By Spencer Altman,
Head of Customer Success
What is Product2Revenue? What is Marketing2Revenue?
Product2Revenue is when the product directly sells itself for a SaaS company with zero (or minimal) need for additional resources like sales or client services to become involved.
Similarly, Marketing2Revenue is the practice of a marketing action (for example, a newsletter or website landing page) directly selling the product or a feature for a SaaS company with zero (or minimal) need for additional resources like sales or client services to become involved.
This concept, as discussed below, is particularly relevant for B2B SaaS companies.
The customer buying cycle and the need for Product2Revenue and Marketing2Revenue
Let us look at an adapted version of a typical textbook customer buying cycle, often referred to as a marketing funnel, dating back to initial concepts created decades by Elias St. Elmo Lewis.
Before a customer can ever purchase a product, they need to know it exists. Then is a phase, however long or short, where the customer considers buying the product. A decision-making phase ensues, which could include comparing with other alternatives, determining preferences and, perhaps, an intent/desire to buy.
Some SaaS products have a buying cycle of a few minutes. For other products, the buying process may take weeks, months and in some cases more than a year, particularly when the price is thousands of euros per year.
For SaaS vendors, the buying/sales process can be long, painful and expensive.
Nothing new there.
Wouldn’t it be nice if it could be shorter and take less resources?
We will get there in a moment.
Let us look into the organizational structure of a SaaS vendor to see which departments are responsible for the different phases of the customer buying cycle.
For SaaS vendors without a Product2Revenue or Marketing2Revenue approach, it is possible that the tasks and responsibilities within the customer buying cycle look like the following:
Responsibilities without a Product2Revenue/Marketing2Revenue Approach
The problem with this approach is that it can be very expensive for the SaaS vendor. A single sales or consulting action is often just for a single customer. Thus, the scalability of this approach is limited.
Some features/products are (massively) complex and thus require (lots of) one-to-one attention from sales and client services.
But, honestly and truly, do all of your products and features really need sales and client services to be involved? What if a product could be sold within just a few clicks directly from the product or via a newsletter without any sales or client services time?
How cool would that be?
In fact, there are some products and features that can (almost entirely) be sold from the product itself or from marketing actions, without the involvement of expensive sales or client support resources.
For these products/features, we are talking about product and/or marketing directly driving revenue and covering the entire buying cycle of the customer.
Responsibilities with a Product2Revenue/Marketing2Revenue Approach
Selling costs per channel for an SaaS vendor
Let us think of the different departments as channels to sell a product. If we look at the costs per channel, then, for some products and features, we could get a graph similar to the following:
Developing a product costs a lot of time and money. Then the product goes live and the effort for that specific feature drops – some bug work, maybe a little maintenance. Let us consider that versions and new releases would be like a ‘new’ feature and thus go back to Day 1 in the above graph. Thus, once the product is released, economies of scale are reached. Each additional unit of the product sold decreases the marginal cost of each and every unit ever sold. A fundamental attractiveness of a SaaS business model.
Let us look at marketing now. Marketing actions also require resources. Newsletters, content, social media, events, blog posts, etc., all require resources from the marketing team. Thus, the efforts can continue over time depending on how frequently and how often marketing is to spend resources on a product or feature.
Let us take an example. Let us say that a single newsletter reaches 1,000 potential customers. What if there were a conversion rate for a specific new product of 1%. That would be 10 new customers for that product. There is also an economy of scale effect here.
As a channel, sales and client services is comparatively expensive. Each and every sale requires roughly the same amount of resources per sale. There are no economies of scale there. Maybe if the team gets their pitch down, etc., then time per deal can be saved. But the efficiencies there are minor compared to those available via selling directly via the product or via marketing.
Not every product can be sold directly from the product itself, nor from a marketing action such as a newsletter or an AdWords campaign or directly from the website of a SaaS provider.
But why not determine which products/features can be sold via the product or marketing and go for it?
Spencer Altman is Webtrekk's Head of Business Consulting. Since joining Webtrekk in 2009, he has been working with companies around the world to help them get the most out of their digital business. His journey in digital analytics began in 2006 as Business / KPI Analyst for weeworld.com, a social network based in the UK. Previously, he spent six years at Accenture in Business Process Consulting in Telecommunications. Spencer can be reached at firstname.lastname@example.org and followed on Twitter @spenceraltman.