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In the fourth article of our series about SaaS and The Long Tail, we are exploring the tail that according to some sources – wags the SaaS dog. At the ultimate end of The Long Tail is the individual – the “me” we all embody. Strategies for SaaS that employ The Long Tail concept, all leverage the power of the Internet to satisfy the individual without addressing them directly. Is it magic? Smoke and mirrors?

If you have been following this series and have grasped the concept of The Long Tail and how it applies to SaaS – you know that the best implementations take in a wide range of needs within a market, but still enable individuals within that market to find what they need or accomplish their specific tasks within the application’s framework. In the eCommerce world, implementations allow sellers to reach individual buyers “transparently” and Amazon is the most used example. But business tools like Salesforce, the CRM powerhouse, and Plex, the SaaS ERP for manufacturers, have also leveraged a single online platform to serve both different industry segments and different line of business (LOB) areas.

These examples represent two, non-exclusive, threads we see in SaaS vendors reaching the “tail” of their customer base successfully:

• In the Community Model – keyword search, recommendations, reviews, vendors, and communities within the platform provide ways to reach out to an individual, tap into their desires and help them satisfy their needs using an “opt-in” approach.
• In the LOB Model – a single platform carries modules, features, and embedded processes that can be leveraged and customized to satisfy particular needs and give users specific roles and views, without creating multiple versions of the application.

This is not a “one way or the other” proposition. A specific service may utilize elements of both approaches – as Salesforce does in many respects. The community model is inherently “noisy” and so has to leverage the tail in many ways to limit the noise to a segment so that it is useful to an individual. The LOB model is inherently complex and requires administration, roles and processes that can be customized to fit specific business areas and organizations.

LOB applications have long utilized workflow or “business process management” (BPM) to provide process capture and automation. However, implementation and customization could be a long and expensive process. In the SaaS world, the difference is that the primary changes needed for something like supply chain operations for a specific industry have been implemented on the core platform and marketed directly to a vertical by the ISV. This lowers the time to implement and adopt the application for customers and provides a managed approach to product development and marketing that is easier for the ISV to handle. These applications also allow a customer to continue the customization to “the last mile” to adapt specific processes, terminology preferences and internal standards while they continue to embrace industry “best practices.”

The community model is relatively new, although it is an outgrowth of many so-called “social media” applications that have been developing for a long time. Some of the key technical concepts are:

• Adaptive Search (example – Google and Amazon)
• Personal Digital Publishing (weblogs, microblogging – examples Blogger, Twitter, WordPress)
• Recommendations and Reviews (community and individual rating systems – examples Yelp, BizRate, Epinions)
• Forums (examples – Yahoo! Groups, Google Groups, Amazon Forum)
• Communities (examples Ning, Facebook, Second Life)

A SaaS offering may adapt some or all of these concepts to reach their customers and marketing may adapt them either on or off the platform (or both) as a way to broaden their audience while reaching specific segments. Using social media for external marketing and customer contact is something we will explore in future articles. Using social media within a SaaS platform to help users find and evaluate services and products, provide support and to increase customer retention are the primary uses we’re seeing adapted now.

Consider the restaurant review and guidebook service, Zagat. From a company that started as a restaurant guide publisher 30 years ago, this service provides user-driven ratings and reviews, voting, discussion boards, news, video, and yes – online purchases of the original guide series. Zagat has built itself into a community with aspects of every concept in our list. Together they become an indispensable and trusted guide for users with a low subscription cost and very personal approach. The same service provides vendors with advertising, online reservations, menu presentation, and ordering – all of which can be monetized in some way.

On the business side, Salesforce has adapted the community model in several directions. For customers, it provides discussion forums, user groups, best practices, and blogs. For partners it provides an Appexchange where they can demonstrate and sell custom solutions to Salesforce customers and leverage the Salesforce platform to provide their own applications. For developers from both customer organizations and vendor partners, it provides Developerforce which is a community onto itself. Few business SaaS providers have been able to adapt the community model so completely to their platforms because if it isn’t carefully considered, it can become unwanted “noise” in the environment. But as this vendor has successfully shown, it can become a value that completes the product in many ways.

Building a service that embraces these concepts is something that takes a lot of planning. In truth, none of the examples I’ve mentioned “sprang full-fledged” as the services they are today. But as SaaS “matures,” more providers are considering these aspects up front and including them in their business plans from the beginning, whether they are included as features in “Version 1.0″ or not. At this point, I think every “would be SaaS entrepreneur” must consider them or face the fact that their competition will use them to take customers and prospects.

This is the last article in this four part series but certainly not the last time we will cover The Long Tail. In future series, we expect to be looking into platforms that enable SaaS ISVs to concentrate more on their product and less on the developing their business back end and social marketing. Stay tuned!

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