With the recent downturn on public stock markets due to COVID-19, a recession or depression is almost inevitable. It’s likely we see mass failures across retail, travel, entertainment, and other industry sectors. The spillover from coronavirus disease and the following shelter-in-place can have drastic consequences in the startup world. Small brick and mortar businesses that were shuttered due to shelter-in-place rules will no longer are spending money on Facebook or Yelp to promote their business nor will they maintain their SaaS subscriptions. Large enterprises will pull back spending in sales and marketing in anticipation of a recession. This could cause a reduction in seat counts or usage for SaaS contract. Similarly, sales teams may find CFOs and financial controllers are blocking many more purchases than before forcing deals to be stuck in procurement or legal review.
The good news is that many developer platforms and APIs have tricks that make them more resilient to a recession. However, if you’re not doing these items today, now is the time to reconsider to ensure the longevity of your product and/pr company.
Focus on the self-service business
During a recession, many large enterprises are hesitant to commit financial and human resources to run a paid pilot or sign a large enterprise contract due to their own financial uncertainty. You could have the best social proof and quantitative numbers via case studies and strong customer logos, yet VPs may have received a directive to freeze all non-mission-critical spend and hiring leaving them no choice. On the positive side, many senior engineers and managers have a budget for discretionary expenditure for SaaS tools. While the budget may be small and only enable a spend somewhere between $100/month to $1000/month, these expenditures usually require very little to sign off or approve. With the correct usage-based pricing model, you will be able to expand these accounts over time which may even approach the ACV you would normally see with a small enterprise agreement even though the customer is paying month-to-month on a credit card. While your competitors watched their sales pipeline dry up and laid off vast numbers of their sales force, you get to gain self-service customers whose usage may accelerate quickly once the market starts to recover.
Recession-proof your pricing strategy
With a self-service business, there are a variety of ways to price. Usually, you want to price using value-metrics rather than cost metrics. However, there may be multiple value metrics you could leverage. Ideally, ensure your pricing enables upsells to be automatic even if their is a reduction in staff. For example, a sales tool that priced by the number of contacts in a CRM or a marketing tool that is priced via MAU (Monthly Active Users) will do better than a tool that leverages per seat pricing. A large reduction in staff can cause the company to renegotiate a lower seat count. However, a few companies will experience a drop off in MAU or number of contacts.
Track your adoption funnel religiously
If you don’t have any product analytics tools in place, now is the time. Instrument everything you can. Instrument your APIs. Instrument your web apps. Make sure every advert or external link is leveraging UTM parameters.. This enables you to understand which acquisition channels have the highest ROI and drive product growth. Top of funnel growth is no longer ideal. You should only be investing in channels that lead to direct conversions. For most developer platforms, this means customers have actually integrated and are actively using your API. If you’re only measuring page views and sign ups, take the downtime to re-evaluate what your true
Build your online presence
With the conference circuit shut down, now is the time to think about your online presence. Create blog posts and webinars that can be posted both to your own blog, but also syndicated out to partners in your space. The key for content though is to ensure it’s authentic and relevant. Quality content almost always wins over sheer quantity. By creating content, you’re increasing your presence in organic search, but you also gain other benefits. For example, potential customers will share the content via social channels giving you additional exposure for free. You can also leverage the content when following up with a strong prospect. Instead of just consistent nudges on “let’s set up a time to chat”, you can demonstrate value by sharing the content for them to consume at their own pace.
Minimize churn risk
Identifying and minimizing customer churn risk becomes far more important than the top of funnel growth during a recession. Many times, we can find additional growth by reprioritizing the potential customers that already signed up and/or are paying. You should have a mechanism to track account health and get alerted when things are not looking good. Things to look out for:
- Customers with decreasing API usage week-over-week
- Customers that are only accessing only one or two endpoints
- Looking into SDKs that have a higher drop off which could indicate bugs or lack of documentation
- Customers with a high number of errors or latency such as unauthorized errors
- Customers who have not accessed your primary value creation endpoints
Focus on customer success and developer advocacy
Depending on your company, you may have a more traditional customer success department or maybe a devrel group with developer advocates taking over some more traditional customer success responsibilities. Your current customers are your largest advocate during a recession. Make them successful with your API with an awesome developer experience and they will tell their colleagues and friends. Some small things include following up with developers who integrated with your API already on what their building and how you can help. If you do identify a customer that’s running into integration issues, reach out and offer assistance.
Look to partnerships and integrations
With paid marketing budgets shrinking and cutbacks in sales headcount, achieving the same growth milestones may seem like a moonshot. Yet, there are countless developer platforms that leverage partnerships and integrations for organic, low-cost growth. Take a look at any company that offers a marketplace that you can be listed in such as GitHub, Heroku, AWS, etc. Because some of these may be crowded reducing your visibility, you should also look to other SaaS tools that your target buyer is also using. If you’re a marketing tool, maybe integration with Hubspot makes sense. If you’re an API monitoring tool, maybe building integrations with PagerDuty and Slack make sense so your customers can get alerts via their existing setup.
Marketing an API platform to developers is tough. Usually marketing and sales budgets need to be decreased, enterprises are more reluctant to sign new contracts, etc. By focusing on your adoption funnel and finding growth channels that are cheap such as content and partnerships can work.