Are you a SaaS startup trying to sell its product but having troubles with the sales numbers? Then it's time to understand the essential things of marketing a SaaS product. The main reason why you chose the SaaS industry is its exponential growth rate. It has crossed the $100 billion mark, but the competition is also cutthroat.
To succeed in such a highly contested market, the cost of the product plays a vital role. Therefore, your approach to selling a SaaS product generally depends on the price of your digital product and your target audience. But how do you decide? Below are three different SaaS sales models to help you lead in your SaaS sales strategy.
SaaS Sales Models Based on Your Pricing and Target Audience
We divide the sales models based on the price and complexity of the B2B SaaS product. As a startup, you need to analyse your strengths and weaknesses before choosing any sales strategy for reaching out to your customers.
The sales model you pick for your startup is a make-it or break-it decision. While your right choice can grow your company, the wrong one can damage your entire sales cycle & recurring revenue, causing huge losses.
The Importance of Price Your sales strategy will be worthless if it doesn't include the price of your SaaS product. Therefore, the average selling price (ASP) becomes a valuable factor for getting insights into a SaaS company. To decide the ASP, you generally consider the type of product & its life cycle. However, the ASP of your digital product directly links to the cost of your sales rep.
The price of a SaaS product has an inverse relation with the number of sales. For example, if the cost of your SaaS product is less, you need a higher number of deals to meet the revenue goals. Therefore, it pressures the marketing & sales teams to find more customers. Similarly, if your product has a higher ASP, it needs fewer sales to meet the same targets. However, the customer acquisition costs in both scenarios may vary.
Contrarily, the ASP is also directly proportional to the risk involved in the deal. Any customer purchasing an enterprise solution at higher costs will seek high-end support.
The Complexity Factor How easy do you think it is for a potential customer to find your product, understand its working, and purchase it? You have to know it because it's essential for deciding your sales model. Generally, a customer will always prefer a simple & efficient SaaS product. But, on the other hand, if a SaaS product is too difficult to understand, customers will avoid buying it, despite its value to their businesses. Besides, with a complex CRM or ERP, a prospect might need to alter its internal business processes. Thus, as an effective SaaS startup, you need to have a sales model that can navigate the customer in any such conditions.
Based on the price and complexity of the products, you can select any of the three SaaS sales models: self-service, transactional, and enterprise. A mature SaaS business may employ all three, while a startup may have resources to focus on only one. However, the choice of sales model may vary depending upon the market type for startups also.
Considering the variations of different pricing and complexities, below are the three SaaS sales models:
If your SaaS product has a low ASP, your entire focus is on the sales volume. Low ASP encourages keeping complexity almost out of the purchase. However, as the name itself suggests, your customers have to understand the value of your product. They need to know how to purchase & use it and be able to service themselves.
A self-service sales model is an excellent choice if you are a SaaS startup. With low-cost offers and freemium plans, you can lure customers into trying your product. It helps the onboarding process of potential customers and gives them an option to make an informed decision before spending a penny. With a wide top of the sales funnel, the sales cycle also becomes fast.
If you raise the average selling price of a product, it increases the risk associated with the deal. If the product costs higher, the customers will automatically look for more than just a transaction. If your ASP is higher, your product has to accompany an interpersonal business relationship with the customer, legal formalities such as invoices, signed contracts, etc., along with human guidance during any complications.
With the involvement of high risk, the transactional SaaS sales model moves away from the customer self-service into more supportive, efficient, high volume sales, and short sales cycles.
Sales in the transactional model depend on inside sales rep supported by online content and marketing, lead generation to build a strong pipeline, and automation to drive complexities away.
Enterprise sales is a highly complex SaaS sales model that requires dedicated sales operations supported by the marketing teams. As a result, enterprise companies invest & use multiple resources to engage and close big accounts. Not to mention, the support services in the enterprise model are of the high touch. For example, it may involve various top-end features like educational tools and training modules with an onsite resolution of issues.
The sales funnel for enterprise sales begins with strategic marketing efforts to facilitate brand awareness, personal relationship building, and tailored educational training programs.
Regardless of the selected SaaS sales model, providing support to your customers is inevitable if you want to succeed in the SaaS market. Whether you are offering your product in a freemium model or through a complex & expensive purchasing process, you need to focus on the supportive services to help your customers every time, or you may lose the deal.
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The average sales cycle for SaaS company
The sales cycle is a set of actions taken by an enterprise company to close the deal. It begins with the lead generation through marketing efforts, going through a period of discussions, and finally onboarding a customer. Your SaaS product’s sales cycle can be quite different from physical products. It includes educational training, more touchpoints, big-size accounts, and thus, resulting in a more extended closing period.
The sales cycle of a SaaS product depends on the sales model you choose. The price & complexity of your product and the type of potential customers influence your sales cycle. However, the price is the primary catalyst—the lesser the price of a product, the shorter the sales cycle, and vice versa.
Quoting Jason Lemkin, the founder of SaaStr, the average SaaS sales cycle with respect to the annual contract value (ACV) should be:
- Up to $2,000 in ACV -- within 14 days
- Up to $5,000 in ACV -- within 30 days
- Up to $25,000 in ACV -- within 90 days
- Up to $100,000 or more in ACV -- within 90–180 days
Other than cost, below are the factors that affect your sales cycle:
a) Type of market: If you are a SaaS startup and new to the market, your sales cycle can be longer. Before you onboard a customer, you have to invest time & money in brand awareness.
b) Enterprise business: Selling your SaaS product to enterprise companies is not only expensive but also involves multiple stakeholders. It increases an already lengthy cycle because you need to keep all the stakeholders in sync and complete all legal or technical formalities.
c) Complexity of the software: A complex software itself slows down the sales cycle. Your biggest challenge in selling a complex SaaS product is to get the right prospect. Once you start the sales discussions, most of your time will be spent on making your potential customers understand the ins & outs of the product.
d) Free trials & freemium models: When you give free trials to potential customers, they use the product for that trial period without paying any money. If you keep long free trials to attract potential customers, you give them more time to use your product free of cost. Hence, delaying the closure. Similarly, for freemium plans, many customers may limit their SaaS usage, lengthening the sales cycle.
What is the SaaS sales process?
SaaS products are software systems that solve the complexities of organizations in many ways. These generally come with subscription-based pricing models. From finding customers to selling the products, the SaaS sales process includes five different stages.
a) Lead generation: In simple language, a lead is a business or person interested in your product. It is the part that introduces your SaaS product to your potential customers to catch their attention. Without lead generation, any SaaS business will fail. This stage may include attracting people to visit your website, engaging & encouraging the visitors to take action, and converting them into a lead.
b) Outbound prospecting: In this stage of your b2b sales strategy, the sales rep contacts the leads generated through marketing efforts. It’s the time when you perform activities such as cold calling, emailing, or using other platforms for communication.
Additional reading - Best Data Enrichment Tools for Emails & Contacts
c) Qualification: As a startup, you will never want to waste your time talking to a non-serious buyer for days. For the growth of your business, you need to put more effort into qualified leads. Sales qualification becomes significant as it increases the ratio of deals closed. It helps you to move on & focus on a prospect who is more likely to buy.
d) Demonstrating: SaaS demo is another vital part of your sales cycle as it enables you to interact your product with the customer and make him aware of the value it will add. In reality, it can be the deciding factor whether you close the deal or lose the prospect.
e) Closing: If you have completed the above stages successfully, the last step is to close the deal. This stage involves negotiating the terms, finalising legal formalities, and handing over the SaaS product against its price.
How to Sell Software as a Service (SaaS)
Through your SaaS product, you sell a platform that adds value to your customer's business. Thus, in SaaS sales, the idea is to sell values, not products. However, when you start selling, below are some unavoidable measures that you need to keep in mind:
Building a sales funnel: Sales funnel is a pattern of events that a potential customer goes through before making a purchase. It helps a SaaS company by allowing marketers to analyse and improve the sales cycle for better revenue outcomes. Various stages of an effective sales funnel for SaaS startups include:
- Brand awareness & driving traffic through different marketing efforts like search engine optimization, advertisements, etc.
- When customers are aware of your product & comparing it with others, you need to focus on generating their interest by telling them the value addition they'll get. But remember, never be pushy!
- If you can engage your prospects well, the chances of your sales increase many times. It is the time when you should make your best offer and make it irresistible.
- It's not the end of the sales funnel if a customer buys your product. It's time for building a stronger relationship and upselling.
B2B SaaS Sales Strategy
The growth of any SaaS startup directly links with the quality of the product & the sales strategy. SaaS is not a one-time payment. Your customers pay periodically for the services rendered. Thus, it would be best if you have a plan that keeps them updated and engaged with your product for a very long time. Right from today, implement the following tips to get the best out of your sales strategy:
1) Communication Communication is the key to efficient sales. Keep it regular and precise. But do remember that your mails shouldn’t frustrate clients. Call your trial signups immediately & keep them engaged with something valuable every time.
2) Email automation Managing a large number of customers or prospects is never easy. Use leading business automation tools in the market to help streamline your business activities. Emails are significant for businesses and their owners. Automating your emails can be a catalyst in nurturing the leads by following up their interests and obtaining valuable information. Automating email can also help in brand awareness and reach an audience that manually takes ages. It not only saves your time to focus on other tasks but also saves cost.
Check out encharge.io to see how marketing automation can help your business.
3) Quick sales cycle Keep your trials short. Longer free trials will only delay your deal. Keep your demos precise and value-focused where your prospects know why the product is beneficial for them.
4) Effective payment planning Giving different subscription plans to customers is a good tactic. However, focus more on providing prepaid annual subscription plans. It helps in a stable income to you plus gives a discounted cost to customers.
5) SaaS affiliate marketing SaaS affiliate marketing is an effective tool to boost your sales funnel if you use the right platform. Besides, it is also a very cost-effective method for startups. Create a payment system for marketing. You may choose from different models like Cost Per Action (CPA), Cost Per Mile (CPM), and Cost Per Click (CPC), depending upon the suitability. If you are using Stripe, start your affiliate program with Rewardful/ for the best deals.