Written by Catherine Pearson Content Writer
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12 May 2019  |  Guide

Moving Downstream: When Does It Make Sense to Expand Your Market?

5 minute read

There’s a lot of information and guidance out there on when it’s right to move upstream and how to take the leap, but what about the other way around? If you’re looking to expand your market, it’s a great idea to look into the benefits of moving downstream. We look at why making the move could significantly improve your long-term revenue.

If you’re looking to make more money from your product, it may be time to consider selling to different segments. Expanding your market can be a valuable way to introduce your product to a different type of buyer and get your brand name out there even more. This is not to necessarily say you should make the seismic shift from B2B to B2C selling, or vice versa. Rather, it’s about looking at where else customers can benefit from your product or service and moving up or downstream accordingly.

The SaaS Industry Scale

The scale above is a useful, at-a-glance view of where businesses are positioned based on buyer type, billing method and business model. It’s possible to move downstream from any point on this scale, too, so if you’re currently selling to prosumers, you may want to consider how your product can benefit home consumers. If you’re an enterprise business, maybe there are small and medium-sized businesses that have an appetite for your service, too?

Are you confused too?

Downstream vs. Downmarket

‘Moving downstream’ means selling to smaller companies, prosumers (professional consumers) and individuals.

In the real world, people can go ‘downmarket’ when buying, opting for a lower quality product to save money. In the SaaS world, it’s less about creating a budget option and more about offering a product to solve individual challenges. It’s important to keep brand value while moving downstream, honing down what you offer as opposed to cheapening the product itself.

When to Make the Move

Moving downstream can have numerous benefits, but your business needs to be in a good position to expand its market before rolling out a version of your product for smaller businesses. This means understanding how people use your product within your current set-up. What is your value metric? Where has feedback indicated areas of expansion and/or improvement?

Once you understand what elements of your product make it truly unique - and the elements required by smaller potential customers that you’ve had to turn away - you’re on track to understanding how best to sell your product downstream. The move towards selling downstream is usually a natural progression for a company that understands its value inside and out and knows, much like we learned at SaaStr 2019, that clunky user interfaces don’t cut the mustard with any customer, be they enterprise or prosumer. It needs to be an authentic shift rooted in understanding your product.

The Benefits of Moving Downstream

From financial to logistical, the rewards of selling downstream are there for the reaping. Let’s take a look at what can be achieved by selling to smaller businesses and individual customers and some of the companies who’ve seen success by expanding their market.

You don’t have to change your subscription billing initially

Expanding to new segments means access to more customers, but this doesn’t have to mean uprooting your billing set-up to accommodate these new users. Unless you’re crossing the B2B/B2C line, you can still reach a different audience and bill them the same.

Personalization software Qubit is a great example of a SaaS company which has expanded into a different market without having to change the way it bills its new customers. Originally offering their platform Qubit Pro to larger companies on the right end of our scale, they realized the enterprise market was saturated and launched Qubit Grow, a ‘lite’ version of the Pro tool targeted towards to small and medium-sized businesses (or ‘SMBs’). With Qubit Grow, Qubit has reached a new audience while still billing by invoice via its sales team, meaning it didn’t need to undergo a huge shake-up in the way transactions are processed to reach this new market.

Your product is accessible to a wider audience

If your customers are loving your product, it’s likely a version of it would benefit businesses and individuals downstream, too. With your product available to a wider consumer base, your revenue will be on the up while your brand is getting a good dose of recognition across multiple markets.

Social listening platform Pulsar found that the brands it supported, often with a large in-house team, were using its complex tool for relatively basic social media analysis. This led the company creating a tool called TRENDS, a platform that could be sold further downstream to individuals and small business just wanting insight into social media trends in much the same way Google Trends offers insight into online searches. With fewer tools came quicker onboarding and, therefore, lower prices to appeal to a whole new audience.

You can make money when you sleep

That may make it sound a little easier that it is, but if you understand the value your product brings, why shouldn’t you widen its reach and increase your profits?

TalkWalker, another social listening marketing platform, decided to capture a market share further downstream by offering a ‘freemium forever’ version of its software after it had gone to market. By making its product available in this way to smaller businesses, TalkWalker were able to educate free users at a higher level of the funnel and encourage conversion from a whole new market.

You have a new product you can build upon

If you’ve made a version of your product available for customers further downstream, you essentially have a new base upon which to build in a whole new market.

Email delivery service Mailjet offers responsive email templates with the freedom for users to customize as they go. As most responsive templates are fixed and uneditable, Mailjet saw the opportunity to create a way to help its customers code their own email for free. Mjml, their unique email coding language, is perfectly positioned to not only assist Mailjet’s current customers but also to offer individual developers value by giving them the means of customization. The result? Free users now speak Mailjet’s unique language and are therefore likely to use its software over the competition as their businesses scale, or recommend Mailjet when they move to a new company.

We Can Help!

Paddle helps businesses unlock their potential by giving them the freedom to evolve and scale. Drawing on our experience and data from helping over 1000 software businesses grow, we are uniquely positioned to support your movement into new markets. Try our demo today to find out how we can help you.

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