The Rise of SaaS: How Salesforce and Marc Benioff Revolutionized Marketing Strategy

Salesforce established a SaaS (Software as a Service) business model that delivers software services via the Internet. While it is best known for business applications like CRM and SFA, Salesforce has significantly broadened the scope of the entire enterprise software market. Founded when the term 'cloud' was not yet in use, Salesforce now serves over 150,000 customers, with its distinctive marketing strategy playing a crucial role in its rapid growth. In this article, we will look back at the history of the software industry in the 1990s when Salesforce was founded, and discuss how Salesforce's marketing has defied industry conventions to grow into a global company. *In this article, the current company name: Salesforce will be used in the same manner.

Salesforce led the global SaaS market

According to a Fortune Business Insights report¹, the global SaaS market, which has been growing rapidly in recent years, is expected to reach $114 billion in 2020 and grow to $716 billion by 2028. Salesforce's revenue for the fiscal year ending January 31, 2020 was approximately $17 billion, which, based on the figures in this report, would give us an approximately 14% share of the SaaS market.

In the 1990s, most of the software offered for business use was installed on CD-ROMs (packaged software). Around that time, Marc Benioff (35 years old at the time), the youngest VP ever at Oracle, saw an opportunity to offer business software as a SaaS (software-as-a-service) rather than as installed software. In his book², Marc Benioff wrote the following about the background of the company's founding.

"The dream was to make it easier to buy and use software, to make it more democratic, without complicated installation, maintenance, and periodic upgrades. At the time, enterprise software took six to twelve months to install, required significant investment in hardware and networks, and software packages delivered on CD-ROM cost millions of dollars. ...(omission)...In the 1990s, the total cost of a low-priced CRM product for 200 employees in the first year alone was $1.8 million. What is even more outrageous is that after all this money spent to implement and manage the software, the vast majority of the software is "shelfware," meaning that it is an asset that is owned but rarely used. According to research firm Gardner, as much as 65% of Siebel's licenses go unused."

In 1999, Marc Benioff founded Salesforce, a CRM provider via the Internet. A new era of enterprise software was dawning.

ASP (Application Service Provider), which is similar to SaaS in terms of providing browser-based applications via the Internet, began to spread in the 1990s. The difference is that ASP is "single-tenant" (providing a dedicated environment for each user), while SaaS is "multi-tenant" (multiple users share a common software environment).

"NO SOFTWARE" marketing strategy led by Marc Benioff

Shortly after its founding, Salesforce embarked on its own marketing strategy to draw attention to its new service model.

Clear positioning and brand definition

Salesforce positioned itself as a challenger to industry leaders, crafting a narrative that criticized traditional, inefficient software delivery models and defined its mission as 'delivering new and better software for our customers. In 2000, Salesforce's service launch event was a device that embodied that story. The bottom floor of the venue was made to resemble "hell," where traditional installed software was portrayed and an actor playing a salesman trapped in a cage shouted "Help me! and a whack-a-mole game in which a software CD-ROM was thrown into a toilet and a mole with the logos of other software companies on the mole. The trick was for invited guests to go through hell and then reach "heaven," the top floor where Salesforce's products were lined up amidst harp music. Founder Marc Benioff donned a combat uniform and played the role of a revolutionary, embodying his fight against the existing software industry.

Differentiation through the "End of Software" campaign

To develop his brand strategy, Marc Benioff consulted Bruce Campbell, a top advertising executive who had worked on President Reagan's television campaign, leading to the launch of the 'End of Software' advertising campaign. The campaign was to strongly emphasize the difference between the company and previous software products by placing a large "NO SOFTWARE" logo on all promotional materials. The campaign was so differentiated from its competitors that it was covered by the Wall Street Journal.

Despite the seemingly radical nature of these campaigns, Marc Benioff wrote the following about the concept of branding².

A company's brand must be consistent to be effective. To consistently communicate the best parts of the company externally requires a total mobilization of employees, products, and messages. ...(omission)...A bank that advertises ``We value our customers'' cannot have 20 customers queuing up for two ATMs. Brands cannot break that promise. If you break your promise, customers will stop trusting you. If that happens, it's the end. ...(omitted)...What a company can own is its individuality as a company. We stand for NO SOFTWARE, not because other companies will not imitate it. It's because we are the first company to believe it matters to our customers."

The NO SOFTWARE campaign continued in the following years, with multiple guerrilla tactics that directly took advantage of rival companies' events. At Siebel Systems, the market leader in CRM at the time, they hired a large number of bicycle cabs in front of the San Diego Convention Center, where the event was being held, and handed out coffee and marketing materials about their company to visitors; at the European Users Week, they rented all the taxis from Nice airport to Cannes, and At the European User Week, they rented all the cabs from Nice airport to Cannes and promoted Salesforce inside the company with the NO SOFTWARE logo. This thorough and unexpected approach to its rival forced Siebel Systems to comment on Salesforce, then just a small venture, and the press became interested in the rivalry between the two companies. Salesforce, as the industry challenger, gained the support of the media and gradually increased its presence in the software industry. Today, SaaS is commonplace, but at the time, the idea of SaaS was so rare that it was probably difficult to get customers to understand the difference without a campaign of this magnitude.

In 2003, Siebel Systems, the market leader in CRM, announced that it was launching an on-demand service, essentially SaaS, and was acquired by Oracle in 2005. SaaS software companies. Marc Benioff has said that he drew on the marketing classic "Positioning Strategy" for his tactics against these rivals.

Community measures to involve users

As Salesforce grew, it shifted its marketing focus from attacking competitors to appealing to the value of its services.

Hosting events where fans invite fans

While other software companies were targeting the executive class with their budgets, Salesforce focused on end-user-focused events. Salesforce dubbed its customers 'Trailblazers,' who became the passionate 'fans' driving the success of these events. Salesforce named its customers "Trailblazers" and actively supported them with flyers and advertisements at events.

The SaaS model differs from software that is bought-and-paid-for in that the essence of the SaaS model is for the customer to continue using the service, thereby contributing to the success of the customer's business. Salesforce, which was strongly focused on "customer success" from its inception, encouraged its customers to share their own stories of how they had made their businesses successful, and word-of-mouth communication from Trailblazer, who actually attended the event, became an important approach to prospective customers. Trailblazers became loyal advocates of Salesforce by participating in events where they shared their experiences and interacted with other users.

What started as a 15-person Salesforce user event led to the annual "Dreamforce" event, which now attracts 170,000 attendees from around the world. Marc Benioff always mentions Trailblazer at the beginning of his keynote at this huge event, which shows how much Salesforce cares about Trailblazer.

SaaS platforming with AppExchange

On June 23, 2004, the day Salesforce conducted its IPO, its stock price rose 54.6%. The IPO was introduced in CNET Japan at the time as follows³, showing the anticipation for the changes that Salesforce and SaaS would bring to the software industry.

"The IPO is being touted as an experiment in a new business model that could reshape the software industry: Salesforce's approach of selling enterprise CRM software on a subscription basis, an approach that is growing in popularity among corporate buyers. Analysts believe that if Salesforce's subscription-based model and similar methods are successful, they could pose a challenge to software companies that sell traditionally, such as SAP, Siebel Systems, PeopleSoft, and Oracle."

Having worked hard to define the value of the SaaS model in its first few years of existence, Salesforce's next step is to build an application economy. The idea for this application economy was conceived by Steve Jobs, who was Marc Benioff's mentor⁴.

The AppExchange, which gave form to this idea, was released in 2006, allowing software services developed by other developers to be downloaded through Salesforce. The AppExchange created an ecosystem for accessing other applications through Salesforce, and Salesforce evolved from an on-demand CRM provider to a SaaS platform. The AppExchange has also enabled Salesforce to know in a timely manner which applications are needed by its customers, giving it an advantage in investment decisions and feature development.

Today, more than 5,000 apps and SaaS are distributed on the AppExchange worldwide. This ecosystem has also led to the adoption of Salesforce for building internal workflows, making it an entry point beyond CRM, which is one of Salesforce's strengths today. In addition, CVC "Salesforce Ventures" is investing in new startups using AppExchange, and the combined scale of the Salesforce economy is expected to reach $1.6 trillion worldwide by 2026, creating 9.33 million new jobs. million new jobs are expected to be created⁵.

All for "Customer Success"

In less than 20 years since its founding, Salesforce has become the world's leading software company, and the SaaS model it pioneered is now commonplace in the software industry, with the aforementioned community initiatives and platform building such as AppExchange serving as models for all SaaS companies. The SaaS model that Salesforce pioneered has now become a standard in the software industry. In an interview in 2020, when Salesforce's market capitalization overtook that of Oracle, Marc Benioff, when asked "Who has been your biggest competitor over the last 20 years?" replied, "Nothing is more important than customer success."⁶ This obsession with unlocking inconvenient and expensive enterprise software that was only available to a small number of companies, and with making customers successful, has been Salesforce's strength.