Maximizing SaaS Outcomes: Having a Clear Value Proposition
Editor’s note: This is the second post in a series in which Georgian Partners’ Advisory Board member, Gab Goncalves, describes how he created value at PeopleAnswers, the predictive talent analytics software company he founded in 2001. If you haven’t already, we encourage you to read his introductory post.
In my first post I introduced the concept of six key drivers that can have a profound influence on maximizing SaaS company exit valuations. In it, I started dissecting the need to have a clear value proposition by examining how to best articulate what you do for your clients. Now let’s conclude the value proposition discussion by examining a few more points.
You Have to Understand Who Your Customer Is
Another key consideration when it comes to creating a value proposition is really having a clear understanding of who is your customer, i.e., who’s paying for your services? In today’s internet / SaaS world that can get confusing because you may have a large company generating some of the revenue, you may have end users, or you may have associates or affiliates. Having a clear understanding of who the customer is and trying to position your message to that customer is a key part of this whole process.
What I like to recommend is that you work backwards from the problem you’re solving. So get a clear understanding of what you’re doing and then reverse-engineer the value proposition. In our case at PeopleAnswers, we knew that we were able to reduce employee turnover. We then started looking at what that was worth to our customers and how could articulate that and build it into our model to measure and prove our value.
When it comes to value propositions the other thing that made us a lot more successful was thinking deeper but not necessarily wider. We had plenty of opportunity to broaden the problems we were solving but we made a conscious decision to get better and better at a fairly narrow problem. As we specialized and continued to drive more and more value propositions in that area, we became known as the experts in that area.
In my view, if you’re early on in your development cycle and you have the opportunity to go broad or go deep, you can never go wrong by going deep.
Fitting into the Competitive Landscape
Another key part of being able to communicate your value proposition is being able to articulate how you fit into the competitive landscape. In PeopleAnswers’ case we made sure we were the ones defining the axis / dimensions of comparison.
As you can see in Figure 1, on the horizontal axis it was about technology enablement ranging from “consultants behind the curtain” on the left of the axis through to “fully autonomous solutions” on the right. Then the vertical axis was about predictability, the ability for the solution to move the needle and make a difference for the customer using it.
By being able to define the rules of engagement, picking the axis and then by being able to clearly communicate them to our prospects, we were able to structure the competitive discussion. We would show this type of slide to prospects many times so they understood how we fit in. We would also tell them that if they were looking for a cheaper or faster way of doing things, then we might not be their vendor of choice.
But if they were looking for a solution that’s highly scalable because it’s so technology rich and not service driven, and they are looking for a solution that is highly predictive — so at the end of the day you will see your turnover numbers go down and your performance go up — then we may be a good choice.
My final comment on value proposition is that it’s very important that you understand who your customer is at a very deep level. Not only who is paying but also everything about them we possibly can learn. At PeopleAnswers we did this by creating deep personas of our buyers. The personas defined each buyer’s role in the organization, how they liked to buy and what types of risks they were trying to protect themselves from. Developing these personas allowed us to test our value proposition. They also helped us understand our buyers is at a much deeper level in terms of their role, buying patterns and habits, risk tolerances, etc. Armed with that information, we could craft our messages accordingly.
If you’d like to read more on, please continue on to the next post in this series about optimizing your total addressable market.