How Brands Can Survive The Commoditization Of SaaS

Here’s a sentence I bet you didn’t expect to read from me: 

Milk is one of the world’s most fascinating industries.

In many countries, the price associated with milk is dictated significantly by the government. The price dairy farmers can sell milk to producers is often set in collaboration with governments. The price has a wide range of variables associated with it such as usage. 

For example, milk used for butter is going to be priced differently than milk used for cheese. And the prices are all set through an annual arrangement between farmers and the government. 

This allows for no large milk producer to come in and underprice a small farmer and put thousands of them out of business because they can’t compete. 

Fascinating.

This is how many commodity-based industries operate… From gasoline to sugar – the government is often heavily involved with a lot of the pricing associated with these products. It’s typically the federal or national government that is influencing these numbers making it very location-specific. 

So what does this have to do with you and your marketing engine? 

Most of us sell on the internet. We’re not exactly competing with our neighbors and most of us don’t sell what is traditionally considered a commodity. 

To take it one step further… The government has yet to show any interest in Martech or workplace productivity tools. Seems irrelevant right? 

Not quite. But hear me out… 

SaaS Has Become A Commoditized Market

While it’s not talked about frequently (probably because many SaaS marketers and founders are in denial) the truth is → SaaS is quickly becoming a collection of commoditized solutions.

It’s never been easier to build a SaaS company, buy a SaaS company, learn about SaaS or invest in SaaS than right now. Across almost every category in SaaS…

It’s getting easier and easier each day.

At the time of this email, there were 702 CRM solutions, 237 Sales Intelligence Solutions, 231 e-Signature Solutions, and 196 Contract Management solutions all competing for attention on the software review site G2. 

That’s a lot of different companies.

Here’s a snapshot of the landscape for some SaaS verticals: 

And that’s just SOME of the verticals. Across all markets, there are more than 24,000 different SaaS companies competing with one another to capture the attention of their customers. 

Sure… It could be worse.

There are more than 150 million dairy farms around the globe.  The amount of SaaS companies competing for attention isn’t even close to that number. 

But…There are a few other big differences here.

Dairy is heavily influenced by government regulations

Most SaaS companies will NEVER be on the government’s radar. Thus, the competition will continue to be high and the requirements of innovation to compete will drive prices even lower.

MEANING: Aligning Your SaaS With Regulation Can Be Powerful

This can be difficult to navigate but works really well in areas that are challenging parts of culture. 

As an example, Veeva which is a cloud-based software that acts in many ways like Salesforce for medicine – hires employees to work in Government Affairs. 

At the time of this writing, they’re hiring someone who can ‘build the right connections within Congress, HHS, the Administration, third parties, and industry to help shape and influence the legal and regulatory environment.” In addition, this person will be “responsible for reviewing and analyzing proposed federal legislation and regulations and develop strategies and messaging to advance Veeva’s mission.”

Serious business right? 

They’re not the only company doing this type of work. Carvana which is a SaaS for car dealerships is looking for someone who can “engage and meet with elected officials & regulators on behalf of Carvana to represent their interests, track interactions and generally maintain a holistic perspective on Carvana’s many relationships with government officials.”

Establishing relationships with regulatory bodies can assist in creating barriers of entry for the competition and remove red tape that has given existing incumbents an unfair advantage. 

Dairy as an industry has been around for centuries

MEANING: If You’re Long SaaS, You Realize There Will Be Many Winners

In 2020, I saw this slide from Bessemer Venture Partners and it blew my mind: 

In 2016, when the ‘Cloud 100’ started there were 36 Unicorns compared to 87 in 2020.  Today, in 2021, the minimum valuation for any company to actually be on the Cloud 100 was $1 billion. Cloud Unicorns, $1B valuation companies, are being created more frequently and faster than ever. 

If this is the reality of SaaS, it’s important to keep in mind that almost none of these Unicorns have 100% market share in their space. This is where opportunity still lies and why more SaaS companies are launching and being acquired every single week.

Dairy farmers are primarily competing with other local farmers

SaaS companies in a vertical compete with everyone in that vertical no matter where they live. That’s the power of the internet. A CRM that has its team in Seattle is going to compete with the CRM that has its team in Stockholm… The e-Signature software founded in Chennai is going to compete with the e-signature software founded in Lagos. The SaaS market is global. 

MEANING: Brand In SaaS Is More Important Than Ever

More than 20,000 SaaS companies are competing for attention every single day on G2 alone. I’d estimate that if we were looking at true and absolute global numbers that figure could be more than double. 

This amount of competition makes it easy for brands to blend in amongst the crowd. It’s also what allows companies who have a strong brand to resist up-and-coming startups stealing market share even when they have better features, products, and pricing.  

B2B SaaS in particular underestimates the value of the brand. Sometimes I think it’s because they view funnel creation and lead capturing as an easier way to demonstrate value. This is a fair thought. It’s especially fair in a culture where you’re incentivized by short-term wins. 

If you’re playing a long-term game then brand becomes more important. You’re not just looking to acquire enough customers to get to your next round of funding. You’re looking to build deep relationships with an audience, unlock new channels of distribution, and establish a true brand moat. 

How To Build A SaaS That Lasts

The future of SaaS is bright. I think we’re going to see more Unicorns hit the market every year and I think we’re going to see more indie SaaS brands provide founders and small teams with a fantastic life. The idea that ‘software is eating the world’ couldn’t be more true. It’s an exciting time. 

But with all of this excitement comes one thing that none of us should forget… 

And that is the importance of staying curious. 

There’s a lot of dialog around cryptocurrencies, NFTs, artificial intelligence, web3, and the metaverse right now. We could easily ignore it and stay solely focused on the trends that have shaped SaaS for the last five years. 

But that’s shortsighted.

No matter what you think about the latest trends; it’s important to know that change is coming and it’s potentially going to influence your sector as well.

Only by staying curious will you be able to stay on top of the changes. It’s a commitment to learning, experimenting, and tinkering that will help you thrive for years to come. 

That said if you’ve made it this far and are still reading… I don’t think curiosity is going to be difficult for you. Your competition however might have a problem. 

They’re the people who in 2035 will be sitting back in awe wishing they did something different. 

But instead, they’ll be crying over spilled milk.