When it comes to software-as-a-service, or SaaS, trying to apply it in a company setting can be a bit overwhelming – even if industry players say SaaS has done a great deal to improve their work processes. After all, what’s a single software capable of doing in order to improve your work? If you’re convinced that SaaS might be the play your company should make, you should first look into these three (3) SaaS sales models you have to know before starting.
Before that, however, perhaps it’s helpful if we look at a few statistics. If the idea of getting into SaaS is appealing to you, you’re not alone. In fact, in 59-percent of workflows in the cloud as of 2013 to 2018 will be transformed into SaaS by the end of 2018. This is a huge transition, given that 80-percent of performance apps used by companies are already being stored in the cloud.
Price and Complexity
Before learning about the intricacies of SaaS sales models, it’s perhaps important to learn about how price and complexity of software interpay in determining the kind of model you should implement for your system. For instance, your average selling price is where demand and supply meets, and as such takes into account factors such as risk, volume, costs, competitiveness, and customer value. Your ASP pretty much puts a ceiling on your cost for customer acquisition, which in turn limits the kind of sales model you can choose from
- Interestingly, deal volume appears to have inverse relationship with price. For instance, large target markets are needed for lower ASPs, as you’ll have shorter sales cycles, higher conversion rates, more pipeline, and more leads to deliver to a lot of customers.
- For instance, a $500 annual recurring revenue (ARR) as an ASP means your rep may need to sell as much as 1,000 deals annually to cover customer acquisition costs. Meanwhile, an ASP or $500,000 ARR may be easier to sustain given you can secure this with just a single deal.
- Of course, price and risk are directly related. High risk is associated with high ASP, but the more risk you’ll provide, the more your prospects will want a personal relationship with the brand.
The transition towards SaaS seems fast and “apt” primarily because of how flexible and volatile an industry SaaS is, and its offerings definitely help companies be optimized, manageable, have access to better opportunities, and have repeatable yet efficient sales strategies. Here are some SaaS models you can look at:
1.) Customer Self-Service is ideal for those who want to achieve significant revenue at lower prices. Of course, this also means having to get complexity out of the window and instead provide simplicity for the sake of meeting high volume. Of course, in the same token, this means the kind of service you will implement is something people will be willing to learn about the system and service themselves.
- Customer self-service models normally assume full revenue responsibility, with companies creating awareness through automation and educational content.
- Customers will likely see features implemented with automation and various tools, such as educational content, templates, and easy onboarding tools.
2.) Transactional Sales are apt for offerings that have different services at different price ranges, which brings more expectations to the offering. Transactional sales models often serve customers who want to see the “face” behind the company – these normally come with higher ASPs, and normally entails customer support, invoicing, premium SLAs, and signed contracts.
- Transactional sales models tend to be high-risk and high-reward. They are commonly associated with rapid onboarding, shorter sales cycles, higher support operations, and higher volume sales.
- This is often backed up by a healthy mix of customers willing to learn about the system but at the same time need a considerable amount of guarantees that they will be supported.
3.) Enterprise Sales tend to cater to offerings that tend to be complex that they naturally begin as enterprise sales. This is a bit of a deviation from the “traditional” sales formula where services start from low-scale, easy-to-use features that gravitate towards more complex systems. Enterprise sales models tend to be services that offer strategic, core business processes implemented through feature-rich suites. These cater towards mid-to-large enterprises, and as such has a different kind of demand compared to other sales models.
- Sales now focus on target prospects, supported through sales engineering resources and product marketing during deals. As such, relationship-building, trust, education, and brand awareness is dealt with high-end marketing. More complex tools include using ROI calculators and product roadmaps assist in the customer acquisition process.
The Bottomline: Back To Basics
Starting a venture in SaaS – be it your own company or a service – isn’t going to be an easy ride. Both SaaS providers and users have respective challenges to face, and these aren’t easy considering the volatile nature of SaaS as an industry. Newcomers in the SaaS industry will need to make sure they maintain substantial growth through the years to keep up with both trends and competitors. End-users of SaaS will have to make sure the SaaS offering they choose will be truly capable of improving overall company operations. However, if you’ve decided to leverage sales on SaaS, do remember the three (3) SaaS sales models as enumerated above before starting your venture into SaaS.
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