Land and Expand Part II: How do you do different products within the same company?
Primary products are what build a software company’s reputation and are commonly its largest source of revenue. So if a SaaS company has a golden goose, why does it decide to spend money on offering new products? For most firms, it comes down to realizing that its customers are willing to spend money to solve a tangential or different problem.
This new product often falls into the category of a particular “functional vertical”, software that services a specific need or department very well within a company, allowing SaaS businesses to capitalize on additional demands and become a one-stop-shop for their customers.
There are two main ways of introducing new products to existing customers, through acquisition or internal development.
Salesforce, a firm we refer to a lot here at Causal Engines, has done an incredible job of integrating vertically through acquisition, represented by its 64 acquisitions to date. In 2012, ExactTarget, a seller of marketing software with Nike, Coca-Cola, and Gap as customers, bought Pardot, the fastest growing marketing automation and lead generation firm for Salesforce’s clients. Approximately 8 months later, Salesforce acquired ExactTarget and took control of Pardot. As billions of marketing dollars shifted from print to digital media, Mark Benioff recognized the opportunity to reach new customers and increase his client’s budgets with a different, pre-established product.
Salesforce did not stop there. More recently, it bought Tableau and Mulesoft, providers of data analytics and integration software, which not only both offer Salesforce new and growing products but also have many customers unfamiliar with the cloud and with legacy data, granting Salesforce access to new types of clients. This focus on integration through acquisition jumpstarted Salesforce’s entrance into adjacent markets without the burden of building in-house.
ServiceNow, on the other hand, decided to build its own full-service business. It felt that it had the internal talent and transparency with customers to create needed products from the ground-up. By doing so, it launched another marketplace under its own brand with products that it had complete control over. This allowed ServiceNow to upsell its IT service management software with employee and customer management tools.
There is no right or wrong. When deciding how to offer multiple products, ask yourself: what is my core focus? Have I gone as far as I can go? What else do my customers need? Who else competes in this space? Can I build a significantly better product in-house? What is my opportunity cost?
If there is significant demand to become a one-stop-shop, being a first mover is very advantageous. Holistically understand your customers’ current needs and future needs, and act accordingly.
This article was a collaboration between Archit Bhise and Sebastian Duluc.