SaaS Oligopoly and How to Plan Your Game

Most of us are now aware of the oligopolistic trends in the software business. The cloud industry for instance is now almost entirely under the mercy of the ‘Big Cloud’ companies like Amazon, Microsoft, Google, and Alibaba. Any small company that tries to enter this competition just fails or gets acquired by the big ones, making the cloud business highly oligopolistic.

Thankfully for non-cloud SaaS businesses, there is still some wiggle room for new products although the competition can be quite harsh. In this blog, we tried to look at some of the factors that define the battle readiness of a SaaS company vying for a top-tier position.

Understanding Your SaaS Segment

Based on users and product type there are a hundred different ways to categorize the specific SaaS business segment you might be in. The important thing is to understand who your ‘real’ competitors are.

For example, if you’re business is offering a subscription-based photo-editing tool and you want to identify the strategies that would effectively pull more customers currently using your competitor products, then ideally you want to look around for companies that offer photo-editing software or editing software as their primary product/source of revenue. The last thing you want to do is go up against a big camera maker that also offers photo editing software as an add-on. Not only would it be difficult for you to compete with them in terms of scale, but offering the same product features without losing profit would be incredibly difficult.

Hence, the smart thing to do is to understand exactly where your current business is positioned and who are the major players in that category. This helps you keep the competition real and your goals achievable.

The Pricing Power

Getting a good grip on your pricing strategy is the key to getting to the top of any business. Whether you price low in the beginning and then up the ante as demand grows for your product, or you decide to play the high card and maintain profitability from the beginning by marketing your USPs; at the end of the day, all that matters is that the customers ‘stay’ irrespective of price fluctuations. If you’re able to do a 10-15% price hike without losing more than 5% of your customers, then it’s safe to say that you’re on your way to the top.
Make sure your SaaS business runs on effective pricing strategies that are based on real-time demand for your products as well as market research. Offering loyalty points, discounts and offers, customer service support, etc also go a long way in ensuring that users show loyalty and don’t mind spending a little more to continue enjoying your services.

Economies of Scale

If you’re really serious about entering the big leagues then spare some thoughts on scaling your business – we mean serious investments. This is important especially if you don’t want to get swallowed by the big fishes. 
 If you look at the larger SaaS players, they remain competitive by acquiring more businesses. In 2021 alone, there were more than 82 SaaS acquisitions averaging $4.2billion at the very least. M&As give them more advantages of scale on top of what they already have. It would be impossible to compete with them and win without expanding your infrastructure and resources and bringing your business to maximum profitability before moving on to smart acquisitions yourself.

Niche Differentiation

Once you become confident about your pricing and your scalability, the next step is to identify unique problems faced by customers in your segment and offer specific solutions as product differentiators. 

You can do this even before scaling your business or setting up the right price. But chances are that your solutions can make your product rather expensive without proper resources or infrastructure support. And for this to work, you must not digress too much from the most optimal pricing for your user segment.  

Enhance Customer Experience

This is one point that doesn’t get said enough where it really matters. Although businesses all over the world are invested in improving user experiences across all touchpoints, most of them are yet to tap into the full potential of great customer experience. Enhancing CX will reflect in your market position which when leveraged properly can increase your brand loyalty points. Nothing spells market leader as well as a Large Market Share. 

Offering a better customer experience is not about offering a lot of services. You can keep your services limited but the quality top-notch – your customer base would come to you. Plus, with limited options, it is easy for them to decide on any subscription plan you might have to offer. 

Conclusion

As in the case of any oligopolistic market, competition can become ruthless in the SaaS industry as well. Many people find SaaS oligopoly quite toxic and believe that it squanders innovation. Be that as it may, getting stuck at the bottom of such an industry leaves you vulnerable to failure in the long run. 

The best way forward is to come out of the rut and try to compete for a position in the top 3 tiers. That way you can always keep your competition healthy and your expectations realistic, while successfully craving a space for yourself among the big players.

In SaaS businesses, subscriptions play an important role in ensuring your success. They are a great way to ensure that you are constantly in touch with your customer’s requirements and offer them what they need. So whatever your SaaS business might be, subscription management platforms, like saaslogic, that help you manage your recurring billing and invoicing along with offer insightful data on usages, trends and pricing can help you establish a long-lasting relationship with your customers.