Ed Arnold has led product development at LeveragePoint, a SaaS solution for value-based pricing and sales, and at Forrester Research where he was VP of Products for CX  (Customer Experience) Analytics. He is a leading expert in value-based pricing and go-to-market strategies and how these energize the customer journey.

According to OpenView’s 2020 Expansion SaaS Benchmarking survey, the COVID-19 pandemic had only a minor impact on revenue growth (the median growth rate for 1H in 2020 was 43% compared to 48% versus 2019), “proving again that SaaS products are sticky and recession-proof.” If true, then all of us in the SaaS world are fortunate indeed.

But perhaps not all of us are so lucky. The recession has hit some industries especially hard, such as travel, hospitality, and certain retail segments. Some SaaS companies who sought a share of the wallet there definitely felt the impact of budget cutbacks and shutdowns. And I strongly suspect that many digital solutions from service providers (as contrasted with pure SaaS plays) suffered serious growth headwinds. Whether this was entirely caused by the pandemic may be open to debate.

Digital products that are part and parcel of an overall service provider solution are invariably B2B or B2B2C focused. Therefore their business models are different from pure B2C SaaS plays in multiple ways. For instance, they tend to be more complex and have bigger ticket offerings that involve multiple stakeholders (power users, casual users, and funders). They also depend on professional services (i.e., human hand-holding) for deployment, onboarding, support, and adoption.

Companies that seek LTV and SaaS valuation multiples but don’t have the requisite ARR growth need to diagnose the root cause. Possible causes might be:

• Buying Journey breakdown - Simply put, not enough deals are coming through the marketing & sales pipeline. The market may not be hearing the message or is indifferent to the value proposition. Or perhaps the sales process is not effective in advancing and closing new business.

• Limited Market Opportunity - There are not enough customers who can benefit from the solution or they feel they can easily do without or get by with inferior alternatives. Or worse, there are strong competitors already serving that market.

• Client Churn - The client tries and buys, but doesn’t stay. B2B clients are lost for a variety of reasons, such as poor delivery (client experience) and low digital adoption. The true Voice of the Customer is not being heard or appropriately acted upon. 

• Faulty Business Model - The underlying economic value formula of the business does not add up. There is a misalignment of the key pieces: price, cost to acquire clients, cost to keep clients, and digital product investment.

• Weak Digital Offering - Without regular and steady digital usage, the solution becomes less SaaS and more like an afterthought to a traditional consulting business - and a definite dead-end to ARR growth. They lack a compelling product vision and roadmap.