Vertical SaaS (Software as a Service) model has become increasingly popular among startups and established businesses. This model involves developing industry-specific solutions to cater to niche markets. This approach has several advantages over the traditional horizontal SaaS model. The following are some of the most compelling reasons why you should consider running a business in the vertical SaaS model.
Firstly, a vertical SaaS model offers you some of the best conversion rates in the industry. Vertical SaaS companies typically target narrow, niche markets. As such, they develop solutions that cater to the specific needs of those markets. This approach results in higher conversion rates because the solutions are tailored to the customers’ requirements. With the help of SaaS subscription management platforms, businesses can streamline their monthly billings and revenue collection which enhances customer experience, resulting in more retention.
Another advantage of the Vertical SaaS model is low customer acquisition cost (CAC). According to recent surveys, vertical SaaS companies spend around 22% less on sales and marketing than their horizontal counterparts. This is because they target a specific customer base and have a more focused marketing strategy. As a result, the CAC for vertical SaaS companies is lower than for horizontal SaaS businesses.
Because vertical SaaS companies focus on a specific industry or market, they face lower competition than horizontal SaaS businesses. This makes it much easier for startups to enter the market and establish leadership in a specific industry.
And finally, they have high growth potential. Because vertical SaaS companies offer customized solutions, they have a competitive advantage over horizontal SaaS businesses. Additionally, vertical SaaS businesses also have better odds of upselling their customers, which further drives revenue growth. This again can be executed effectively by using subscription and billing software available in the market today.