This article is Part I of a 4-part series on the shifting landscape of B2B buying and selling, how revenue teams have adapted, and where we think the market is headed.
TL;DR:
- B2B SaaS experienced a golden era with an influx of capital and a focus on go-to-market strategies.
- The traditional sales funnel and data-driven processes became the foundation of go-to-market understanding.
- The market saw an explosion of SaaS solutions and an increase in email deluge, leading to declining conversion rates.
- The pandemic brought about significant changes in buyer behavior, with a rise in digital communities and increased reliance on content consumption for decision-making.
- The digital transformation paradox emerged as conventional funnel metrics struggled to capture evolving buying behavior, leading to the need for companies to adapt and evolve.
The Golden Era of B2B SaaS: 2018-2022
The years from 2018-2022 could be called the Golden era of pre-AI startups. B2B SaaS was living its best life. Startups were bathing in cash. They were getting their rounds pre-empted because deals were becoming that hot.
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I remember just two years back in 2021, there was a saying in the startup community that it was easier to raise money than it was to hire great talent.
The Capital Influx
Initially, we saw the influx of capital into SaaS businesses often channeled into go-to-market strategies. B2B SaaS companies hired like nobody’s business: sales reps, ad spend, sales reps, marketing tools, and more sales reps. Resource bloat accrued because of the mounting pressures to produce in order to meet valuation expectations.
This forced the hands of many B2B SaaS startups to hire too many employees to hit those targets. As the economy has continued to recede in 2023, shareholders, boards, and VC firms alike are asking nearly every startup to surrender to a RIF - aka layoffs - to reduce the bloated, unproductive staff.
GTM Strategies
The traditional construct of going to market was that of the sales funnel. Tools like ZoomInfo and Outreach would make one sales rep feel like the power of ten sales reps. But instead of cutting back, companies went all in, flooding the market with outbound — more dials and cold outbound calls, and more mass emails out the digital door.
With so many bodies, predictability and structure became the name of the game. I remember being curious about sales and asking Larson Stair, an expert sales founder in our Techstars batch.
"What makes a salesperson great?" — Alan
"Process." — Larson
Sales with a process is a science, which makes it more predictive. Without a process, it was emotion, which made it less predictive. VCs have historically pushed for predictability, which pushed for certainty in measurement. What is the best visualization of this predictability? The Marketing-to-Sales Funnels with conversion rates at every step.
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At the same time, with the explosion of data, whatever could be measured was measured. Everything became seemingly quantifiable when the funnel was the foundation of go-to-market understanding, turning GTM into a science, and sales and marketing as “the scientist” executing the experiments.
The SaaS Startup Explosion: the 2020s
As venture capital continued to flow into the 2020s, the SaaS market saw an influx of tools, thanks also to the commoditization of API software development. Competitor apps could be spun up overnight with just a handful of developers. The availability and affordability of cloud service helped ensure that the entrepreneurial developers sitting inside a B2B SaaS company could develop revenue-producing applications to their heart's content.
Carina, Zack, and I built one such competitor tool during our time at Techstars without knowing anything about the space.
Everyone started building and buying everything. Then, the capital and the revenue started coming in - and it was good. However, when everyone starts making money, good decisions start going out the window. Lots of shelfware was created and sold to consumers who were sold something that didn’t deliver value.
The Email Deluge and Declining Conversions
Inboxes exploded from the deluge of emails. Eventually, Google started throwing certain domains into spam. Whole cottage industries emerged just to warm emails to improve deliverability so companies could send more.
Conversion rates started declining.
But the pressure mounted. What did people do? More hands on deck. 5% closed won conversion last year, 1% conversion this year? No problem. Pump up the top of the funnel to sustain revenue growth.
If your job was on the line, why fix something that wasn't broken? Plus, who had the bandwidth to innovate when the existing system was barely afloat? Nobody ever got fired for buying IBM.
Lots of hungry reps to feed right now. Where are all the MQLs, form fills, white papers, and link clicks? Because of the short time horizon of CROs, the whole go-to-market team needed to operate on a similar timescale.
The Pandemic's Impact on Business
Then 2020 ...
The pandemic changes everything.
It completely disrupts B2B SaaS marketing, in ways that are still being felt today.
And it all started with B2B SaaS buyers.
The Buyer's Evolution
Let's talk about what happened to the buyer.
Forget B2B SaaS products for a second. For the first time, during the pandemic, buyers were building entire teams without ever meeting face-to-face with their new hires.
As a result, B2B SaaS providers had to learn how to connect with buyers that were increasingly connecting with peers, potential clients, and sales teams entirely online.
The Rise of Digital Communities
Demand for community skyrocketed. Reddit, Discord, and Zoom engagement shot up. And in the wake of all this, professional communities like Pavilion started sprouting up everywhere. LinkedIn evolved into a real professional social network.
Suddenly, buyers, who in the past, would meet each other maybe once or twice a year at conferences to exchange ideas about B2B SaaS solutions, can poll thousands at a time, globally, for advice on whether to use Outreach or SalesLoft, Hubspot or Marketo in a single post, and get curated answers back within minutes.
Content Consumption
With social media engagement at an all-time high, consumption of marketing content like e-books, blog posts, podcasts, influencer endorsements, and peer reviews soared.
In 2020 alone, media uploads increased by 80% YoY, driven by an influx of social media marketing in the SaaS space. How-to videos, explainers, pre-recorded sales pitches: B2B buyers were absorbing it all.
The increase in content consumption meant that demand generation became a key factor in the B2B SaaS business model.
B2B Decision-Making
As well as consuming more and more content during the buying process, the way organizations decided on when and why to purchase a SaaS product also changed.
In particular, partnership programs - for example, Hubspot and Salesforce's app ecosystem - started gaining traction as a go-to-market channel, with buyers increasingly making purchase decisions from trusted B2B software vendors.
The Digital Transformation Paradox
Consequently, B2B SaaS underwent a digital transformation overnight.
The change was swift. But, ironically, as the world digitized, conventional SaaS metrics struggled to capture the evolving buying behavior.
Private Slack chats, influencer endorsements, or old-school phone calls - the funnel couldn't track these. The same large quantity of SaaS vendors still existed. It's just now the buyers could see them all a bit more clearly.
The Dark Funnel and Its Impact on B2B Marketing
In the past, companies could track customer interactions through traditional marketing automation platforms. However, with the rise of third-party marketing channels like podcasts, events, influencer marketing, and organic social media, companies are unable to track these interactions effectively. This lack of tracking has led to a major shift in the distribution of content and communication between companies and their customers.
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The software vendor landscape was vast, but now, buyers had a clearer view. The competition between vendors became fierce, with countless "Top X tools for Y" lists and regular Gartner and G2 matrices to guide buyers.
Still, the traditional sales and marketing model that drove buyers down the funnel persisted, even as it was seeing diminishing returns. A decade of conditioning led ingrained these large processes of generating Leads to MQLS to SQLs, as well as the people who maintained them.
The Informed Buyer
But here's the twist: Buyers were leveling up. They were more informed and more savvy. At least that's what they thought:
- 70% of the buyer’s journey is done digitally before talking to a salesperson (Sirius Decisions)
- 80% of B2B purchasers said that they would not even speak to a salesperson until they had done their own research (The Corporate Executive Board)
- 80% of business decision-makers prefer to get company information from a series of articles versus an advertisement. (B2B PRSense)
- 84% of B2B decision-makers begin their buying process with a referral. (Sales Benchmark Index)
- 86 percent of buyers use peer review sites when buying software (G2)
The number of people in the SaaS solution buying committee was also becoming much larger. Each member has their own needs that must be met before the purchase can go through, so that means different messaging and timing for different personas.
It was like wringing water from a rock and suddenly finding yourself in a desert. That's okay because the VC well always had more rocks to pull from.
Navigating the New Demand Landscape
Post-pandemic, B2B SaaS companies faced a fresh challenge: the funding bubble began to deflate. Buyers tightened their belts. Sales quotas were missed.
Traditional methods seemed outdated in this new reality.
While many clung to old strategies, successful B2B SaaS organizations recognized the need for efficiency and adaptability. They shifted focus from lead generation to efficient demand capture and demand creation, emphasizing trust and authenticity in an informed buyer's world.
"How can I sell you something," no longer works. The approach must be proactive: "What does my customer need from me." Companies like Aligned have built the digital sales room to create better buying experiences.
In this evolving landscape, it's not about who spends the most - on sales teams, marketing campaigns, or SaaS tools - but who adapts the best.
Now that you're keyed up on the changes in the B2B market pre- and post-pandemic, read on for Part II, the future of account based marketing.
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