One of the main issues we experience when integrating with a new client is the lack of a clearly identified market for us to target. This isn’t all of the time, but it is more often than you’d imagine, and even more than you’d imagine with series A and B funded start-ups. So, I’d like to give some guidance on how to get a start on identifying a market so you are better equipped in general, and you can integrate more smoothly with a MaaS provider if and when you decide to adopt such an operating model.
Solving the SaaS Identity Crisis
The first step is to identify who you are going to be selling to. This is of course going to be specific to your product and location, but for the sake of making this article workable, we are going to use the example of a hypothetical US based SaaS company offering a subscription-based icon library. The target market here is, broadly speaking, web designers. I used the words “broadly speaking” here because web designers globally are a pretty broad, spread-out group. This is actually fairly paralysing, so we need narrow the focus in order to proceed.
Assessing Your Target Market
Our first step starts with an analysis of Total Addressable Market (TAM), then moves on to Serviceable Available Market (SAM), and finally identifies the Serviceable Obtainable Market (SOM). These three different calculations operate as layers of assessment to systematically narrow focus down to a group that can be cleanly targeted with marketing messaging and communications. We’ll go through each one now, sticking with our Icon library SaaS.
TAM: Total Addressable Market
The journey begins with TAM, which represents the total market demand for a product or service. It’s the maximum potential revenue opportunity available if a business achieved 100% market share. Understanding TAM is crucial for grasping the full potential of the market. It is calculated by taking the Average Revenue Per User (ARPU) and multiplying it by the total number of potential customers in the target market.
For instance, consider a. If the ARPU of our Icon SaaS is $20 per month, and the global market of web designers is estimated at 10 million customers, the TAM would be calculated as follows:
TAM = ARPU × Total Potential Customers
TAM = $20 per month x 10,000,000
TAM = $200,000,000 per month
This figure represents the total potential monthly revenue the SaaS company could earn if it captured the entire global market of web designers. That’s not exactly realistic though, consider that a portion of that market already has an icon library, or consider language as another barrier. What changes you would have to make to your SaaS to serve a global market just on the factor of language. Then consider the payment landscape for subscriptions… yeah, it gets painful. Attempting to market to everyone in this way would quickly deplete any budget, with a poor outcome in terms of revenue. So, we need to identify what part of that market we could actually serve, and is available.
SAM: Serviceable Available Market
SAM narrows down TAM to the portion of the market that can actually be reached and served by a company’s products or services. It is a subset of TAM, focused on the segments that are within the geographical reach or within the product’s current capabilities. Can you talk to them, get your product to them, and let them pay you for it?
Continuing with our icon library, if this SaaS currently only serves the North American and European markets, and these markets constitute 40% of the global market of web designers, the SAM would be:
SAM = TAM × Percentage of TAM Reachable
SAM = $200,000,000 per month x 40% (4,000,000 web designers)
SAM = $80,000,000 per month
This is the potential market size that the SaaS company can realistically target given its current market reach. But its budget is limited, and their concern right now is identifying where to aim this marketing budget. What part of the SAM is within reach given the constraints of reality?
SOM: Serviceable Obtainable Market
SOM is the portion of the SAM that the company can realistically capture in the short to medium term. It needs to consider factors like market competition, brand strength, and product uniqueness.
Continuing with our example, if the SaaS company estimates that, given its current marketing and sales capabilities, and if it limits its target market to the US, it can capture 10% of the SAM. The SOM calculation would therefore be:
SOM = SAM × Estimated Market Share
SOM = $80,000,000 per month x 10%
SOM = $8,000,000 per month
This figure represents a more realistic short to medium-term revenue goal for the company that the TAM or SAM, considering its current capabilities and market competition. It also provides a target market and leads us towards performance goals, which we’ll cover in the next section.
Understanding TAM, SAM, and SOM is vital for SaaS companies to realistically assess their market potential. This analysis lays the groundwork for creating effective, targeted marketing strategies through MaaS, ensuring efforts are focused on achievable and profitable market segments.
Assessing Your Business Goals
For SaaS companies, aligning marketing strategies and target markets with business objectives is crucial. One effective way to achieve this alignment is through the use of OKRs (Objectives and Key Results). OKRs help in setting and tracking goals, ensuring that every marketing effort contributes to the broader business objective. If we have a SOM and a target market of web designers, we then need to lay out a path towards achieving that market share. This requires smaller chunks of performance measurements rather than one big one, as it allows for course corrections as we proceed. It is an agile approach to business performance.
Defining Objectives
Objectives are high-level, qualitative goals that articulate what the company aspires to achieve. They should be clear, ambitious, and motivational. They set the direction and define the desired outcome, motivating the team to work towards a common goal.
For our hypothetical icon library SaaS, an Objective might be:
“Establish the icon library as the premier online resource for web designers.”
This Objective is broad and aspirational, providing a clear direction for the company’s efforts. But measuring progress is just as important as setting a goal, so we need to identify what winning looks like.
Setting Key Results
Key Results are the benchmarks for measuring progress towards the Objective. They need to be specific, quantifiable, achievable, and time bound. Key Results act as milestones that indicate whether the company is on track to achieving its Objectives.
For the same icon library SaaS, the Key Results could be:
“Increase monthly recurring revenue to $1 million by Q4.”
This Key Result is quantifiable and directly ties revenue growth to the Objective.
“Achieve a customer retention rate of 90% by the end of the year.”
This focuses on customer engagement and satisfaction, critical for the SaaS model.
“Grow the user base to 500,000 active subscribers by the end of Q3.”
This Key Result emphasizes market penetration and user base expansion.
“Launch 10 new collaborative features, receiving at least 80% positive feedback, by Q2.”
This is about product development and user experience, aligning with the broader Objective of establishing the library as a premier resource.
These Key Results are measurable, time-bound, and directly contribute to the success of the Objective. They provide a clear roadmap for the company’s efforts and allow for objective assessment of progress. The importance of identifying a target market, and performance measurements, are crucial in business. This is true of any business, not just in SaaS, and once this is done its then just as important to integrate them into how you operate.
Integrating OKRs in Marketing Strategy
In the context of MaaS, integrating OKRs means ensuring that marketing initiatives are designed to directly impact these Key Results. Whether it’s through targeted digital marketing campaigns, enhancing user experience on the platform, or strategic content marketing, each action taken by the MaaS provider should be aligned with achieving these Key Results, and, in turn, the overarching Objective.
In other words, OKRs provide a structured framework to align your marketing strategies with your business goals. By defining clear Objectives and measurable Key Results, you can ensure that your marketing efforts are not just tactical but strategically aligned with your long-term vision and objectives. This alignment is crucial for the effective integration of MaaS and for driving sustainable growth and success.
Integrating MaaS With Your Business Model
Integrating a Marketing as a Service (MaaS) provider with an existing SaaS (Software as a Service) business model requires a strategic approach that aligns marketing efforts with the overall business goals, product offerings, and customer needs. While there may not be a specific, widely recognized framework exclusively for this integration (yet), a combination of established business and marketing strategies can be effectively applied.
1. Service Level Agreements (SLAs)
Service Level Agreements (SLAs) play a crucial role in formalizing the partnership between a SaaS company and a MaaS provider. SLAs outline the specific services to be provided, the standards of performance, and the metrics for success. They set clear expectations and provide a basis for accountability.
For our hypothetical icon library SaaS, an SLA with a MaaS provider might include:
- Service Deliverables: Detailed description of marketing services such as content marketing, email marketing campaigns, and social media management.
- Performance Standards: Benchmarks for content quality, campaign response rates, and engagement levels on social media.
- Response and Resolution Times: Agreed-upon timeframes for addressing issues or implementing changes in strategy.
- Reporting and Communication Protocols: Frequency and format of performance reporting, and channels for regular communication.
An effective SLA ensures that the MaaS provider is fully aligned with the SaaS company’s objectives and is committed to delivering results that contribute to business growth.
2. Key Performance Indicators (KPIs)
Key Performance Indicators (KPIs) are metrics that measure the effectiveness of marketing efforts in achieving business objectives. They should be closely linked to both the SaaS company’s goals and the MaaS provider’s performance.
For the icon library SaaS, relevant KPIs might include:
- Customer Acquisition Cost (CAC): Tracking the cost of acquiring a new customer through various marketing channels.
- Monthly Recurring Revenue (MRR) Growth Rate: Measuring the month-over-month growth in recurring revenue.
- Lead Conversion Rate: The percentage of leads that convert to paying customers.
- User Engagement Metrics: Data on user interaction with the icon library, such as average session duration and frequency of use.
These KPIs provide tangible targets for the MaaS provider to aim for and enable the SaaS company to track the impact of marketing efforts on its core business metrics.
Effective Integration
Integrating MaaS with a SaaS business model using SLAs and KPIs creates a structured, results-oriented framework. SLAs ensure that there is clarity in the services provided and the standards expected, while KPIs keep the focus on measurable outcomes that matter to the business.
A thoughtful integration of MaaS using SLAs and KPIs offers a pathway for SaaS businesses to enhance their marketing efforts strategically and effectively. This integration forms the backbone of a successful partnership, driving both marketing innovation and business growth.
Managing the SaaS-MaaS Relationship
Effective communication forms the backbone of any strong relationship. It’s essential to establish clear, open channels of communication with a MaaS partner. This includes regular meetings, transparent sharing of data and insights, and an open dialogue about successes and areas for improvement. Such communication ensures that both parties are on the same page, working towards common goals. This is where a clear SOM and OKRs will really shine.
In essence, managing the SaaS-MaaS relationship effectively is about creating a collaborative, dynamic partnership. Clear communication, shared goals, and a commitment to regular strategy reviews are the pillars of this relationship. By fostering a partnership that is based on mutual understanding and aligned objectives, you can fully leverage the benefits of MaaS, driving growth and success. This ongoing, synergistic relationship is fundamental to the continued effectiveness and evolution of the MaaS strategy, ensuring it remains a powerful tool in your arsenal.
