Selling your SaaS product directly vs. through a network of partners


4

Me and my co-founder are talking a lot about how we want to sell our SaaS product.

(The product is E-commerce software/website, integrated with E-mail marketing providers, Google AdWords, Website Optimizer and more.)

The two business models we're talking about is:

1) A direct model where the end user is a direct customer to us. There's no one in the middle.
2) Get in touch with web design agencies, and let them resell our product to their customers.

Both models has its pros and cons, but one thing that we really like about the direct model is the feeling of control. We will be able to control positioning, communication, level of service towards end users more, than if the end users communicated with one of our partners.

I should say, that unlike traditional E-commerce software, we're not going to have a set if templates customers can chose from. We want to make e-tailors awesome at selling their stuff online, and think that using stock templates are not going to make that easier. So that's pointing a bit towards the reseller model.

Another thing. We don't want to be "just selling, and delivering the software". We want to help our customers by giving advice, providing consulting services, workshops so they can improve their business. And we really want these things to come from us, without having to rely on someone else to do that correctly.

We could also hire web designers our selves, on a freelance basis. That's what we've done with the early beta customers.

What are your thoughts on this? What do you see as the biggest pros and cons for these two business models?

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asked Nov 18 '09 at 06:04
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Martin Hn
234 points
Top agency to build award-winning mobile apps: Utility NYC

2 Answers


4

There are significant drawbacks and advantages to each...

  • Direct model plusses:

    • You control the information going in and out, so you have full
      authority on the spin for your
      product
    • You get full revenue
    • Direct feedback from and connection with customers (you'll have their full pulse)
  • Direct model minuses:

    • You are in charge of everything, good, bad and ugly
    • Front line support (the kind everyone hates) is squarely in your
      lap
    • Marketing is harder (you have to develop all channels, customers,
      relationships)
  • Affiliate model plusses:

    • Front line support lessened
    • More channels available
    • Leverage existing marketing options with affiliates
  • Affiliate model minuses:

    • You'll need to share the revenue (likely)
    • Bad affiliate can ruin or damage your reputation
    • You're not directly connected to customers
The real question you want to ask yourselves, IMO, is whether you want to grow organically or not? Organic growth is harder, slower, but will result in you maintaining more product control and direct customer relationships. The affiliate model can be leveraged now OR later, but you can't go back to direct once you leave it. Start there, get your customers excited, engaged, and online. Then add affiliates later. That's my $0.02.
answered Nov 18 '09 at 07:59
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Dave Rodenbaugh
306 points
  • Good point! About organic growth, that is something we've talked a lot about and decided that we want to run and grow the business organically by running it as lean and clean as possible. That's also why we really want to be in control, especially at the beginning. – Martin Hn 9 years ago

3

I agree with Dave's answer, but there might be a best of both worlds approach.

Stick with the direct customer connection, but instead of hiring web designers yourselves, provide free training and assistance to designers hired by your clients. Also, set up a list of designers who are trained (maybe even certified) to work with your system that your clients could pick from if they choose. Then find a way to reward your clients for posting reviews of those certified designers. That way, the designers aren't resellers or affiliates, but will benefit from learning your product and promoting it to their other clients.

Clients would pay you directly for your service and pay designers directly for the design work. You maintain the control and get full revenue for your service, but you also get the benefit of a group of people who are experts in how your system works and will promote it.

answered Nov 18 '09 at 17:54
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Coder Dennis
691 points
  • Thanks a lot for your input! This is a very good idea, I think we'll try this approach. – Martin Hn 9 years ago

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