B2B> B2C - Deepstash

B2B> B2C

B2C SaaS is limited to Individuals plans. The ability to offer Team plans is a major advantage of B2B SaaS. 

  • With only ~50% per year retention, these B2C SaaS businesses are effectively an arbitrage on marketing CAC (customer acquisition cost). There’s no long-term business. 
  • Netflix and Peloton are the exception as they have unique retention strategies.
  • Individual plans are a good business only when retention is unusually high (e.g. churn under 2% per month)

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Teams > Individuals in SaaS businesses

SaaS companies make disproportionately more money with Team plans:

  1. Deal Sizes are bigger
  2. Retention is so much better. Once a team is collaborating in a product, no single user can easily make the decision to leave
  3. Seat Expansion. Successful Team products have “net negative churn,” meaning that expansion from retained accounts exceeds revenue lost from churned accounts.

Individual plans are the definition of a Leaky Bucket, with usual yearly churn rates of 50%. The Individual plan makes sense for enabling sharing and collaboration as soon as you can. But Teams are the ultimate destination.

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CARR

Total contracted annual recurring revenue is the single best metric for the health of a business. It encapsulates new logo growth, expansion, and churn in a single number. Shows the money that comes in every year for the life of a subscription (or contract).

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Usage-Based Pricing

Usage-based pricing is a go-to-market model where the customer pays based on how much they use your product or service. 

It goes by many names: consumption-based pricing, pay-per-use pricing, and pay-as-you-go pricing.

The simplest examples of these are utility bills like water and electricity.

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Land and Expand

In sales, “Land and Expand” is a strategy to land a customer with a small deal, and then sell into the organization to expand your footprint to more seats, additional departments or more products and services.

Land and expand plays out like this in a SaaS:

  1. An individual user signs up for a free trial
  2. Then converts to a paid user
  3. Then you get as many other users in that company as you can
  4. Finally, you convince key decision makers to adopt your product across the organization 

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