It is vital for businesses, particularly those who wish to live through the current COVID-19 crisis, to cut their expenditures associated with SaaS. A rising number of sectors are closing their doors, significantly impacting the eCommerce industry.
Most of these businesses may see a decline in profitability, mainly because many eCommerce sellers are now more concerned with meeting their basic needs than investing in more innovative services.
Even though most sectors have seen a decline in organic traffic and conversions, hope is on the horizon. As a result of the elimination of the danger in China, an increasing number of consumers there are now opting to do their shopping and even their food shopping online. After the lockdown, this tendency may hit Europe and the US.
Despite this, there is still a significant distance before the market begins to catch up. During this period of economic uncertainty, you must be capable of reducing the expenses associated with your SaaS company.
The expansion of membership e-commerce and the decline of B2B SaaS firms for the first time after their phenomenal growth during COVID-19 are two worrying trends that portend difficulty for SaaS companies in the future.
The United States sees a rise in interest rates, Europe is experiencing a problem related to the cost of living, and investor appetite is decreasing globally. In a nutshell, it seems like there will soon be a recession on a worldwide scale. In the following months, we may anticipate rising worries and decreasing expenditure, with repercussions across all industries, especially software, for more information on SaaS vendor management, click here.
Businesses in a downturn may find no lack of essential pieces of advice, but founders would be better off using a handbrake. Experts researched more than 23,000 subscriptions and software-as-a-service (SaaS) firms since they have experience in the software industry, which is estimated to reach $692 billion in worldwide sales by 2025. In addition, researchers felt it was important to provide concrete guidance that software company proprietors may follow to better prepare for the impending economic slowdown.
These tendencies should raise red flags for SaaS providers entering the market. They may improve their chances of surviving the current crisis and emerging from it in better shape than their rivals if they move now to fortify their core competencies.
Let’s begin with the market for consumer-oriented software.
Since consumers’ preferences change more rapidly than corporations’, software firms whose revenue model is based on serving individual consumers, such as subscription e-commerce platforms, are more likely to adapt quickly to market shifts. Because of this, they are an effective leading indication of forthcoming market developments. Since the first of 2019, this graph presents a breakdown of the expansion of e-commerce businesses based on the monthly recurring income that has been recorded.
As can be seen, the market had tremendous growth despite the epidemic and with the assistance of economic stimulus payments, sometimes known as “shimmies.” Because of this, the demand increased at a rate similar to typical growth times ten.
But as of right now, all of that is shifting. As COVID continues to decline, customers are moving away from subscription items that are pleasant to have but are not vital to their lives. A consumer debt bubble is developing due to people’s attempts to keep living a “stimmy” lifestyle despite the diminishing availability of economic stimulus packages.
Seven Straightforward Methods Can Reduce the Cost of Your eCommerce SaaS Solution.
At best, consumer software businesses may expect flat growth rates and a “pancaking” of monthly income.
At worst, there will be a contraction due to sales being countered by rising churn rates. Despite stable revenue, attrition rates are rising, with 22% more consumers leaving subscription boxes, 16% more leaving subscribe and save, and 11% more going consumer SaaS than a year ago.
1. Make adjustments to your pricing model.
During times of economic turmoil, software owners are faced with the difficult choice of whether or not to lower their rates. Do not act in this manner, regardless of your rivals. If you reduce your pricing, you will see a reduction in your margins and cash flow. If you lower pricing for your clients, they desire a price drop.
Price cuts signal your company is having financial difficulties. Once a price has been cut, it is difficult to bring it back to its previous level. Customers are unlikely to shell out more for a resource that has been reduced.
Even if lowering prices is never a win-win situation, you may encourage repeat business and attract new consumers by providing them with special offers. You can negotiate payment arrangements with them and take advantage of pre-payment savings. You have a few months to make adjustments to your pricing strategy before you are required to update the introductory price.
2. Reduce Infrastructure Costs
One more intelligent thing you can do to decrease SaaS costs is to concentrate on infrastructure expenditures. If you host your website on the cloud, you may cut your expenses by a significant amount. Because with cloud computing, you won’t have to worry about purchasing and maintaining costly servers on your premises. Your data will be kept in the cloud, where it will always be accessible to you, and it will be possible to save it there.
In addition, your cloud service provider will manage your hosting and assist with disaster recovery. If you’re in the cloud but pay too much for hosting, 2020 may be an excellent opportunity to switch to a cheaper provider, at least until business normalizes.
3. Examine the Fees to Be Paid for Particular Instruments
In a time of need, not all of the tools at your disposal will be useful. You could use a specific analytics tool for which you spend significant money. Still, for the time being, you can substitute it all with Google Analytics or one of the numerous other available programs without charge. There is no use in using specific pricey onboarding or loyalty solutions if the quantity of consumers you have steadily declines since they will not benefit you. Tools might be put on hold or switched out for cheaper alternatives while the situation is resolved.
4. Reduce the costs of your office space.
If some or all of your staff members can work from home, you may be able to find more cost-effective office space elsewhere. You’ll save money on rent even after the lockdown ends, and you may rotate employees between working from home and coming to the office.
If your team is productive while working from home, you may want to consider moving all of your employees to remote positions and just keeping 10% of them in a quaint office space. Due to the high cost of office space, you will realize significant expense reductions in the long term due to this decision.
5. Reduce the Money Spent on Advertising
The cost of advertising continues to rise. To maximize your savings, you need to know how to maximize your savings. Employing a PPC specialist in-house is considerably more cost-effective. In addition, you may begin using search engine optimization and email marketing to increase the number of leads.
6. Cut down on the costs of your eCommerce integration.
Spending considerable time and money to get your SaaS solution working with online storefronts is a significant undertaking. Doing the integration in-house may save you money, but it will likely take months of hard labor and thousands of dollars. The integration development costs, the subscription costs, the server hardware prices, the maintenance charges, and the staff training and development costs are all part of the conversation here.
7. Diamonds are produced under pressure.
There is a good reason why people believe that the most successful businesses were founded during economic downturns. If you use the tips above to optimize your company, you’ll offer yourself the most excellent chance of thriving and position yourself to take the lead in the industry in the coming years.
The Walt Disney Company was established amid the Great Depression and is considered the
worst economic downturn the United States has ever seen. HubSpot and Salesforce, two modern software companies, are excellent case studies. During the epidemic, they placed a primary emphasis on the community, the experience of their customers, and delivering additional value without increasing prices.
What is the overarching philosophy behind such businesses? “The winner will determine who has the most users at the end.” It should be the guiding principle for all SaaS organizations preparing for the impending economic downturn. Utilizing a service provided by a third party will allow you to significantly cut down on the expenses associated with integrating your eCommerce platform, which is excellent news.
First, ensure that you can keep alive, and then shift your attention to building wealth throughout a lifetime. In preparation for the anticipated economic downturn, you should strengthen the basics of your business to decrease customer turnover, boost or maintain a stable income, and keep your head above water.