Enterprise SaaS is a specialized tier of cloud-based software solutions designed explicitly for large organizations. Unlike standard SaaS offerings, enterprise-focused packages come equipped with an array of advanced functionalities engineered to meet the intricate and large-scale demands typical of enterprise operations.
So how do you move up the ladder to target these types of customers, and is it really worth the hassle?
This comprehensive guide will explain what Enterprise SaaS is and the opportunity it presents to software entrepreneurs. You’ll gain insights into why this market segment is crucial, how to adapt your business model and product for this audience, and what best practices to follow in your sales and marketing strategies.
Why Should SaaS Companies Target Enterprise Businesses
Many SaaS companies adopt the longtail targeting strategy because SMB buying cycles are shorter, with low friction conversions and lower customer acquisition costs. It’s an easy win. Admittedly, most of us love quick wins.
Also, there are a lot more SMBs than there are enterprise firms. So from a top-level view, it would make sense to pay attention to SMB customers.
There’s an obvious catch.
Research shows that 22% of small businesses fail in the first year, 32% in the first two years, and 50% within five years. To put it into perspective, if you focus on SMB businesses alone, chances are you’ll be losing almost a third of your customers every two years.
That puts you under constant pressure to generate new customers to continue growing.
Enterprise companies, on the other hand, boast higher survival rates. And, despite offering a smaller pool, they promise higher average revenue due to the number of seats. That means a significantly higher customer lifetime value.
Key Considerations for the Enterprise SaaS Business Model
Enterprise SaaS is massive, dominating the forecasted $702 billion growth of the cloud app market. But before you think about taking a slice of that pie, there are a few things you need to consider.
1. Platform Expectations
Enterprise SaaS is a software solution that gives enterprise-level businesses a robust package with lots of customization options to meet their insanely high demands.
Let’s use Slack as an example.
Slack is a popular messaging app that has revolutionized the modern workspace. But like most SaaS brands, Slack understands that enterprise businesses have unique needs.
For instance, they have higher security, collaboration, and customization expectations. As a result, they provide unique features to enterprise businesses.
Among others, they provide large-scale collaboration, higher security and compliance, custom terms of service, and so on. You can see how they differentiate this service by looking at the price comparisons.
It’s not just about the needs, though.
Enterprise businesses cannot afford bad publicity. Can you imagine the headlines (and repercussions) if Microsoft was on the news because they used software that resulted in a massive data breach?
That’s why enterprise businesses have such high software security and privacy requirements. You’ll need to keep this at the top of your mind if you want to secure enterprise clientele. That brings us to the next question.
2. Customer Service Experience
Enterprise businesses don’t just pay premium prices for your product. They pay for a seamless experience.
You need to provide a superior customer experience. That’s why SaaS brands like Zapier use dedicated support and enhanced security to differentiate enterprise products from lower-tiered plans.
You have to make peace with the demands of enterprise customers too. You’ll have to invest in account managers and significant product improvements to retain these customers.
3. Effective Marketing Channels
Enterprise buying cycles are long (six or more months) and complex, involving costly investments, higher risks, and many stakeholders.
You’re not only persuading them that your product is the solution they need; you must also convince them that your SaaS brand is the right fit for their business. That requires relationship building.
The most effective marketing channels for building relationships are events like SaaS conferences and ABM.
Content marketing does work, too. But thought-leadership SaaS content marketing is more effective than top-of-the-funnel definition terms.
A 2020 report by Endelman discovered that 88% of decision-makers found thought leadership to be an effective approach for enhancing a company’s perception.
Unfortunately, the same survey discovered only 17% of the thought leadership content they read was good or excellent. There’s clearly an issue here.
Take Writer as an example.
The company launched an effective enterprise SaaS SEO strategy to establish thought leadership in its niche. They did this by investing in generative AI guides.
The content they are producing helps decision-makers understand how companies are investing in AI for content marketing. It’s produced to educate prospects about the market, not generate an instant conversion.
4. Enterprise SaaS Churn Rate
Enterprise customers tend to have lower churn rates than SMBs.
The graph below shows the churn rate declining as the account value increases.
Higher prices, lengthy contracts (enterprise firms tend to opt for annual subscriptions), and increased friction from switching products result in higher retention.
But this doesn’t mean you should take it easy. When annual-based subscribers churn, the