Pure SaaS is not a MOAT.

Pick any problem (for e.g. Habit Tracker App) and you will find tons of already existing SaaS available in the market claiming that they solve the same problem, but they are indistinguishable from each other. What would you pick? The cheapest one, right?

This is what we called as Commoditization.

Commoditization is the process where distinct, valuable goods or services become uniform and interchangeable, causing companies to compete solely on price.

So, you may think SaaS is Dead and no one should be building another SaaS just to become indistinguishable and competing based on price.

No, but this is not true. You might ask are there any example of things that completely commoditized, hit the price of zero but still survived? And the answer is “Yes”.

I’m going to tell you about a product that cost almost zero rupee, you can make it at home. But yet this company is surviving for a decade and charging a lot of money for this, and you still buy it again and again.

And that company is Coca-Cola.

The special thing about Coca-Cola. It’s just a sugared water anyone can make at home in just few rupees of cost. Yet Coca-Cola is surviving for decades while being completely commodity product.

The reason Coca-Cola survived as a sugared water because of the brand value it has created in consumer's mind. Making brand doesn’t mean to just adding logo on top of some goods or service. It is about the perception of consumer towards the brand. You might think other company can also build another brand and sell the sugared water. But a cheaper brand cannot dethrone Coca-Cola in same way cheaper SaaS cannot replace your SaaS if you learned the secrets behind Coca-Cola.

Brand

People don’t buy Coke just because it’s a drink. They buy it because they already know it, have seen it for years, and feel comfortable choosing it over other options.

Trust

People trust Coca-Cola because they know exactly what they’re getting every time. They know it’s safe, they’re not going to die from drinking it, and the taste will be the same wherever they buy it.

Distribution

Coca-Cola is available almost everywhere. Whether you’re at a mall, restaurant, airport, movie theater, or small local shop, there’s usually a Coke nearby.

Network

Millions of shops, restaurants, and distributors sell Coca-Cola. Because so many places sell it, more people buy it, and because more people buy it, even more places want to sell it.

In short: Coca-Cola is not winning because of the sugar water. It’s winning because people know it (brand), trust it (trust), can find it anywhere (distribution), and see it everywhere (network).

If you observed Coca-Cola survived, because it played on top of Brand, Trust, Network, Distribution. It’s a very strong wrapper around Coca-Cola which makes it irreplaceable.

So, a pure SaaS is not a moat. The actual thing that is going to increase SaaS revenue or make it profitable is more about the 4 points we disscused about Coca-Cola rather than just writing code