Category Takeovers & User Dependency
Sohini Surapaneni and Jason Katz • March 15, 2021 • Paid Advertising & Digital Marketing
Congratulations! If you’re reading this, you’ve probably either founded or have been recently employed by a SaaS company. What a great place to be! Did you know that in 2008, only 12% of companies used cloud-based apps? A decade later, a Bettercloud study showed that 73% of organizations said nearly all of their apps would be SaaS by 2020. While this rising popularity is great for your SaaS start-up, it also must make you aware of all the competition you face to rise to the top. Surely, you begin to wonder how to stand out, and what your growth marketing strategy should be to do so.
Realistically, if you look at any article on SaaS marketing, you’re bound to see the same strategies to grow your start-up. PPC/SEM, ABM, SEO, PR, Product Marketing, etc... it’s acronym bingo! Tactics such as these are crucial to growth. But what exactly is so special about your startup? How will marketing elevate your company to next level valuations -- transcending what everyone else is doing?
You’ve probably heard that Eleanor Roosevelt quote, “learn from the mistakes of others.” Well, you can learn from the successes of others too. Let’s take a look at how three great SaaS companies - Hubspot, Slack, and Shopify - and peer SaaS unicorn companies attained extraordinary success with marketing and how you can infuse these lessons of Category Takeovers and User Dependence driven by your Mission into your own startup.
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Category Takeover
Founded in 2006, the CEO of Hubspot coined the term “inbound marketing,” providing software that helps companies attract visitors, convert leads, and close customers. What sets them apart from other companies was the fact that they were able to transfer the keyword of “inbound marketing” into a new “category” of business that inevitably traced back to their company and contributed to their reaching 100,000 customers and $1 billion in annual recurring revenue.
Hubspot has maintained a content heavy blog for years, where they often start blogging about a new release before it’s even marketed or released. They write about exactly how beneficial inbound marketing is, including describing what it is and how to use their software to create an inbound marketing strategy. As they grew, they eventually ramped up their content production to at least 50 well-written pieces of content a week. They launched Hubspot Academy, offering hundreds of hours of free training courses and certifications on inbound marketing topics, available to anyone. Their work includes leadership articles, brand videos, social content, speeches, and editorial podcasts, at least according to Meghan Keaney Anderson, VP of Marketing at HubSpot. She described their aggressive search engine optimization goals:
With our SEO strategy, we’re not just playing for top placement in SERPs, we’re targeting the entire first page — ads, featured snippets, top organic results, directory listings, you name it. I also have to mention review sites, which have become increasingly important for SEO in recent years.
Perhaps the success of Hubspot brings about the somewhat risky (aka expensive and unlikely) idea that companies like yours can coin a term and market it alongside your unique product. But it’s not unheard of! Consider Uber, for example, that is often the first company associated with ride-sharing services. Even Kleenex, whose company name often replies to the phrase “tissue paper.”
The goal is to trace an idea back to your company, which in addition to having an excellent product can be done through extensive SEO research to ensure that your articles, blog posts and software are brought to life as a company that has pioneered an idea. The concept behind Hubspot’s marketing is not that risky at its core, and the words of HubSpot’s VP of marketing come trilling around once again.
Having a clear brand identity, sharpening that identity through thoughtful product positioning, and then bringing it to life with strong messaging and complementary creative execution.
Hubspot executed the “inbound marketing” Category Takeover but isn’t unique in deploying this tactic. David Raab coined the term Customer Data Platform in 2013, created the Customer Data Platform Institute in 2016, and hasn’t showed any signs of slowing down with sponsorships, speaking engagements, content, and more. The IT Services Marketing Association (“ITSMA”) coined the term Account Based Marketing (“ABM”) in 2003 but it wasn’t until Demandbase was founded in 2006 that commercialization accelerated with its stack of enabling software starting with advertising, an M&A acquisition binge including Engagio for analytics & orchestration (also coined term Marketing Qualified Account (“MQA”) which in itself is a category takeover asserting dominance over Marketing Qualified Lead (“MQL”)), and showing no signs of slowing down with frequent virtual programming (events, webinars, etc…) as part of the ABM Leadership Alliance uniting stakeholders from across the ABM landscape during the Pandemic.
Category Takeover is the marketing approach of Hubspot, David Raab, Demandbase, and more. This approach is bound to bring you something new and exciting to draw in your potential customers.
User Dependency
Business messaging app Slack’s valuation increased from $0 to $4 Billion dollars in just 4 years and then it was acquired by Salesforce for $28 Billion dollars just 4 years later, making it one of the fastest growing SaaS startups of all time. They convert as high as 30% of free users to paid plans reaching 120,000 paying business customers. So how did they do it? Slack is about collaboration. It requires collective buy-in or don’t bother. Company teams become dependent, quickly. And Slack takes advantage of this to market itself as “customer centric”. With this strategy, Slack is gradually getting its brand name incorporated into everyday use - “Hey, I’ll just message you on Slack!” Can you turn your company name into a verb?
Their marketing of the “fair billing model” is a wonderful example of how they come off as “customer-centric”. This policy states that if a Slack user stops using the software for 14 days, Slack gives them their money back through prorated credit, making sure that even small businesses can afford to go premium with little risk. But really, business teams tend to become so dependent that it is very rare that the model actually needs to be enacted.
Their extensive list of free services, paired with their cost-effective billing policies made their brand all the more lovable. So lovable, in fact, that they launched a Twitter collection where business could tweet about their love for Slack. Slack Wall of Love was started via Slack’s twitter, which now amounts to nearly half a million followers, and acts as free advertising done by willing and satisfied customers. Slack then uses these tweets and positive feedback in their content marketing and social media posts.
We bet heavily on Twitter. Even if someone is incredibly enthusiastic about a product, literal word-of-mouth will only get to a handful of people — but if someone tweets about us, it can be seen by hundreds, even thousands.
Because Slack’s free services have indefinite trial limits, small teams are able to incorporate their software into their routines, even if they have no direct plans to purchase a premium subscription. The goal is to get users hooked early and then monetize. Apple is a good example. With an iPhone and AppleID comes free iCloud storage; but, as time goes on, most consumers will run out and need to purchase more. There are ways to get storage for cheaper prices, but by then, consumers are committed to Apple and would rather avoid any hassle.
Free Slack users spread the word through social media like Twitter, and through word of mouth among students that will one day get hired at businesses that use professional messaging services. Slack focused on building an active user base and then marketed their innovative and cost-friendly pricing method to them. While Slack’s free services have so many benefits, the premium version makes the lives of dependent company employees even easier.
Slack executed the User Dependency (kinda also did “team communications” Category Takeover too) but isn’t unique in deploying this tactic. Google is the master of User Dependence, enticing users with “free” products (Google is paid through Freemium subscription upsell (e.g. G-Suite Storage, Google Analytics 360) and data which it monetizes through advertising (i.e. Google Ads) and then holding them captive because of their tremendous value and stickiness. Google Analytics is used by ~30 million companies (BuiltWith) (More than 180k (BuiltWith) paying for Google Analytics 360), G-Suite Email has more than 2 billions users (More than 6 million paying business customers), Google Tag Manager is used by more than 9 million companies (BuiltWith), and the list goes on. The two companies that merged to become Dun & Bradstreet (“D&B”) were founded in the 1840’s to provide business credit information. D&B has millions of company records that constitute a “vast majority of the world’s GDP”. This data not only helps make business decisions but also powers the sales teams of B2B companies globally, enriching CRM records with business demographics like industry, mapping company hierarchies, and populating key executives powered by a massive database and its matching algorithms to its crown jewel unique company identifier, the D-U-N-S number (created in 1963). D&B has a client base of ~135,000 including 90% of the Fortune 500. The company has been around for 180 years and continues to be part of the pulse of the B2B economy. Dropbox similarly creates User Dependency through the nature of cloud based storage with additional ease of use through desktop and mobile apps which led to 500,000 business team users, 56% of the Fortune 500, and an $11 billion market cap.
User Dependency is the marketing approach of Slack, Google, D&B, and more. If you have a company that provides software that your customers can potentially become dependent on, either individually or as an organization, you want to get your own customers to normalize the use of said software.
Mission Driven -- Category Takeover AND User Dependency
Shopify used marketing strategies similar to those of Slack and Hubspot. Like Slack, Shopify built User Dependency though in this instance through a closed software platform providing nearly all functionality a merchant would want. Like Hubspot, Shopify centered the building of their company around ecommerce in its Category Takeover. And it was all driven by Shopify’s mission to make commerce accessible leading to 1.7 million customers and a massive collection of case studies and a $140 billion market cap.
Shopify began to anchor on small businesses through programs like Build a Business. It simplified software design for them from easy-to-use administration features to better search functionality. Shopify then touted easy implementation for small businesses in its marketing, prominently featured in a newly created entire section on its website labeled “learn” - blogs including guides, podcasts, and forums. Shopify was popularizing ecommerce.
Shopify fleshed out its software to provide a robust suite of ecommerce operation essentials such as built in sales features, customizable virtual stores, and social media marketing resources. This convenience built a dependency between their customers and their software. And its tech does not integrate well with others, meaning that once a company decides to use Shopify, it fully commits. And thus all upgrades, add-ons, and additional features are all found within Shopify itself; there’s no reason or option for customers to go anywhere else.
Yet - here’s the twist. While Shopify’s product and marketing elevated its stature with small businesses, it didn’t tap into its full potential until it shifted its mission. Since its founding in 2006, Shopify touted “making it easy for anyone to create a beautiful and powerful online store.” Gradually, its mission became broader, making “commerce better for everyone.” Shopify shifted its mission from product to accessibility. They expanded beyond ecommerce to people that sold anything, experienced or not. When Shopify received funding in 2014, the founders released this statement:
Shopify began as an easy way to sell products online...This new round of funding will help us further expand into physical retail with POS, so our merchants can easily sell their products anywhere, at any time.
Shopify accelerated its growth by shifting from a “product-first” company to a “movement-first” company. Entrepreneur David Cummings describes a movement-first company as centered around “educating the market about this better way to do things”, most often through live events and heavy sales and marketing. While software is supposed to simplify business, people all too often struggle to use new software. Shopify began to focus on the actual success of their customers. Shopify became synonymous with ecommerce.
Shopify executed the Category Takeover AND User Dependency approach driven by its mission and is in an elite group of companies deploying this tactic. Segment was founded in 2011, something special amidst the awful 9/11 tragedy. It started in Y Combinator as a lecture tool that took off quickly post-pivot to an API data collection tool (analytics.js). Segment commercialized Customer Data Platforms in its Category Takeover by requiring all vendors with integration endpoints to build for ONE data schema around a unique User ID in a “developer playground” open ecosystem mission. Once brands start using Segment, internal users from every department demand the most robust profile from larger integration catalog libraries which creates steadfast User Dependency. Over 120,000 companies (BuiltWith) use Segment contributing to a substantial customer case study library and ultimately its acquisition by Twilio for $3.2 billion. Salesforce was founded in 1999, bringing CRM to the cloud and enabling a massive app exchange built on it in one of the most successful Category Takeovers of all time with tremendous User Dependency driven by its customer relationships and experience mission. Salesforce has scaled to 150,000 customers incl 100% of Fortune 100 and 9 million installs on app exchange from 3,800 total apps for a total market cap of $195 billion (March 2021).
Category Takeover AND User Dependency driven by mission is the marketing approach of Shopify, Segment, Salesforce, and more. Your company should think about its mission, and how to deeply infuse that into your product, marketing, and brand until all become one.
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As you and your company craft marketing roadmaps and continue to expand, consider what Hubspot, Slack, Shopify and their peer SaaS unicorn companies have done to boost their success. They’ve done category takeovers - inbound marketing, CDP, ABM, ecommerce, CRM. They’ve created User Dependency - mail, storage, analytics, ecommerce, CDP, CRM. And they’ve leaned into their mission to drive both forward - Ecommerce, CDP, CRM. Through these marketing approaches, these companies created massive wealth surpassing $1 billion valuations and some going well beyond. The odds are against it but these marketing approaches give you a path to lean in.