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A meta-problem for many startups: selling to SMBs at scale at a reasonable cost. Lots of small businesses can unlock significant value with better software, an

by ef4 11y ago

A meta-problem for many startups: selling to SMBs at scale at a reasonable cost. Lots of small businesses can unlock significant value with better software, and could be convinced to pay for it. But the upfront cost of acquiring those customers is too high to make it worthwhile. If you could offer a highly-curated marketplace, you could spend the customer acquisition cost once and sell to them over and over again, so they're buying all their IT through you, trusting you to vet the products and get over their risk-aversion. You could sell bundled solutions that are guaranteed to interoperate out of the box, lowering per-transaction integration costs.

akshatpradhan 11y ago
It sounds like a Health Exchange, but for SMB. While the Health Exchange isn't curated, it functions as a marketplace. I'm curious how curation would work.
nickfromseattle 11y ago
Appdirect.com is working on something similar. From my experience with cloud marketplaces there is still a high cost to support onboarding unsophisticated SMBs post-sale - this includes initial setup / integration, migrating from legacy platforms, end-user training, etc. SMBs are price sensitive, so charging what it costs you to deliver this will decrease adoption and subsidizing this cost can take too long to recoup. A good example of this is Office 365. Let's say your profit margins are $2/user/month and you spend 3 hours onboarding a new 10 seat customer at a cost to you of $1/minute on the phone. It will take you 9 months to recoup your onboarding cost ($180 in cost / $20/profit/month). Self service adoption can be possible depending on the product if there is no need for integration or legacy data migration, however products that require these activities see a high rate of drop off in the self-service channel because SMBs often times aren't sophisticated enough to solve these challenges themselves, don't use the service and churn out after a couple of months. Additionally, if the customer has a poor onboarding experience with the first product they've purchased you lose their trust and it makes it very hard to cross sell and upsell other services.

by ef4 11y ago

akshatpradhan 11y ago

It sounds like a Health Exchange, but for SMB. While the Health Exchange isn't curated, it functions as a marketplace. I'm curious how curation would work.

nickfromseattle 11y ago

Appdirect.com is working on something similar. From my experience with cloud marketplaces there is still a high cost to support onboarding unsophisticated SMBs post-sale - this includes initial setup / integration, migrating from legacy platforms, end-user training, etc. SMBs are price sensitive, so charging what it costs you to deliver this will decrease adoption and subsidizing this cost can take too long to recoup. A good example of this is Office 365. Let's say your profit margins are $2/user/month and you spend 3 hours onboarding a new 10 seat customer at a cost to you of $1/minute on the phone. It will take you 9 months to recoup your onboarding cost ($180 in cost / $20/profit/month). Self service adoption can be possible depending on the product if there is no need for integration or legacy data migration, however products that require these activities see a high rate of drop off in the self-service channel because SMBs often times aren't sophisticated enough to solve these challenges themselves, don't use the service and churn out after a couple of months. Additionally, if the customer has a poor onboarding experience with the first product they've purchased you lose their trust and it makes it very hard to cross sell and upsell other services.