Israel spends about 4.4% of its GDP on research and development. The country is a startup on its own. Almost every family has an entrepreneur in them as their culture is developed on entrepreneurship. It often termed as a startup nation. Various startups are coming up in various domains, especially dominated by tech-driven startups. This tiny nation has built what we call a perfect startup ecosystem, with the government, defense forces, investors and people joining hands in building up this. We as a developing nation should pick up some positive points from them.
According to Statista, the number of startups founded in Israel between 2014 and 2017. In 2017, the number of startups founded in the country was 700, a decline compared to the previous year’s 932. In 2019, the ease of doing business score in Israel reached 73.23. During the period of consideration, the ease of doing business in Israel was 49 in worldwide comparison.
So, in this post we’ve shared some insights why Israel is well ahead in startup race. Here are some reasons why Israel is a hub for entrepreneurs and entrepreneurship
Reasons Why Israel is Well Ahead in Startup Race
Why Israel is Well Ahead in Startup Race?
Support from Government
Israeli government started building the startup ecosystem from 1974, by commissioning OCS for Research and Development. Currently, it supports around 30 incubation centres and provides various grants ranging in millions of dollars for startups in tech sectors. The focus is more on tech, biotech and medical technology. Government has also reduced Corporation tax for tech companies from 25% to 6-7% ( depending upon the business ) and AHS removed bureaucratic obstacles to encourage hi-tech mergers. Also in In 1993, the Israeli government initiated a plan called Yozma (Hebrew for “initiative”) offering attractive tax incentives to foreign venture-capital investments in Israel and promising to double any investment with funds from the government.
The Large Pool of Venture Capital
With the highest number of venture capital investment in this tiny country, investments per startup have exponentially increased within a few years. The countries have around 75+ active venture capitals, out of which around 20% VCs are international ones with local offices. Some many other VCs do not have a physical presence yet invest heavily in the startup of this nation. Also, the International business person comes back to the country to share their knowledge and money. Some of them became angel investors to back up startups.
Buzzing Startup Culture
People are quite enthusiastic about starting their venture. Meetups at coffee shops and people discussing new ideas and innovations are quite common. Israeli startups are more focussed on cybersecurity, edtech, medical technologies and SaaS(Software as a service). Since the population of Israel is less so their target audience is from other big countries like USA, India etc.
There has been tremendous growth in coworking spaces and accelerators. These help people with the same passion to interact and grow together. Many great and revolutionary ideas came out of these spaces. The startup city of Israel, Tel Aviv has about 80 accelerators and incubators. These have also helped many potential ideas to turn into successful ventures.
Israel Defense Forces
Innovations and building technology for IDF have resulted in big startups sprouting up in technological and defence domain. They have helped in solving complex military problems and exporting defence technologies to improve their GDP. Due to the compulsory military training for both men and women makes them relevant and displaced, which eventually helps in their entrepreneurial skills.
Culture and Community
Israel is a country of refugee and immigrant, making it a very diverse country. The two-thirds percentage of people in the country are willing to take the risk of entrepreneurship. The culture of the country is made on entrepreneurship. Also, since it is a very small country, there is no local or regional. market, hence forcing the entrepreneurs to think globally. Also, they have tricks and ways to cooperate with funding for themselves.
Survival Leads to Innovation
As mentioned above Israel is the country of migrants, they have survived through a lot of suffering. This has to lead to a lot of innovations in Israel as it said survival leads to innovation. This innovation has indulged the spirit of entrepreneurship in the Israelis. They gave then continued this process and keep on building entrepreneurship in their country.
Israel’s entrepreneurs both men and women, due to their military training are the reason behind their discipline nature and approach towards their business. These are why they are dedicated to their business. They focus on their work ethic and how it’s going to compete in the markets of the world.
Silicon Wadi
It is the Silicon Valley of Israel. Situated in the coastal plains of Israel. It is an area with a high concentration of high- technology companies. It is the reason behind the name of Israel as the “startup nation of the world “. It covers much of the country’s High tech industry. Many international technology companies along with ahem their research and development sector situated in here. Example are Intel, IBM, GOOGLE, Facebook, Microsoft etc.
It is also the home of popular Israel is companies like Zoran Corporation, CEA Inc. Redware etc. It is the perfect place for having a startup and making it a successful one.
Easy Procedure of Starting a Startup
It is not very tough to start a startup in Israel. Starting a startup is easy in the startup nation. If someone is willing to, do so, then read the market ecosystem, gather a team of own, form an idea, join a incubator or accelerator if details like pitching, licensing is wanted to be avoided or someone wants to go independent and have the resources, few bucks a relevant idea then Israelis go for it.
Israel is a small country with a population of mere 8 million but the development it’s doing in the field of a startup is commendable. From government to investors everyone is backing the startups. Even though there is risk there but that risk is worth taking for Israelis and they are taking it. Also, there is no end of startups there but each startup is different from the other and has something to offer which is new and needy. They believe in world domination with their products and hence they are working toward it through their startups.
The whole of India was in shock after the ghastly attack on 40 CRPF personnel on 14 February 2019. Even though it’s been more than a year since that unfortunate day, people are yet to fully recover from it, especially the families of the jawans martyred in the terrorist strike. How ironic it is that a day of love and romance is now going to be remembered for death and grief. Incidents such as this one naturally give rise to the desire for revenge, and the retaliatory Balakot air strikes was a much-needed response. While retaliation took the form of physical attack, retribution happened somewhere in India but in a different way: the internet. Yes, we are talking about a cyber-war and Anshul Saxena, an Indian, has waged the same against Pakistan. Anshul has become a dreaded figure for those who still support Pakistan despite about the gruesome act that the Islamic nation carried out. Check out Anshul Saxena’s biography.
Anshul Saxena is a programmer and an ethical hacker. He’s active on YouTube and other social media channels where he shares news and personal opinions. Anshul regularly tweets about politics, foreign affairs, and national security.
Anshul Saxena
Anshul tweeted about various Indian hacker groups that took down Pakistani websites. People began to assume Anshul himself was a part of these hacks but he never made any claims about the same. Here are some tweets from the Anshul Saxena’s twitter handle:
4. On 17th February, More than 50 Pakistan Websites were hacked by Indian Hacker Group – 'Team I Crew'. When they sent me those links, I asked them about HTML links. They said it's sent from system in a hurry. Well, I removed HTML link from one site to check & found it hacked. pic.twitter.com/qknrACZsWH
Anshul is bringing justice to the fallen by drawing attention to those anti-Indians who are shamelessly celebrating the Pulwama terror attack on social media platforms. He finds them and files reports against those obnoxious individuals. With the help of India’s cyber police, Anshul also identifies anti-nationalists. It is because of Anshul that such masked terrorists who use Facebook, Twitter, etc. to spread negative sentiments have lost their livelihood and now repent their actions.
Anshul is the embodiment of patriotism. He went on to identify Indians who were uploading negative posts against the largest democracy in the world with respect to the Pulwama Attack. Some of these busts are:
Those Indians who have made fun of Terror attack on CRPF Jawans & sympathised with Terrorists on Social Media via Tweet & Facebook post, immediately send me their screenshots, links, & whatever detail you find on my email anshulhelp@gmail.com
Following the Pulwama attack, Anshul has amassed a following of more than 600,000 if all of his social media handles are considered together. In fact, Prime Minister Narendra Modi started following Anshul Saxena on Twitter for the latter’s efforts.️
There are probably thousands of Indians out there who are retaliating against Pakistan through cyber techniques. Whether the technique is a good or bad tactic doesn’t matter here. Sharing Anshul’s posts will spread awareness about the incident, and people shall hopefully realize that propagating negativity on social media does no good. Impressionable minds in the form of Indian kids and teenagers also use such platforms and may get the wrong message if this negativity isn’t put to rest. Hence, Anshul deserves nationwide appreciation and recognition for his work.
Kudos to Anshul Saxena, the hero of the digital age!
Whether you are a new blogger or may be your blog is getting a lot of traffic. In this post you will get to know everything about Short-Tail and Long-Tail keyword and also how to find them. If you are serious about blogging and want to rank your blog higher on search engines then you must already know the term “keyword” and its importance. There is nothing more important in SEO than the keyword. There are mainly two types of keywords, long-tail and short-tail (narrow-tail) keywords.
To rank higher on search engines you have to do keyword research and find the best keyword for your blog. It depends on you which one you chose but the debate of their users will never come to an end. So, let’s see which one will suit you better.
What are Short-Tail Keywords?
Short tail keywords or narrow keywords are the keywords with 1 or 2 words. They are not specific at all. As they are general keywords, they attract lots of traffic. Narrow keywords grab the traffic from all over the world and they are vast. When someone searches the term “keyword” on Google, they get the links to the blogs with all types of information like “what is keyword”, “how to choose the keyword”, etc. and there is a strong possibility that the user will go to more than one result for multiple information.
But in the opposite case, when people want to know only about the specific information they use long keywords like “what is short keyword”, they will just click one link from the result and read the required information only and you will not get traffic to other content. It would be hard to rank on narrow keywords, but once you did it, your smart work will pay off immediately.
As it is already cleared form its name, long-tail keywords are long keywords. Keywords with 3 or more words are known as Long tail keywords. These keywords are specified. They are used to target people with a particular niche interest.
For instance, you can focus on “best north Indian food in Jaipur” instead of “Indian food”. However, you might not able to get as much traffic as you might get with the second keyword on the first rank, but it will be much easier to rank with the long keyword.When you target people with specific interests, you more likely to impress them. “Indian food” might attract people from all around the world, but “best North Indian food in Jaipur” will target people who might want to eat North Indian food in Jaipur.
And if you are a restaurant, you can grab that lead. Or you can also get sponsorship from any company, dealing in that niche, which in this case, North Indian restaurant in Jaipur. So, in simple words, Long-tail keywords are used to target people with specific needs.
Difference Between Short Tail Keywords and Long Tail Keywords
Short-Tail Vs Long-Tail Keywords
Long-tail keywords generally have very low competition. You can easily come up with a long-tail keyword and get a high ranking. Short tail keywords deal in very high competition. You cannot rank your website unless you have a very popular website.
Long-tail keywords have a much higher conversion rate. A low conversion rate has been observed in narrow keywords.
Long-tail keywords attract only specific people. Narrow keywords are general. Therefore, attract all kinds of people interested in one niche.
Only specific people will search your keyword. Therefore, the search volume is low. Most of the people search for the narrow keyword as they save time. So the volume is very high.
People use the voice search when they have a long keyword. So, long keywords rank well in voice search and the voice search volume is high.
The voice search volume of short-tail keywords is very low. People tend to use their keyboard to type the narrow keyword instead of using voice search.
Although we think the long-tail keywords are the best kind, we respect your choice and believe that you are more aware of your needs. So, you can choose a much better option for your website.
How To Find Keywords for Your Blog?
Even if you know which type of keyword suits you the most, you cannot just, decide the keyword in the air. You need to research and plan. There are many tools available online to research the keywords. However most of them are paid, but the best and free option is Ubersuggest. It gives a detailed analysis of the keyword. Alternatively, you can use the Google keyword planner, which is also good service. Some more tools to find keywords are:
Google Trends – It shows the change in the popularity in the search trends over time.
AdWord and SEO Keyword Permutation Generator – It combines the list of every possible keyword in permutation.
AnswerThePublic -It finds questions, prepositions, comparisons, alphabetical and related searches to the keyword.
Google Correlate – It is another medium by Google. It finds search patterns that correspond with the real-world trends.
There are more like Keywords Everywhere, Google, Keyword Tool, IMBforSMB Bulk Keyword Generator etc.
The keyword is the soul of blogging. If you don’t focus on keywords, the search engine will not focus on you. Select the best keyword type, come up with a list of good keywords and research all of them. Analyze their search volume and CPC. And after all, this, start writing great content. If keywords are the soul, then the content is the mind. Then consider Google as the controller, as it can control both of them! Even wipe them out! Ok being back to the topic, this post was just to tell you the difference between Long-tail keywords and short-tail keywords. If you have a small or medium level blog, then go for Long tail keywords. Comment some more keyword tricks we can try out in our next post. Share this post with all your friends. Don’t forget to turn on eyes on more articles from StartupTalky. Thank you for visiting and reading this post on StartupTalky. Hope to see you soon.
The world is evolving at an expeditious speed, so is the world of money and business. The up to the minute development is money in the form of cryptocurrency. A cryptocurrency is a form of digital or virtual currency created to work as a medium of exchange. Cryptography is used to carry out and verify transactions. The creation of new units of a particular cryptocurrency is also controlled. Collectively, cryptocurrencies are finite entries in a database that no one can modify unless specific conditions are fulfilled.
Blockchain is irrefutably an inspired invention – originated from a person or group of people known by the alias, Satoshi Nakamoto. In the easiest way, blockchain can be understood as a time-stamped series of inflexible records of data that is managed by a cluster of computers rather than any single entity, every single block of data is secured and bound to each other using cryptographic principles. This forms a blockchain.
Market Size and Overview
Bitcoin holds the paramount supremacy in the cryptocurrency market with around 45% of market share & a massive market capitalization of $142.2 Billions (Rs 9.25 Trillion). Altcoins, is the term used for other cryptocurrencies which includes other 1550 currencies that are traded.
India’s crawl into the cryptocurrency market coincided with 2017’s massive spike in prices, when 1 Bitcoin became worth $20,000 in valuation. The immense popularity and massive movement, caught the attention of the Reserve Bank of India (RBI) and the government, leading to an official warning in December 2017, with the then Finance Minister Arun Jaitley confirming that the government did not see Bitcoin, or any other cryptocurrency, as legal tender.
Soon after the dazzling start, came the downfall. From a whooping 15,000 units per day towards the end of 2017, cryptocurrency trade in India lost almost 90% hitting a mere 1,500 units as of March 2018.
The individual values of such currencies also perished. Bitcoin, the most famous virtual currency, rose from $1,000 a unit at the start of 2017 to over $20,000 by the year end ripped off back to below $8,000.
The investor sector took the hardest hit. The top e-currency exchanges of India who were shaking hands with around 2,00,000 and 3,00,000 investors a month; came down to around 50,000 maximum.
But, to everyone’s wonder, Bitcoin made a profit over 44% in value nearly 16 months RBI banned virtual currencies.In July, 2018, Bitcoin was at $6,541.79 which rose upto $9,450.68 in October 2019, securing a rise of 44.47% during the period.
Scope of Cryptocurrency
Even after the initial slowdown in India, cryptocurrency is now back in the ring. Demonetization strengthened people’s faith in virtual currency
The cryptocurrency market is estimated to rise upto USD 1.40 billion by the year 2024, at a CAGR of 6.18% during the forecast duration. It has become a new favourite of entrepreneurs, SMEs, start-ups, are taking an interest in cryptocurrency due to its revolutionary concept to counter transactional conformity.Owing to factors like safety and reliability, the scheme attracts extensive venture funding, partnerships , collaborations, and amongst cryptocurrency solutions providers to provide end-to-end solutions.
The Indian market has about1548 cryptocurrencies which are currently functional in the market as an alternative to Bitcoin.
For a country like India, where everything is weighed on a scale of monetary worth, the only way to beat cash is to make a currency that is more worth than cash.
Other than that, native companies know more about the Indian consumer mindset than anyone else. The only way crypto economy can be established, is letting the population step into game, with a crypto exchange and a wallet. This would prove to be humongous difference for the blockchain community.
India underwent a relationship of sorts with blockchain. On the one hand, the Indian government has shown tremendous inclination towards blockchain technology, initiating government-sponsored blockchain projects in nearly half the Indian states.
At the same time, the government has displayed amounts of indecision towards cryptocurrency, it wanted to control its growth by enabling measures for the same. As per recent reports, the adoption of bitcoin might see a significant boost in 2020. According to research company Arcane Research, Bitcoin trading volumes have increased more than 100% in just a week’s time.
In the report given on the 9th of January, the company states that the 7-day average for Bitcoin rocketed upto 126% in 2020’s first week. $1.5 billion were traded just on the 8th of January.This is a huge development, considering that only $192 million was traded on Jan 1.
The governments and the central banks might be more affectionate to digital currencies, taking the demand to a new zenith. The cryptocurrency market alters everyday, with new currencies in the game proving to be more profitable than the existing. According to crypto traders, Bitcoin would climb to a new peak of $20,000 in early 2020.
Conclusion
Despite India’s curious stance, there is a ray of cautious optimism towards the cryptocurrency domain. Positive regulations by the government seems to be gathering significant momentum, and most experts are convinced that India won’t be saying goodbye to cryptocurrencies anytime soon.
India is undergoing an economic slowdown, and cryptocurrency can effectively help. The blockchain domain has seen a tremendous rise in the number of jobs, other than jobs it can help in attracting new foreign venture capital investments into Indian startups, evidently, the total amount of funds raised globally in ICOs in 2019 is over $346 million. It can also offer the opportunity to bank the massive 300M+ unbanked people in India.
It can be assumed that cryptocurrency is here to shine, so as a developing nation rather than taking a step back we might as well consider a progressive approach to a sector that is nascent, growing multitudes and has transformational potential.
You have a freelancing hobby that looks like it could become a full-time career option then you need to make some major changes in your work environment. Some changes will be easy and comfortable while others can be difficult and time-consuming.
For example, if you are planning to start your own company, you have to pay taxes at both the state and federal level. Something that your company took care of before. We have provided you with a map here showing everything that happens when you leap.
Let’s start with some of the basic pre-requisites to launch your freelancing career.
Make sure that there are a fair and profitable market and a client base out there that you can cater to.
Make sure that you love your hobby enough to make it a full-time job that gives you income.
Ask yourself this question before you start, am I willing to put in the work and energy that it requires this business to become a successful source of income? You have to remember that the goal of every freelancer is to become successful and earn good money.
The number of freelancers is increasing day by day because more people seek flexible working hours
Before you start with the actual work, there is a need for a basic plan. A plan that tells you what the fundamentals of your career are going to be. You need to chalk out certain points that form the basis of your work.
The number of hours that you are willing to put in every week.
An account of what your expenses are going to be.
Your goal and your purpose behind your career. Basically what you hope to get from all of it.
Your long and short term goals.
How are you different from your competitors in the field and why should your customers choose you over them? You need to provide not only your area of expertise but the specifics of your skills. The longer and more elaborate the list, the better are your chances to get selected/hired by prospective clients.
Income
Income
Now that your hobby is going to become your job, you need to make sure that it brings in enough money. You have to do a thorough calculation for this purpose. Calculate your annual salary and calculate what you need to earn in a month.
You have to take into account various aspects like unforeseen expenses, clients leaving and months where you need to beef up your productivity.
Take a good look at your budget and your level of industry expertise and decide on the number of hours you’re going to work in a week.
Now, this sector is big, as in you have to rattle your brain over this because this is what keeps your business alive and going. When all of this was just a good old hobby of yours, you took whoever came to you as your client. But now you have to be wise and selective when it comes to choosing your clients. You need a source of income, preferably one that is long-term and also stable. Look for clients who have spent at least $10,000 online and are looking for long-term relationships.
Marketing Your Services
You need to increase the number of clients. That is of primary importance. This is the most basic strategy of success in your business. Also as your number of clients increase you will start to look “official” to your existing clients.
It’s the age of the Internet and to be a successful freelancer you need to have an impressive portfolio/webpage. There are multiple ways to do this and it’s really easy.
There are many websites where you can build your portfolio. If you are a content writer then here are the websites for you Clippings.me, Press folios.
If you are a graphic designer then you can create your portfolio on Wix, Kro.
These websites have attractive templates where you can drop in your information. Or if you want a webpage of your own then you can go to Weebly or WordPress to create your website. You don’t need any type of programming skills to develop your website on WordPress.
Be it a portfolio or a webpage, it’s a good idea to include case studies showing the problems that your client presented to you and the way or the skills that you used to solve them and a visual (if possible) showing your final work. Your portfolio/webpage must include who you are, what skills you’ve got and why you are better than others in your field.
LinkedIn Marketing
LinkedIn is a necessary tool that can further your career. Your account should be polished and complete with authentic information about your working history and skill set. If you have a web-page or a portfolio then make sure your LinkedIn page has their link. Include a professional-looking headshot and if possible, testimonials from past clients.
Try and reach out to potential companies and recruiters. There’s an even more effective way to make sure that companies notice you. There are LinkedIn groups that are great for networking and getting new clients. Show active participation in group discussions and put your skills to good use and someone or the other will notice you. Some of these groups allow automatic joining whereas in others you have to request access.
Cover Letter
Another thing that you have to learn is that Personalized cover letters give you a better fighting chance. This shows your interest in the company and your willingness to work with them. Begin by researching the company and learning about its needs as much as you can. If possible address the cover letter to the hiring manager’s first name. Your message should be brief with proper official format and language. But try to give a little touch of personalization and discuss how you could add value to the firm. Make sure to include email address, phone number, Skype ID and available hours to set up an interview.
Benefits Of Turning Your Hobby Into A Full-time Career
There are so many advantages to choosing a freelance job as a full-time career. You can travel anywhere in the world. This is the best way to work while you are travelling because in a full-time job under any company you will not be able to do this. But if you choose to be a freelancer for full-time then you have the opportunity to work from anywhere, travel to beautiful places and eat delicious foods.
Many people are now becoming Digital Nomads to enjoy their life and to be free from the regular 9 to 5 schedule. So, take advantage of this time and just ride on the wave of success.
As we can see, it’s a long journey and it also has to be a well-planned one. You have to keep your patience and keep working, trying to bring in more and more clients to make yourself eligible to work with some big-shot companies out there. There’s fierce competition out there but as the wise old owl said there’s nothing that a good business plan and determination cannot achieve.
For many new products, price is a decision made shortly before launch. But pricing a software-as-a-service (SaaS) product presents unique challenges for product and marketing teams. Unlike traditional software, customers licensing SaaS products pay for your product on a recurring basis. This gives you more options for pricing models. The problem is, you have no idea how to price your SaaS Product. You are probably asking yourself:
“Should I be charging less than my competitor, or more?”
“Should I gate off specific features, or charge by a metric like number of users — or maybe both?” And the list of questions goes on…
Pricing for SaaS Product
This article aims to help you find answers to all your pricing questions. “You must know your customers to know your pricing”. Gathering customer data helps you understand the general makeup of your customers and quantify the value people derive from your product, so you can drive your pricing strategy accordingly. Surveys are a very effective and relatively fast way to obtain information, but you need to be smart and intentional about the questions you ask.
Standard survey templates include demographic data points such as age, gender, location, etc., but behavioral insights are more useful for pricing purposes. One of the most important things to consider when it comes to pricing strategy is what your different customers actually care about when they use your product. By realizing who wants what, you can understand which features all customers should have, and which features can be gated by tiers.
FLAT RATE PRICING: Flat rate pricing is probably the simplest way to sell a SaaS solution: you offer a single product, a single set of features, and a single price. This method is still used by eCommerce SaaS CartHook. A single monthly price of $300 (or $2,400 billed annually) grants access to all features of the company’s product.
SAAS USAGE BASED PRICING: Also known as the Pay As You Go model, this type of pricing strategy directly relates the cost of a SaaS product to its usage: if you use more of the service, your bill goes up; use less, and your spend decreases. Usage based pricing works particularly well for recurring billing platforms like Chargify.
SAAS TIERED PRICING MODEL: Tiered pricing allows companies to offer multiple “packages”, with different combinations of features offered at different price points. SaaS content marketing company HubSpot employ tiered pricing to great effect: each tier is designed around the needs (and budget) of a different type of potential customer, ranging from Basic to Pro to Enterprise.
PER USER PRICING: A single user pays a fixed monthly price; add another user, and that price doubles; add a third user and, you guessed it, the monthly cost triples. Example of such pricing is road mapping SaaS ProductPlan. The only variable in their business plan is the number of users added to the account, and the per-use price is the same, whether you’re a single user or a team of 100.
FREEMIUM BUSINESS MODEL: Thanks to high-profile success stories like Slack, Evernote and Dropbox, many SaaS companies use freemium pricing: offering a free-to-use product, supplemented by additional paid packages. Live chat SaaS, Drift use freemium pricing to great effect. Their “Free” package allows small companies to talk to their first 100 contacts for free: when demand for the service increases beyond that point (most likely correlating with company and revenue growth), it becomes necessary to upgrade to their paid packages.
Your pricing model is at the heart of your SaaS business: it’s the foundation that allows you to build out repeatable sales processes and generate recurring revenue. But, within the framework of your pricing model, there are all-manner of different goals you’ll need to hit on the way to your over-arching objective of “growth“. That’s where SaaS pricing strategies come into play. Each of these strategies is suited to a different objective: whether that’s rapidly expanding into a new market, or attracting particularly high-value customers.
Here are a few additional areas to consider when pricing SaaS products:
Your sales model influences your pricing.
Create upsell opportunities within your pricing model.
Use caution when offering annual pre-purchase discounts.
Build discounting options in enterprise licensing.
Consider free trials.
Service is key.
The demand curve is not linear.
Also, a lot of companies offer a “free tier” which has limited features. The idea is that people will start using the product, get value out of the free tier but see a lot more value if they were to start paying and eventually upgrade. In theory this sounds great and for some companies it is. The problem with the free tier is that you may start running into problems such as the high cost of providing support to the free customers, the free tier bringing in the wrong type of customer, and requiring you to spend resources to try and convert the cheapest customers to actually pay you. Early-stage startups feel this pain the greatest since they can only afford spending resources on critical operations. Look at your buyer personas and product — sometimes the freemium model works well and sometimes it does not.
Applying the 10X rule to SaaS product pricing is simple. Just make sure that the value your solution delivers is at least 10x what you charge for it. If you can save a company $100,000 per month, you should probably initially think about charging them $10,000 per month. If you can save a company $10,000 per month, you should probably be charging them $1,000 per month.
10x Strategy
Now, let’s see some companies with their pricing models.
Upscope Co-browsing doubled revenue by doing per seat pricing only after making lots of mistakes.
Drift made a free plan so they only charge those really using it.
Hubstaff found their free plan ended up costing them money
TribeHR took a data driven approach to pricing their product
Aircall figured out pricing by calling their customers and talking
Creately made a ‘Pay whatever you want plan’
Conclusion
Pricing your product is an ongoing process. You will never be done with your pricing strategy. As you get more data and feedback from your customers you will change your personas to be more accurate and change your pricing strategy to better target those people.
Comment your views on the article and also let me know what is your pricing strategy in the comment section below.
One of the directions of the search for the foundations of the strategic success of an enterprise is the resource approach of strategy formation, which is considered as an alternative to the market-oriented strategy of strategy development. The resource concept occupies a steadily leading position, being currently the most advanced and reasonable tool of the theory of strategic management. The theoretical background of the resource approach is in good agreement with the works of classical economists, for example, E. Penrose, J. Schumpeter, R. Rumelt, and others.
The practical significance of the resource approach lies in the new justification of the role of management in the strategic management of the company. To effectively manage the process of creating competitive advantages, management needs to identify, develop, protect the organization’s resource base promptly, implementing new combinations of resources, which will ensure effective transformation and change of resources “at the entrance” to the organization into output value-added products that have value for consumers. The resource approach lays the methodological basis for the qualitative analysis of strengths and weaknesses, allowing to highlight the resources that are key to building and maintaining the competitive advantage of companies, especially startups. The purpose of this study is to analyze the resource-based view as an essential element for the development of startups.
The “compression” of the economy, the structural and temporal uncertainty of the further development of industries and regions make the study of internal sources of economic potential startups relevant. The results of monitoring the main approaches and methods of strategic management (Prahalad et al. 2001) show that the study of the micro bases of firms’ sustainable competitive advantages is increasingly concentrated in the area of the modern resource concept (RBV). The primary side of a resource-based company representation theory is its ability to combine many previously separated threads of the theory of strategic management into a single stable analytical framework – competitive analysis, industry analysis and assessment of parameters of the internal environment of a company (Fleisher & Bensoussan, 2007).
The resource approach to the formation of a strategy is based on the fact that each firm has a variety of resources acquired in the factors of product markets and “acquired” in the course of its activities, as well as the ability to combine them with their capabilities (qualified personnel, technical means) and goals.
The principal differences between the modern RBV approach and other theories of strategic management are as follows:
The unit of analysis is the firm, not the industry (market) (Wernerfelt, 1995).
The source of sustainable competitive advantages in different resources (heterogeneity is explained by the specific transformation of resources within the firm) (Penrose, 1995).
The essence of the company’s strategy is not in the traditional development of the product structure and coverage of market segments but the development of a dynamic concept of changes in its nature (Ciszewska-Mlinarič & Wasowska, 2015).
The ability to use economic instruments allows us to explain how a company’s resources determine its effectiveness in dynamic competitive conditions.
Resources as a Critical Category of RBV
Studying the controversy on this issue and at the same time recognizing the dynamic nature of the market and intra-company processes, the authors generally consider the differentiated approach to the separation of categories of the resource concept to be the most successful from the logical nature of the puzzle of terms. Nevertheless, some definitions and their interrelations require clarification. The basis of the formation of the company’s resources is the factors of production, defined as undifferentiated resources available on the market – land, unskilled labour, the capital.
Thus, the external environment is the primary source of the company’s resources. It is clarifying the existing approaches to understanding the category of “resources” (Helfat et al. 2009). The authors propose the following definition: resources are specific assets controlled by a firm that are difficult or impossible to imitate and which allow a firm to implement strategies that enhance its economic and managerial efficiency, as well as ensure its receipt of quasi-rent (Helfat et al. 2009).
The definition focuses on two significant points: first, the company must control resources. To control does not mean to own, but to find an opportunity to use them. This theoretical construct not only explains how business ideas “start” without resources but does not contradict the idea of using resources within the framework of a relational approach (sharing resources in an inter-company network); secondly, the concept of quasi-rent is interpreted as a method of obtaining economic benefits by capturing the disproportionate share of other economic rents over the competitive level: Ricardian (income from owning limited valuable resources), monopoly (income from market power) and entrepreneurial (income from risk and innovation) (Fleisher & Bensoussan, 2007).
Thus, effective resource management should automatically provide higher returns than competitors. It is precisely the presence of quasi-rent that, unlike the industry approach proposed by M. Porter (2008), explains the difference in the efficiency of companies operating in the same market. Adhering to the principle of separation of the categories “resources” and “abilities,” it is important to note the available classifications of resources that meet this requirement (Porter, 2008).
According to K. Hofer and D. Schendel (1978), the firm’s competitive advantages can provide six types of resources: financial, physical, human, technological, organizational and reputational. R. Grant (1991) adds intangible resources to this typology. Later, they were allocated three blocks of resources: material, intangible and human (Grant, 2016). Sh. Hunt (1999), in addition to the generally accepted list, identifies the seventh type of resource – jurisdiction (legal), bearing in mind the possibilities of using the institutional and other advantages of the company’s location. Roos, S. Pike and L. Fernstrom (2005) classify all the company’s resources in the context of two blocks: the first includes the so-called traditional economic resources — material and monetary; The second group includes intellectual resources, including relational, human and organizational capital. The authors argue that it is the second block of resources that can provide the firm with competitive advantages in the long term.
D. Collis and S. Montgomery (1998) divide resources by type of efficiency into two categories:
Public goods – resources that can be simultaneously and conflict-free to be used in several businesses (trademarks, technologies, advanced management methods);
Private goods – resources that are harder to manage due to competition between departments (financial resources).
The classifications of J. Timmons and S. Spinelli (2004) are based on the need for resources to create a business. They allocate four types of resources required for the organization of a firm: human (management team, not employees!), Financial assets (plant, equipment) and a business plan, i.e., resources that an entrepreneur can control, starting his activity.
From the standpoint of the theory of transaction costs, resources are specific assets that cannot be used in an alternative way without a significant loss of their potential. It is a problem of moving resources that make their heterogeneity long-term, and their competitive advantages sustainable. Using the specified evaluation criterion, O. Williamson (1985) identified six types of resource specificity: the specificity of the location of the asset; the specificity of physical assets; human capital specificity; targeted assets aimed at expanding production capacity; trademarks; asset specificity over time.
Combining the RBV analysis with the principles of the systems approach, G. B. Kleiner suggests investigating two significant resources – the right of ownership to the space available to the subject and the time available to them, proving that it is these resources and their properties that ensure sustainable development of the system. Despite the differences in the structure of resources, the authors, adhere to one position – they seek to select resources that meet the requirements of uniqueness (Chursin & Tyulin, 2018). Therefore, before determining the final composition of a firm’s resource portfolio, it is essential to determine the list of properties that should be present in a competitive resource.
Analytical Evaluation of Resource Properties in RBV
For the first time, an analytical scheme for assessing the properties of resources was cited in his work by J. Barney (n.d.), proposing four measuring parameters: value (value – V); rarity (R); the impossibility of copying (imitability – I) and the indispensability of a model of organization (organization – O). The VRIO model, linking the listed properties of resources with the sustainability of the competitive advantages of a firm, is currently almost the only generally recognized and widely used tool for identifying resources in strategic management. The study of J. Barney gave a powerful impetus to the use of this analytical framework in other works. So, R. Amit and P. Schumaker (1993) clarify the properties of resources: value consists of external value (strategic industry factors) and the complementarity of resources within the firm; rarity is determined by the physical rarity of the resource and (or) the low possibility of its sale; the impossibility of copying is divided into merely the impossibility of copying and the low substitutability of resources.
According to D. Collin and S. Montgomery (1999), the value of a resource is created by three factors: rarity, conformity, and demand, i.e., the value is a consequence of rarity, and not an independent attribute of a resource, according to J. Barney. Also, the authors point out that resources cannot be assessed in isolation from other factors since their value is determined in conjunction with market forces (Collis & Montgomery, 1999). R. M. Grant determined the most significant properties of resources according to the level of potential of their profitability: at the stage of creating an advantage – the rarity and relevance (relevance) of a resource; at the stage of creating sustainability, the advantages are the duration of use, the ability to imitate and transfer the resource; at the stage of assigning the results – ownership of the resource, level of market power and integration in the processes (Grant, 2016). M. Peteraf (1993) identifies four criteria that a firm’s resources must meet to generate sustainable competitive advantages: resource heterogeneity; ex-ante restrictions on competition (only those resources that are purchased at a price below their present value can generate rents); ex-post restrictions on competition (difficulty in imitating a resource) and imperfect resource mobility.
The VRIO conditions given in general are only necessary but not sufficient for the usage strategy of specific resources of a particular firm: a strategic resource for one firm may not be such for another (Barney, n.d). In other words, the correspondence of the available resources to the degree of their importance is significant for obtaining sustainable competitive advantages in this market (spatial aspect) and existing conditions (temporal aspect).
The theory of resource dependence is closely intersected with the RBV concept, according to which an organization depends on the business environment in direct proportion to its need for resources or actions (Thompson, 1967). Possession of strategic resources increases the independence of the company from changes in the external environment. The founders of the resource dependence theory J. Pfeffer and J. Salancik (2003) distinguish two properties of resource significance: the relative volume (size) of the required resource (for example, for a university the primary resource will be human capital) and its criticality for the functioning of an organization for many types of business it will be insignificant, but without this resource the activity of the company is impossible).
RBV as the Foundation of a Competitive Startup Business Model
Supporters of the traditional approach consider the resource strategy as a combination of two groups of decisions: decisions about the volume and quality of the necessary resources and decisions about the behaviour on the market of resources. In the resource concept, resources play a fundamental role, which means that their management should be much more efficient. The sequence (algorithm) of the development of the strategy of the company based on the RBV analysis can be represented as follows:
Setting the goal and determining the desired results;
RBV – analysis;
The rationale for the choice of strategy (Foss, 2005).
For a firm to be recognized as competitive, it must be of value, be unique in terms of visible external results, and useful from the internal results of the activity. Therefore, at the 1st stage of the formation of a resource strategy, before deciding on the acquisition or use of resources, the firm should make a forecast of the results that are planned to be obtained with the help of these resources. Thus, the management of a firm must classify external (visible) and internal results, to understand how they are related to each other. There are three areas of a company’s strategic development (three ways to get visible results): cost leadership, focusing, and differentiation. In each case, the firm generates specific values for the consumer; accordingly, it can be concluded that the required resources and their significance will differ significantly (Deusen et al. 2007).
Assessment of the results, in general, is a needed practice not only for companies but for college and university students as well. While they are taught to write entrepreneurial finance research papers, they often forget about their own productivity. Conducting research, writing essays, and analyzing different business studies is a valuable academic experience, but often it stands between students and their own, much more perspective projects, side jobs, networking, etc. Addressing one of the professional academic writing services, for assistance, is a cost-effective way to deal with the academic to-do list on time and spare energy for real breakthrough projects.
At the 2nd stage of the formation of the company’s resource strategy, the resource portfolio is analyzed (RBV analysis). Systematization of the previous provisions of our study allowed us to identify the main directions of this analysis:
1) Assessment of the degree of relevance of resources (compliance with the demands of the external environment) is feasible by studying four parameters that determine the key success factors for any business (Rockart, 1979): characteristics of the macro-environment, industry parameters, competitive position and the specifics of the company (in particular, determining the place of the company in the value chain);
2) Assessment of the availability and adequacy of resources for the implementation of the chosen strategy. The identification of the resource base of a company can be made by drawing up a resource tree – a structure that allows the decomposition of common groups of resources for their specific types (Roos et al. 2005). The method of compiling a resource tree allows you to identify both resources and the portfolio as a whole simultaneously;
3) Determining the significance of each type of resources for creating quasi-rent – can be made by weighing resources in two directions: assessment of the impact of the resource on the generation of economic rent; comparison of the available resource with the normative (ideal) in quality and quantity;
4) GAP-analysis – identification of excess and (or) missing resources. In terms of a combination of properties, a resource can be conditionally assigned to one of four groups: an unconditionally valuable resource (regardless of market conditions and other institutional conditions, gives a firm a competitive advantage); conditionally valuable resource (gives competitive advantages under certain market conditions); a necessary but not valuable resource (available for most market players, but necessary for generating economic rents; an example of this is the source of funding); non-valuable and optional resource (its presence does not affect the competitiveness of the company or gives a negative effect) (Økland, 2015);
5) Determining the complementarity of resources. Complementary resources, as noted earlier, can have an additional positive effect. Therefore, it is important to classify resources by pairing degree, which will allow choosing from the available strategic alternatives those that will use the associated resources, i.e., to give the maximum possible synergistic effect (Ambrosini, 2007). It is also important to carry out a “reverse” process, namely: to determine how existing resources can be integrated in another way, and on this basis for choosing adjacent strategic alternatives.
At the 3rd stage – the justification of the choice of strategy – the problems identified in the process of RBV analysis are eliminated. Within this stage, in our opinion, the following strategic choice is possible:
1) Investment in resources – At the same time, the firm must answer two questions:
How to invest: in current resources to maintain existing competitive advantages, in new resources to implement new projects or to refrain from investing;
What to invest in? (It is possible to use resources in different strategies);
2) Improving the quality of resources – strengthening existing, mutual addition of resources and their balancing, reprocessing and co-optation;
3) Resource regulation – expanding the company’s resource access to markets or focusing on one; focus on cost reduction or product quality (according to the selected strategic area). Resource properties are not stationary. It means that their uniqueness and, consequently, their value may change over time. Therefore, the proposed sequence of actions the company must comply with permanently – only then can we talk about long-term success (Kirsch, 2007).
Conclusion
So, proposed by identifying the resource portfolio, determining its properties that provide sustainable competitive advantages, the algorithm for justifying the strategic choice of a company allows to: determine the resources of the company in the context of the modern resource approach; identify the factors contributing to the uniqueness of the company’s resource portfolio; determine the set of properties of the resources needed to generate economic rents; identify the final composition of the firm’s resource portfolio, allowing to achieve sustainable competitive advantages; highlight the main directions of RBV analysis.
FAQs
What is a resource-based view?
The resource-based view (RBV) is a managerial framework used to determine the strategic resources a firm can exploit to achieve sustainable competitive advantage.
What is the primary limitation of the resource-based view?
(1) The recourse-based view has no managerial implications, (2) the resource-based view implies infinite regress, (3) the resource-based view’s applicability is too limited, (4) sustained competitive advantage is not achievable, (5) the value of a resource is too indeterminate to provide a useful theory.
Customer engagement is the key to sustaining growth for SaaS companies. SaaS businesses must aim to educate and entertain their users to boost satisfaction and retention. You want customers to feel compelled to login to your platform in the morning, during lunchtime, and even before bedtime. You want the stickiness factor. Not only does this help boost user satisfaction, but it can also help your company improve customer retention.
More and more SaaS companies are recognizing the amazing value that product-led growth provides. As a result, user engagement tools have become increasingly important. The goal of a SaaS CEO should be to increase the profit they make from each customer (LTV), and lower the costs in sales and marketing that it takes to acquire each customer (CAC). Measuring Customer Engagement is a key tool that will help you achieve that goal, as it will allow you to increase your trial conversion rates, which directly reduces CAC. And it will help you lower your churn rates, which directly increases LTV.
What is Customer Engagement?
Customer engagement is all about interactions between your customer and your brand. As a result, the interactions that you qualify as an engagement will be just as unique as your business. When you let your customers choose how they’d like to engage with you, you’ll be more likely to uncover the type of interactions that they find valuable. By making it easier for customers to engage in ways they find valuable, you’ll strengthen their emotional investment in your brand.
What is customer engagement?
Some customers will have a deeper level of engagement than others. For example, a new shopper might engage by following your brand on social media and placing an order, but this level of engagement is very different than someone who’s placed 10 orders in the last year and also referred their friends. Finding ways to add value to your customer experience can help you drive more valuable engagements more often. When customers feel like they have just as much to gain from engaging with your brand as you do, you’ll foster a sense of reciprocity that keeps them emotionally connected to your brand.
The digital marketplace offers customers a greater range of options than they’ve previously experienced. Now, the majority of value is gathered over time through a continuing cycle of commitment and re-commitment. To maintain a customer’s interest, enterprises need to be responsive to change, alert to a customer’s day-to-day needs, and in frequent contact. Customer engagement helps to continually demonstrate your commitment to the customer and allows you to deliver value in every phase of the customer journey. The importance of great customer engagement can’t be emphasized enough, as it builds and fosters:
Customer engagement is the proof you provide to your customers that you value their success and are always working to deliver more. Remember, friendships endure while acquaintances come and go. With the right engagement strategy, you can foster long-term, mutually beneficial relationships with all your customers.
How to measure Customer Engagement?
You can’t improve customer engagement if you don’t know how to measure it. There are a number of different ways you can calculate engagement, which is why we’re giving you a head start by highlighting the most important metrics to start with. Measuring customer engagement requires that you do the following:
Identify the key events that you would like to track.
Track the number of customers who complete a purchase without making an account
Assign engagement scores to each action in a way that can be changed as your company evolves
Keep an eye on how often your customers make a purchase
Find the average amount a customer spends when they make a purchase
Create a database to store this information, ideally in a form that allows for fast querying, and easy cube-style, cross tabulated analyses.
Connect this database with other data sources that contain additional customer attributes that are relevant for understanding segmentation
Compute an engagement score for each user that can be used by sales and support.
Customer Engagement Score = (w1*n1) + (w2 * n2) + … + (w# + n#) where w is the weight given to a random event and n is the number of times the event occurred.
Communication plays an integral role in customer relationships. You’re already emailing customers welcome messages, product updates, and the occasional thank you note. Real-time triggered emails get good results because they respond to subscriber actions and are relevant to them, so they benefit from current high engagement. Whereas routine marketing emails can be more like interruptions and are sometimes rejected as irrelevant.
Let’s imagine that new users who don’t take a significant action on your platform within 2 days of signing up are more likely to churn. You can set up a triggered message to nudge these users to login to their accounts. Below is a triggered message from Buffer. Their system automatically emailed when social media post surpassed a specific audience reach.
Triggered messaging
While routine marketing emails may seem interruptive because they may be irrelevant, triggered email messages tend to have a more positive impact on customers. Since the messages are triggered by specific actions that the customer did or did not take, these messages are more relevant and thus, more beneficial to the customer and more likely to promote engagement.
Award points when a customer makes a purchase
Showing your customers that you appreciate their investment in your brand can be as simple as awarding them points each time they place an order. Polaroid Originals adds value to every order their customers place, making each of them more likely to return to make another order in the future.
Award points for a purchase
By showing their customers they have just as much to gain from each purchase as they do, they’ve fostered feelings of reciprocity that will give them every reason to order from you again.
After working in SaaS marketing for years, it can be easy to forget how challenging it can be for a new user to navigate your company’s platform. Many customers may not be familiar with SaaS technology and may have a hard time successfully using the platform or getting the most out of its features. This frustration can often cause users to give up or move on to another SaaS product they may believe is easier to use. In addition to sending triggered messages with helpful tips, tutorials, and advice, you can also engage these users through in-app messaging to help provide ongoing assistance.
In-app chat feature
Simply establishing the fact that you are available makes your customers feel better. It makes them not just view the product as some pixels on the screen, but as an extension of the people behind its creation: you. In-app messaging is effective because it allows you to speak with your customers one-on-one, helping them solve their greatest challenges. In addition to providing direct assistance to customers, you can also use the chat feature to find out which features new users are finding most difficult or asking specific questions about their experience. You can then use the information that you gather through these conversations to create interesting and relevant content that is helpful for users who are having similar issues.
Encourage your best customers to share your brand with referrals
RUNGUM Give 5 Get 5 Explainer Page
Driving engagement also doesn’t have to be solely between your customers and your brand, it can also be between customers. Empowering your best customers to easily share your brand with their friends and family can not only help you acquire a new one, but also engage the customers you have. RunGum’s Give $5 get $5 simultaneously adds value to the friend that’s been referred to their brand and the customer that referred their friend. It’s this value that will make both customers more likely to re-engage again in the future.
Continuing education is a vital part of SaaS customer engagement. In addition to free trainings and webinars, you can also create video tutorials as part of your SaaS marketing strategy. While you will still want to provide the typical educational assets such as blogs, e-books, and guides, you can also use video tutorials to engage your audience. Videos are stimulating and allow you to clearly and simply communicate your message to users faster than you can in text. Videos are also easier to consume on mobile devices, allowing users to quickly and conveniently access your training videos on demand. Basecamp, a project management company came up with a series of tutorial videos to educate prospects.
Educational tutorial and videos
If you want to produce video tutorials that are engaging, you need to think about what your customers most want to learn about your software. Consider what your customers greatest challenges typically are when they start to use the platform. Also, think about which features your customers will find most useful and create content around these topics. In addition to the topics that you choose for your video tutorials, it’s also important to consider how you plan to structure the content. To keep users interested, use storytelling methods that will help draw them in and make your content interesting and helpful.
Conclusion
Customers are the lifeblood of your business. To retain your users, experiment with different engagement strategies to improve retention. In the end, it’s important to remember that engagement = retention. If people aren’t using your platform, it could be because they are not engaged.
It’s essential that SaaS marketers try out different user engagement strategies to find the most effective tactics for improving customer retention. You can use the SaaS marketing strategies above as a starting point for experimentation. Choose one or two of the strategies above and watch as your engagement rates steadily improve over time. Also, please let us know if this article helps you in any way.
Discounts are one of the most powerful tools in a sales team’s arsenal. But way too many companies are using them wrong. To get people into their product, many SaaS companies turn to discounts to increase acquisition. They think that they can raise prices later, once these customers see the value in the product. But by discounting, you have already hurt that value.
SaaS Discounting
Pricing is a dedicated and patient process. After spending so much time perfecting your pricing, you shouldn’t use discounting as a “quick fix” to bring in more customers by underselling the value of your product. Excessive discounting causes a ton of damage to growing SaaS businesses. The most obvious impact is losing potential revenue. While that does hurt, there are much more destructive consequences that come later. So, let’s jump right in.
Discounts Increase Your Churn
Discounts increase your churn
One simple rule is key to sales: customers buy when the perceived value exceeds the price. The gap between price and value is the benefit a buyer receives. This is what makes discounting so effective at winning deals. You can get away with low value by offering an even lower price. That allows you to preserve this value gap. In this way, discounting hurts your business and increases customer churn.
Discounted Customers Are Less Willing to Pay
In SaaS, customers are constantly presented with so many promotions and discounts that if you offer a discount “for two days only,” they know there will be more coming down the pipeline. When just looking at the goal, it seems that the aggressive strategy may be the better choice. However, limiting our view to only this small window of time means we miss the significant repercussions of such an aggressive discount strategy further down the line.
Discounted customers are less willing to pay
We see that by using aggressive discounts, customers had:
Lower willingness to pay. Their price threshold is already set so low so when the price is brought back up, they have a higher price sensitivity and are less likely to renew.
High churn rate. Following the rise in price, rather than renewing, customers are more likely to churn out and look for a cheaper alternative.
Lower lifetime value (LTV). With so many customers that don’t renew, you’re losing out on that investment you’ve made to acquire them without even experiencing any revenue.
That simple price and value model doesn’t reflect how people actually behave. That’s because there is a difference between actual value and perceived value. While actual value provided doesn’t change when you lower price, the perceived value does. Why is that? Through experience, people have learned to associate high prices with high quality. A nice dinner is more expensive than a burger from a fast food restaurant. A Ferrari is much more expensive than a Ford. Price is a proxy for quality.
And this is why the perceived value is so important. When you lower the price of your software, perceived value will also decrease. A low price may help you land the deal today. But a low perceived value reduces the likelihood a customer be successful. At low price points, customers may not invest time & resources in your solution. It is easy to forget about a solution you paid little for. Without customer investment of time and resources, they won’t see results. And if they don’t see results, they will leave at the soonest available opportunity.
Discounting Undervalue Your Product
Companies often offer discounts thinking that it will help with cash flow by increasing acquisition of customers. However, in the long term, it ends up hurting you instead as you have to spend longer recovering CAC which is even higher with the increase in customers. Even if the discount brings in more business initially, you may never end up recovering CAC for these discount customers and ending up losing even more money in the end.
Discounting undervalue your product
While discounting directly affects your actual revenue, it also kills your momentum as a company by training both your customers and your team to devalue your product. By offering the same product at a discount, your potential customers may not think your product is worth your original price. Your sales teams just want to close. They may be using discounts as the path of least resistance to close a sale, diminishing the culture of profit you want to centre your company on.
Another dangerous consequence of discounted customers with high churn is confusing your company strategy. Companies optimize growth by identifying an ideal customer profile. Once understood, they then focus marketing & sales on these target customers. But if your churn is too high, you don’t know who your best customers are. In SaaS, a good customer isn’t one who is easy to sell. It is a customer who sticks around for a long time. Retention is much more important than the first sales conversion.
So, excessive discounts used to land deals hide the most important insight: who will stick around. And if you don’t know whom to target, you will waste money on sales and marketing. This lack of focus also hurts your product team. They need to design features to make current customers stickier and attract new ones too. But if product managers don’t understand your users, they can’t improve the product to better meet user needs. So, the product gets bloated with unnecessary features that don’t tie to a clear use case. And guess what? Bloated products confuse and frustrate customers trying to use them. That reduces adoption and increases the likelihood of churn.
Conclusion
Businesses are evolving every day, and so are the tricks that can help you acquire customers. Discounts are one of the oldest, most effective selling tools; that being said, a discount isn’t just an easy-win tactic, but something you need to employ strategically based on the needs of today’s decision-makers. Bad discounting can do serious damage to your customer retention efforts.
It attracts low-value customers who don’t appreciate your service and are likely to churn. It creates a ton of work for your Customer Success team trying to rescue accounts that won’t stay. And it confuses the ideal customer profile your teams need for focus. If you know about any other disadvantages/advantages of discounting, please let us know in the comments section.
Software as a Service (SaaS) is the present and the future of the tech industry. According to Transparency Market Research (TMP), the SaaS market will reach $164.29 billion by 2022. The IDC says that SaaS delivery is growing five times faster than the traditional software market, with cloud software accounting for $1 of every $4.59 spent on software.
Discounting SaaS products can greatly impact your revenue and consumer perception. Survey reveals that discounts have a substantial influence on customer acquisition, brand loyalty and brand perception among consumers. But here’s the thing: Discounts work differently from the seller’s perspective. And if businesses aren’t careful with discounts—if they don’t strategize correctly—the whole thing can backfire in a big way.
Long-Term Effects of Discounting
Quality and price coexist. In the consumer’s mind, the higher the quality, the more the product costs. So, when buyers notice your discounted product, they are confused. And their first rational is: something is wrong. Frequent discounting serves to lower the value of the brand because of an almost subconscious reaction by the consumer who believes that quality also has been lowered.
Consequently, your pricing strategy will train customers to buy only when you offer discounts. That’s not helpful for your bottom line. Your team won’t be attracting ideal customers who want your products. Instead, price-sensitive buyers who don’t appreciate your product’s value could become the norm. Data also revealed that SaaS discounting lowers LTV by over 30%.
Here are 7 key lessons that companies can use to implement pricing and discount strategies that work. So, without further ado, let’s get started.
Tips to Implement Correct Discount Strategies
Package Level Discounting
Package level discounting is discounting without actually discounting. In fact, this method encourages customers to pay more than they intended to in the first place. For example, a customer signing up has the option of taking the $10 per month standard package plan, which will fulfill their needs. However, by signing up today, they can get the premium package with all of its extra features for $20 per month instead of the regular price of $30 per month. And they can have it at this price until they cancel or downgrade, after which they’d have to pay full price.
Or maybe they could enjoy the reduced price for the premium plan for the first 12 months — giving them a lengthy period to reap (and hopefully become attached to) the benefits and extra features. It’s a clever way to use discounts and a great method for sales reps to deploy with new customers.
Understand the Timing of Cash flows
Companies at any stage should consider offering discounts to their customers—but not without knowing their own profit margins. Discounts can kill a company’s cash flow if they are offered in silos, without taking into account sales commissions and data from the finance team. But how do you determine the ideal discount percentage? It’s a tricky question but thankfully one you can do a little math to answer.
In the graph below, there are three discount models:
25% off monthly payments
25% off upfront annual payment
First three months free
Both the 25% off monthly and three months free options result in the company facing a cash challenge if the commission is paid within the first 3–6 months, with the 25% off monthly option putting the company at greatest risk. As you can see, the best approach for the business is to offer 25% off up front.
Principle of Reciprocity
If you give the customer a discount, the customer should you give you some other commitment in return. That commitment should be something other than closing the deal. One commitment to consider is increasing the length of the contract. This is a win for both parties. The customer gets an attractive price on your offering. Your company locks in a few years of revenue, eliminating any chance for near-term churn.
Another commitment to consider is changing the payment terms. Pair a discount with paying the entire annual contract right now. Or tie discounts to quarterly payments. Once again, this enables you to lock in more revenue early. Even better, you get money in hand right away.
To be really effective, discounts require scarcity
Whether that scarcity is the amount of time the discount is available, the number of discount subscriptions available, etc. it needs to be there. If you don’t put some bookends on the offer, it looks like you’re just discounting your product for no reason (or, several reasons like your product sucks, you don’t value it, you’re desperate, you don’t know how to market your product, etc.).
Scarcity also gets people to take action; no scarcity, no sense of urgency to take the offer. It means you’ll have to actually figure out how to attract better customers, raise the value perception of your offering or, ideally both. If you really do have cash flow issues, then figure out how much you need and offer only that many annual subscriptions, then stop offering them.
Don’t broadcast discounts to the world
A lot of people are willing, and happy, to pay full price. A large banner across a website advertising discounts risks lost income from those people. The idea of a discount should be to make it easier to close a sale, but only as a last resort. Sales reps need to identify customers that require a discount to sign-up and offer them sparingly. Instant demos and online sales meetings are a great way to get to know prospects and understand their pain points and motivations in order to know when (and when not) to offer a discounted rate.
Ultimately, products should be priced to reflect true value and command sales without any deviation in price. However, when the moment is right and when prospects need a little nudge in the right direction, discounts used at the right time can be used effectively.
Percentages Are Hard for People to Understand
Let’s say you’re out getting your favorite coffee. There’s a special promotion, and you have a choice: You can either get 33% more coffee for the same price, or take 33% off the price. What would you do? A team of researchers at the University of Minnesota’s Carlson School of Management asked the same question to their students. The vast majority of them viewed both options as equal, even though the discount by far is the better proposition.
In other words, customers prefer getting something extra to getting something cheap. Retail businesses often see bonus deals valued more than discounts of the same value. For SaaS businesses, this is a great tactic to incorporate in sales proposals—offer the first or second month free instead of using percentages.
Enterprise and student discounting are the most commonly used demographic-specific discounting methods in SaaS and can be used without damaging the perceived value of a product. Given the factors involved, such as volume and package requirements, enterprise discounts should be issued on a case-by-case basis without prices being plastered across a website. Non-disclosure agreements (NDAs) can also be put in place to ensure deals remain confidential.
Conclusion
Discounting your products is a major business decision. It can attract the wrong customer and even cheapen the perception of your brand. However, in certain circumstances, offering discounts to enterprise customers can produce greater long-term benefits. So, be strategic with your SaaS pricing and discounting strategy and let us know your views in the comment section below.
