One of the primary rationales or selling the full SMB marketing and technology stack is that sellers who only go to market with a single product are vulnerable to churn. So for defensive reasons, it’s important to be in a position to be that single source provider to the small business customer.
Offensively, the full stack is also a great opportunity to solve a small-business pain point (confusion) and gain share of wallet. Small businesses have in fact expressed a need for solutions that ties together mission critical apps in a single platform with a single price. The Tech Adoption Index shows that at least half of SMBs prefer this route to shopping for individual point solutions.
Just offering the full stack alone doesn’t ensure success. There are many ways to fail with a full stack approach. But one clear key to success it to offer a layer of integration and intelligence that makes the full stack a productivity enhancer for the SMB.
“To say, ‘Here is one central login for eight apps’ is not good enough,” said Jackie Cook, Vendasta’s chief strategy officer at the company’s April Vendastacon event in Alberta, Canada.
“They want to see in the palm of their hand what is happening around their business. Through unified notifications, unified reports, unified tasks — all in one central place to see what is going on.”
It’s also widely noted that many companies that offer the full stack have few if any customers that buy 100% of the solutions in a particular suite. For example, speaking at the LSA ‘18 conference in Chicago, Zoho President Raj Sabhlok noted that the typical Zoho One client uses about four of the suite’s 40 plus apps. So in rough terms, Zoho users are tapping into about 10% of the suite’s capabilities.
Some see this as an indictment of the all in one model, and Raj would probably be the first to admit he’d like to grow Zoho One’s apps per user metric well beyond four. However, using this point to argue that the full stack model doesn’t work misses the point.
“We know more apps doesn’t equal more value. You don’t want to be an ‘app slinger’,” Cook said. “Can we solve more of their problems? You don’t need to sell them everything but you need to be able to serve them as their needs change.”
Vendasta has found a very direct connection between products per user and churn. Even if a client only uses a fraction of the apps in a platform, as long as they are using more than one (and preferably several) the ability to retain that customer skyrockets. Similar to Zoho, Vendasta has launched an SMB app marketplace of its own, and has integrated more than 30 apps to date.
Vendasta quantified this through a churn study it conducted using performance data in its own platform. The survey tapped into more than 100,000 small business records. It limited the study to businesses with at least two year’s tenure with Vendasta, and only those businesses that made a purchase (vs. freemium).
The figure below is from Vendasta’s recent churn study, which draws a clear connection between the number of apps an SMB purchases form a platform and the monthly retention rate.
“There is a far greater switching cost even by adding one more product,” Cook said. “Upsell and increase basket size [the number of products an SMB purchases from you]. Not only does it extend the life of your customer, it also helps capture their share of wallet for the lifetime of that customer.”
This blog post is an excerpt from an upcoming LSA White Paper, “The Full-Stack, Tech-First Future” commissioned by Vendasta. The report will be available in June.