Realize the Potential of Your Cloud BusinessThrive on the Disruption
Some thrive on the disruption, while others strive to survive it.
Businesses selling both on-premise and cloud-based solutions concurrently, are coming to realize that these value propositions require wholly different approaches from both marketing and sales to ensure overall business success.
Companies with both on-premise and cloud offerings are finding that their cloud business is disrupting their existing business model. Cloud business growth is strong but annual revenues per unit are often 50-80% lower than with on-premise products and breakeven can take up to 18 months.
Cloud businesses disrupt existing businesses for three reasons:
- Companies that sell on-premise products typically get 50-75% of lifetime value from those products and services in the first year of customer ownership. In contrast, cloud businesses only get 10-25% of lifetime value in the first year.
- Because cloud products run on the vendor’s hardware, they require ongoing investments as the sales increase. This creates additional complexity for the CFO and finance organization.
- The primary goal of most on-premise product marketing and sales organizations is to sell the product once to each customer. In contrast, cloud organizations operate on a subscription model, requiring a wholly new approach for customer engagement and retention. Consequently, retraining the marketing and sales channels disrupts existing processes.
Often companies with both an existing on-premise business and a startup cloud business don’t do what is necessary to make their cloud business a success over the long term. They see the rapid growth of the cloud business and try to keep it from cutting into their initially more profitable on-premise business.
Launching a successful cloud business requires recognizing and managing the differences between the two business models and either actively positioning them for different market segments so they don’t compete, or managing the transition from one business model to the other. Trying to keep one business from disrupting the other has been shown not to work.
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How Boston CMO Can Help:
We at Boston CMO help you develop and implement a plan with the right marketing program and metrics to get your cloud business flying right. In a company with a dominant on-premise product line, we help you think through and develop the necessary strategies to ensure success with both your newer cloud business and your existing model. Specifically, we help you:
- Optimize the value proposition, positioning, and packaging. Cloud products need to be simpler to use than their on-premise counterparts to encourage user adoption. User adoption is especially critical to the SaaS business model because customers who aren’t happy can leave at any time.
- Determine the right metrics and set achievable goals. Different metrics and marketing KPIs are needed for cloud success. Customer acquisition cost, lifetime value, and customer churn are three key metrics for managing cloud solutions. In contrast, with on-premise products sales, growth, revenue, and margin are the KPIs companies commonly use. Unfortunately, many new cloud businesses are gauged by existing and incorrect metrics, and as a result are not being properly measured or managed effectively.
- Market and sell for lifetime value. Unlike on-premise products where the marketing job is largely finished when the product is sold, with cloud products the engagement must continue to ensure your customers remain loyal. Your key to success is sharing enhanced knowledge and best practices, while continuously increasing product functionality through cross-sell/up-sell.
- Manage the transition. The transition to cloud-based products and services requires a clear plan, as well as involvement and support from key groups, such as finance, sales and IT. We’ll set you on the path to succeed and support you through an essential transformation for both your marketing organization and your company.
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