Three years ago, we invited our longtime friend of Bowery and the CEO of Zuora, Tien Tzuo, to discuss his “Three Rooms” concept on the Bowery Capital Podcast. This past October we featured a review of his new book, Subscribed, which we highly recommend to any founder. One concept he discusses in the book that we thought we’d take a more in depth look at is the 4P’s. As Tien jokes, one of the first things you learn in any marketing class are Product, Price, Promotion, & Place, but, the terms were actually popularized in the 1950s by Harvard Professor Neil Borden. It goes without saying that a lot has happened between then and now, so here’s our thoughts on what the 4 P’s mean for SaaS and how they can help you:
1. Product. The basic idea, which has stood the test of time, is make something that people want. The update has come in the way the product or service exists with the shift towards SaaS-driven models. But, whether it’s widgets or Salesforce, the goal is still to build a product or service that people will buy.
2. Price. Relative to product, pricing is a concept that’s been revolutionized. It’s also the most important of the 4 P’s. How much does each tier of my service offer? What does this plan mean relative to that and how do I charge for a set of features? Tien notes that there are a lot of ways to mess this up – too complex and people will be turned away, not knowing exactly which services they need, too simple and you won’t be getting compensated more by the people who use your service the most. Instead, design your pricing in a way that follows your customer’s journey. What core elements do all your customers expect and what are some willing to invest more in acquiring? Thinking in these terms is where you can lock in your subscriber relationship and where your company becomes truly valuable.
3. Promotion. Something Tien is particularly right about is how modern companies advertise. Instead of focusing on the push-pull factors inherent to a large advertising and channeled-product focus, companies need to focus on experiences. As we talked about in a previous post, this is where Tien’s “Three Rooms” concept takes hold. Companies need to focus on first, the market; second, the value proposition; and third, the product. The driving question in focusing on these three rooms is “Why now?” If you can answer this question and design your promotion around that answer, your product or service will tell a better story and ultimately be more successful.
4. Place. Simply put, place is the idea that your product needs to be sold in convenient locations. Today, it’s about most efficiently owning the customer relationship. For a founder, that means leverage the information that your SaaS model provides and use it throughout your sales channels. As always, your first priority should be renewal, but by monitoring your data carefully, you can more accurately gauge the potential for upsells.
What the 4 P’s mean for SaaS is something every founder in the space should be familiar with. By promoting a structured form of thinking, the 4 P’s can help you determine what goals your company needs to be achieving and in what ways you can achieve those goals.
If you liked “What the 4 P’s Mean for SaaS and How They Can Help You” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Special thanks to Robert Linck for his help with this post.