budgets and operating plans; fortifying the balance sheet is certainly the common denominator across all of those revisions, but we don’t know what we don’t know. There is no right answer or silver bullet for how to think about what haircut to apply to our booking or churn assumptions.
That caveat aside, there is certainly a general line of thinking that can be helpful as you “embrace for impact” with your go-to-market plans.
Sales and marketing teams need to respect that many prospective buyers are sensitive about being sold to in the current climate. To that end, companies should prioritize building an audience over merely cultivating MQLs — especially if you have subject matter expertise to offer. Bravely, an on-demand professional coaching platform, has been hosting webinars on topics such as “leading through uncertain times,” and on average one-third of attendees are new contacts for them. And webinars surely are not the only tactic here — offering potential customers any free value-added resources goes a long way, particularly if the prospect is unable to start a buying cycle. BounceX, which offers behavioral marketing tools to retailers, provides daily updates and reports on how COVID is impacting retail metrics. While possibly difficult for businesses with complex implementations, think about what sorts of trials you can offer. In the Bravely example, they are offering discounted 90-day trials rather than pushing annual contracts. Lunchbox, a company that helps restaurants bring their online ordering in-house, has launched a “Fast Track” implementation and is going so far as to offer new customers 90 days free, which is quite meaningful to restaurants in this climate. Seated, a dynamic pricing platform for restaurants, has opened up a hotline for its restaurant partners to get business advice.
Positioning is also of paramount importance in new business conversations. ActionIQ, an enterprise customer data platform, has embraced the reality that their customers (marketers) will have fewer people and fewer resources, and has pivoted their sales approach to be about budget optimization. Augury, which offers AI software to predict equipment failure, has adjusted their positioning in order to emphasize the connection between the crisis their customers are facing and the solutions they provide. They’ve shifted from “machines are the foundation of digital transformation” to phrases like “supply chain resilience” and “operational resilience” given the supply chain pressure that has emerged from COVID. Augury has carried through this new position into its content and webinars to drive higher registration rates.
Thought leadership tactics not only drive new leads, but also nurture the leads already in the funnel. That said, it is also imperative to do an audit of your automated campaigns to ensure the messaging is relevant and not tone-deaf — log into your Outreach/SalesLoft equivalent and read every last message! If you are offering free resources and/or thought leadership, you should merchandise those in your drip templates.
Field marketing and events are a critical source of pipeline for many SaaS companies, so the rampant COVID-related postponements and cancellations delivered an immediate blow. For enterprise SaaS businesses with longer sales cycles, the timing of these events is critical to achieving downstream bookings targets. If sales cycles are six months long, we need the event today to yield bookings in the fall; when the event/lead generation opportunity is pushed to the fall, the prospective bookings push out into calendar 2021. The intake curve won’t wait for events to be rescheduled, so marketers need to get creative.
It’s worth noting that most marketing leaders have dialed back spending in an abundance of COVID caution. With the funds they are investing, some are doubling-down on virtual events. With webinars, that intimate dinner you were hosting with the industry luminary can now accommodate hundreds of people. GAN Integrity shared examples where a 12-person dinner with a compliance leader from FIFA evolved into a 180-person webinar and they hosted a 120-person virtual fireside chat with the French ADA. Marketers should tap into company advisors and board members to borrow brand equity to promote these webinars, and should feature compelling thought leadership programs in paid channels. And everyone in your organization should effectively become a BDR to help drive engagement with these programs. Unfortunately, webinars don’t allow for the intimate conversation that would be garnered around a dinner table. Yes, you can push hard for follow-on 1x1 conversations, but buyer sensitivity is real. Many marketers are also investing in more intimate virtual lunches or happy hours; companies will send prospects a bottle of wine or a restaurant gift card to make the gathering feel more like a typical live event. (Marketers should also think about repurposing some content for “canned” live events, wherein they can replay key content from older webinars while also offering live chat/discussion with a smaller group.) A strong virtual events program has to balance quality and scale.
With the stall in live events, some marketing leaders are moving field budgets into digital spend — after all, we can all be confident that our buyers are online. (Interestingly, we are also hearing many reports of declining CPCs.) Electric, which provides IT support solutions, typically allocates 49% of the marketing mix to digital, but shifted that to 79% of spend in Q2 (using email, Facebook, LinkedIn, and paid search). Interestingly, Electric has seen an uptick in performance in some digital channels — a recent email promoting a webinar on Navigating the Remote Workplace During Covid-19 yielded a clickthrough rate of 7.5% versus an average 3.5%.
That said, COVID should be a forcing function to assess the most performant channels and cut the proverbial fat as well as to reconsider your addressable target market: if travel is one of your target industries, you are certainly thinking about how to double-down on some of your others.
First and foremost, remember the old Bain statistic: it’s 6x more cost-effective to retain a customer than to acquire a new one. Retaining your existing business is the most effective lever to pull in the fight to protect your go-to-market and ARR.
To state the obvious, it is imperative to appeal to customers’ challenges, particularly if they operate in an industry hard-hit by COVID. This means being flexible, even if it means a short-term business hit. Customer success is always about playing the long game anyhow — for the love of LTV! If your business is serving a hard-hit industry such as travel, consider preemptively offering to extend customers’ contracts by the number of months they were impacted (or even more). Yes, this tactic yields MRR compression today, but contraction is always better than churn, and the tactic also 1) builds goodwill, especially when done preemptively and 2) provides everyone with a little more breathing room before the renewal. This could also mean being flexible on payment terms, perhaps waving your 3% ding for moving from quarterly to monthly payments, etc. CallRail, which provides phone-tracking software to SMBs, quickly operationalized revised pricing plans for existing customers that were on the brink of difficult times, and also introduced “pause” functionality so that customers could freeze accounts without losing their configurations.
More important than contract flexibility, however, is driving value for your customers. Consider this tweet from Nick Mehta, CEO at Gainsight: every SaaS vendor will be on the proverbial chopping block right now, so adoption and more importantly, value/ROI, are critical. (Side note: Nick’s team at Gainsight pulled together this helpful guide to help minimize churn.)
Companies who already embrace customer ROI in their DNA — businesses like Kinetic, which offers wearable devices to demonstrably reduce workplace injuries (and the associated costs) — are better positioned than others, but it’s not too late for any business to adopt this ROI mindset. As always, the key to customer success has little to do with your own business objectives and everything to do with driving the customer’s desired outcomes.
Companies need to provide thought leadership and resources to existing customers mirroring how they would engage new prospects. CSMs need to be more proactive than ever before with recommendations and value-added suggestions aimed at boosting customer ROI. If you have new cross-sell products coming down the pike, consider offering them gratis through the point of renewal. Engineering and product resources should be investing in projects that can have an immediate to near-term impact on your customers.
Recognizing that sales activity will be lower in the coming months, consider borrowing sales and marketing resources to help with existing customer retention — sales executives often have deep experience building “three-wide” strategies in organizations, and being multithreaded is more important than ever before, particularly knowing many of your customers might have personnel shifts. The more attention and consultation you can give existing customers, the better!
Again, there is no right or wrong way to adjust your new logo growth or churn targets, especially because the swings will vary widely by the industries you serve (i.e. Zoom is going to look a lot different from travel software). That said, the common practice is to plan aggressively for your downside, particularly so that if you make headcount reductions, you mitigate the risk of having to do them again. Most businesses are planning for an extremely material reduction in bookings in calendar Q2 (we’re seeing 40–70% as the common assumption range), with performance slowly rebounding in Q3 and even more so in Q4 (but still not back to original op plan levels).
Businesses that rely heavily on inbound leads are sometimes going a step further with their analysis. CM Group, the parent company of several email marketing technologies, has built dashboards to compare regional COVID case data with site traffic and corresponding MQL shifts in order to more granularly assess (and estimate) the impact.
At the management level, a matrix that juxtaposes your new logo assumptions vis-a-vis your churn assumptions can be helpful for understanding the impact of your key financial metrics (ARR, cash balance, etc.). Cash is king, so determine where you want to be from a runway perspective and work backward into your adjustments.
Perhaps most importantly, be transparent about your assumptions and make a point of regularly updating your organization on how reality is shaking out versus the revised plan. Overcommunication is critical; numbers should be communicated at least weekly.
*Depending on the industries you serve, sensitivity analysis for cash balance should also assume worsening DSO metrics.
Again, we are all in unchartered waters, so there is truly no right answer for how to think about modifying your operating plan or the supporting initiatives. But being empathetic and putting your customers first (as well as your employees!) is a surefire first step to feeling better about the new state of the world.
Cassie Young is a Venture Partner at Primary Venture Partners.
This post was originally published on Primary Venture Partner’s Medium page.