The 1P marketing trap & why many SaaS businesses fail

Let's start with a heretical thought: Software-as-a-Service is not a revolutionary business model. It's primarily a pricing and distribution model within the traditional 4P marketing mix.

Strip away the jargon and SaaS fundamentally represents a shift in the Place (cloud vs. on-premise) and Price (subscription vs. perpetual license) elements of marketing. The core offering—software that solves business problems—remains fundamentally unchanged.

This reframing isn't meant to diminish SaaS's impact. Rather, it highlights that SaaS companies succeed or fail based on marketing strategy far more than technological innovation—a reality many founding teams struggle to accept.

The 1P marketing department problem

This brings us to what I call the "1P Marketing Department Problem." In far too many SaaS businesses, marketing has been relegated to just one P: Promotion. These departments exist solely to generate leads, create content, and manage social media. They have little to no influence on:

• Product: Features, roadmap, and experience are owned by product teams.
• Price: Subscription tiers and pricing models are determined by finance or sales.
• Place: Distribution strategies and channel decisions are made by the C-suite.

The result? Businesses where 75% of the marketing mix is developed without marketing expertise. This explains several common SaaS failures:

• Products built without clear market positioning.
• Pricing disconnected from customer value perception.
• Distribution strategies that copy competitors without differentiation.
• Customer insights trapped in marketing, never influencing broader strategy.

Success stories & cautionary tales

The 1P marketing trap: Evernote

Evernote offers an instructive case study. Once valued at $1 billion, the note-taking app struggled to monetize effectively despite massive user acquisition. While we can't definitively prove internal marketing structures, public statements and product decisions suggest a promotion-centric approach to marketing.

Former CEO Phil Libin acknowledged in interviews that they "spent years trying to figure out how to make people pay" after building a popular free product—indicating disconnect between product development and monetization strategy. Their challenges weren't solely marketing-related; market saturation, competition from platform providers (Apple, Google), and execution issues all contributed to their decline. In 2022, Evernote was acquired by Bending Spoons for what analysts estimated was a fraction of its peak valuation.

4P marketing excellence: HubSpot

Contrast this with HubSpot, where marketing has influenced all 4Ps since inception:

• Product: Their marketing team helps define product features based on market research and competitive analysis
• Price: Their tiered pricing model evolved directly from marketing's understanding of customer segments
• Place: Their distribution strategy combining direct sales, partner channels, and self-service was marketing-led
• Promotion: Their inbound marketing approach builds on the other 3Ps rather than compensating for them

This integrated approach has helped HubSpot maintain premium pricing even as competitors emerged. Their stock has outperformed the broader SaaS index by 112% over the past five years, demonstrating the power of integrated marketing strategy.

Beyond simplistic narratives

It's important to acknowledge that the 1P vs. 4P marketing framework, while useful, doesn't alone determine success or failure. Multiple factors influence SaaS outcomes:

• Product-market fit: Even the best marketing can't save a product nobody wants.
• Execution quality: Operational excellence matters tremendously.
• Competitive dynamics: Platform companies entering your space changes everything.
• Timing and macro trends: Many successful SaaS companies benefited from tailwinds.

We can also find counterexamples to our thesis. Mailchimp achieved remarkable success with promotion-heavy marketing prior to its $12B acquisition by Intuit. Atlassian famously grew with minimal marketing investment. These exceptions remind us that no single framework explains all outcomes in complex markets.

Nevertheless, the evidence increasingly suggests that integrating marketing across all business functions creates resilience and strategic advantages that promotion-only approaches can't match—particularly as categories mature and competition intensifies.

Beyond the 4Ps: marketing's strategic role

SaaS businesses need marketing that goes beyond the 4Ps to include two critical functions:

1. Diagnosis: Continuously identifying market gaps, competitor vulnerabilities, and emerging customer needs.
2. Strategy: Aligning company resources to exploit these opportunities.

Twilio demonstrates this approach. When marketing identified that developers struggled with the complexity of communications APIs, they didn't just promote their product differently—they influenced product development to create Super SIM and Flex, reimagined pricing to align with developer workflows, and expanded distribution through developer ecosystems.

AI's price inflection point

According to recent analysis from Gartner and McKinsey, the stakes for integrated marketing are rising with AI's emergence. As AI potentially reduces knowledge worker requirements in certain functions, the traditional per-seat SaaS pricing model faces challenges.

While evidence is still emerging, early signals suggest different responses based on marketing orientation:

Organizations with promotion-centric approaches appear to be responding reactively—often discounting to maintain seat counts or adding "AI features" without strategic coherence.

Meanwhile, companies with more integrated marketing functions are proactively reimagining their value proposition:

• Snowflake exploring compute-based pricing alternatives.
• MongoDB developing transaction-based models.
• ServiceNow testing outcome-based pricing tied to workflow improvements.

These shifts remain speculative to some degree, and the full impact will only become clear as AI adoption matures across different industries and functions.

Data layer advantages

Beyond traditional product features, sophisticated SaaS companies are building competitive moats through their aggregated data layers. Companies like Salesforce increasingly position their value not just in CRM functionality but in the insights derived from millions of customer interactions across their ecosystem.

While direct evidence of increased switching costs remains anecdotal, customer testimony suggests that losing access to comparative benchmarks and industry insights creates significant psychological barriers to switching—potentially even greater than the technical migration challenges typical of on-premise software.

This network effect represents a form of strategic marketing that transcends the traditional 4Ps and requires tight integration between product development, pricing strategy, and value communication—coordination that's challenging without marketing involvement at all levels.

Breaking out of the 1P trap

For SaaS companies looking to elevate marketing from lead generation to strategic driver, several approaches show promise, though results vary by context:

1. Reorganize around customer outcomes: Companies like Zoom have reported success reorganizing product teams around customer segments rather than features, with marketing leadership embedded in segment teams. This approach works best for companies with diverse customer types.
2. Redefine marketing metrics: Forward-thinking firms like Datadog have expanded marketing measurements beyond lead generation to include perception shifts and category development. This broader perspective helps marketing influence product and pricing decisions.
3. Elevate marketing leadership: Some companies, including Stripe, have prioritized marketing expertise at the executive level early in their development. While this approach isn't universally necessary, it signals the importance of market positioning alongside technical development.

These approaches aren't silver bullets and must be adapted to each company's specific situation, stage, and market dynamics. Nevertheless, they offer practical starting points for breaking the promotion-only mindset.

A counterintuitive path forward

Interestingly, traditional enterprise software companies with established product marketing disciplines (Oracle, SAP) may have certain advantages over pure-play SaaS companies in today's evolving landscape. Their institutional experience in value-based selling and complex pricing models provides frameworks that some digital-native SaaS companies are still developing.

This isn't to suggest legacy companies will automatically outperform SaaS natives—clearly, many factors determine competitive outcomes. However, it highlights that marketing expertise transcending promotion is valuable regardless of delivery model.

For SaaS founders and leaders navigating these complexities, consider these questions:

• To what extent does marketing influence all 4Ps in your organization?
• Are your product, pricing, and distribution decisions made with marketing input?
• Does your marketing team have the capabilities for market diagnosis and strategy?
• Is your CMO a strategic partner to the CEO or primarily focused on lead generation?

The answers won't determine your fate, but they may reveal opportunities to strengthen your strategic position in increasingly competitive markets.

Because while SaaS may have begun as primarily a pricing and distribution innovation, sustainable advantage increasingly depends on how these elements integrate with product development and communication strategy—in other words, how effectively you leverage all four pillars of marketing in concert.