- 22 March 2023
- by Andrej Fedek
- 0 Comments
Today, the world of SaaS is booming. Take whichever popular service – there’ll be a SaaS company behind. Think of any problem you need to solve: from poor sleeping to managing your budget to credit scoring (you name it), there’ll be an app for it. In the USA only, there are about 17K SaaS companies as of 2022, making it one of the leaders in the SaaS industry distribution. And as the demand for SaaS products keeps growing, the industry won’t shrink in the nearest future – right the opposite.
While it’s great for the industry, for SaaS salespeople, it becomes more challenging to do their job – to sell. The SaaS grounds have become saturated with the offer – there can be tens of solutions to a certain need – so winning customers might require more effort and a wiser, strategic approach. So let’s look at the SaaS sales and some actionable strategies that might help understand and win customers.
Understanding SaaS: a brief look at the SaaS business model
But first, let’s take a brief look at the SaaS model and the specifics of SaaS sales compared to traditional B2B or B2C sales.
SaaS, by definition, stands for software as a service. It’s a cloud-based delivery model in which solutions are hosted on a third-party server and accessed using a web browser or application programming interface (API). In this model, customers don’t need to install or maintain the software locally. They can access it when needed from anywhere there’s an internet connection. Customers usually also get simplified maintenance and support. SaaS usually operates under a subscription.
Peculiarities of SaaS sales
SaaS products can aim at individuals or business customers. However, due to the specificity of the industry, SaaS sales have several unique characteristics distinguishing them from traditional B2B or B2C sales. The peculiarities mostly derive from the fact that SaaS usually sells not a product but rather a solution to this or that pain point, especially when it comes to B2B SaaS, and also the character of the relations with customers. Let’s break down some of these peculiarities:
- Focus on a long-term relationship
The SaaS sales model usually involves a subscription, meaning customers pay a recurring fee to access the software. Closing a deal – a purchase – isn’t the end point here. Customers should continue using the service, which requires building long-term relationships with them and ensuring they’re satisfied with the product in the long run.
- Non-intrusive sales approach
SaaS companies, especially in the B2C sector, often use a low-touch sales approach. It often comes with the transactional type of sales, implying selling a high volume of subscriptions at comparatively low prices. Such sales mostly rely on automation, self-service, and online marketing to attract and convert leads rather than a traditional sales rep’s work. A sales team’s role in such a case is more about leveraging technology, data, and analytics to identify and target potential customers and encourage them to purchase.
- Metrics-driven approach
SaaS sales teams should rely heavily on metrics and know the most critical ones, such as MRR, CAC, Churn rate, and more, that help measure and optimize performance. (We’ll touch upon those in more detail further.)
- Collaborative approach
As customer experience is one of the biggest drivers of SaaS sales, the sales process requires joined forces of different teams (besides sales), such as customer support, marketing, and product development, to ensure a seamless customer experience and growth. So internal collaboration can be a cornerstone for successful SaaS sales.
- Innovation and iteration
SaaS companies are known for their fast pace of innovation and regular release of updates and new features, which requires a sales team to adjust and communicate changes to customers quickly.
How do SaaS customers typically go through the sales funnel?
A SaaS sales funnel, just like a B2B sales funnel, comprises all the classic stages, such as awareness, interest, consideration, and conversion. The difference is in the post-sale stage, which is no less (and maybe even more) important for SaaS sales. For a traditional sales funnel, the story usually ends with purchasing a product (conversion). A SaaS funnel goes a little further. Selling a SaaS product requires more stages of the funnel to ensure earning a long-term commitment from a customer and making the most of these relationships. Those stages include onboarding, retention, and upselling.
Once a customer has made a purchase, they need to adopt the software, taking the necessary steps to set it up and make it work for a customer’s needs. That’s what onboarding is about. It usually involves setting up the account, providing training and support at every step of the software adoption, and ensuring a smooth transition to the software.
SaaS companies rely on customer retention to drive growth, so, usually, the final stage of the funnel is to ensure that the customer is satisfied and continues to use the software, involving ongoing support, communication, and a focus on customer success.
Often, SaaS companies go the extra mile to make the most out of their relationship with loyal customers. Once the users know the product well enough or need to grow, it might be the right time to offer some additional services or a possibility to scale within your product, which opens nice upsell opportunities.
It’s also important to note that the SaaS sales funnel isn’t necessarily a linear process, and customers may move back and forth between stages depending on their needs.
How can sales process look for an SaaS business
With all the above mentioned in mind, a typical SaaS sales process can take several steps, such as prospecting, qualification, demonstration, trial, purchase, onboarding, and renewal. Let’s look at them in a bit more detail.
Prospecting involves identifying and reaching out to potential customers who might benefit from the software through various channels, such as social media, email marketing, and advertising.
Qualification is, in a nutshell, finding out whether the leads are a good fit for the software. This step might involve understanding prospects’ needs, budgets, and decision-making processes.
A demo is needed to showcase the features and benefits of the software. Be it a live demo, a pre-recorded video, or a webinar, if you like, – think of any form of demonstrating software’s capabilities to do what the customers-to-be need, and solve their problems.
A trial or test period allows people to try the software and see if it meets their needs. The trial period can range from a few days to a few weeks, depending on the complexity of the software.
Purchase is the step at which the prospect converts into a paying customer. Sometimes (usually with more complex products), it may involve negotiating pricing and terms, overcoming objections, and addressing any remaining concerns.
Onboarding, as mentioned above, is the period of adaptation, during which the team helps a customer set up the product and get more acquainted with its ways and full feature set. It’s a critical step because the next one depends greatly on its success.
Renewal is the final stage of the SaaS sales process. If a customer comes through and renews their subscription, you may say congrats to yourself on winning their loyalty and ensuring continuous purchasing from them in the future (aka more sales for you). Bringing a customer to and through this step involves ongoing support, communication, and a focus on providing the best customer experience.
Challenges a SaaS sales rep typically faces
SaaS sales can be challenging. Depending on the niche and the complexity of the product, sales reps can face various hardships that might hamper the sales process. Still, there are some challenges unique and typical for SaaS sales.
- Managing a long sales cycle
SaaS often features longer than traditional sales cycles, as customers may take more time to evaluate the software and decide on purchasing it. This way, sales reps might want to be patient and persistent, always available for communication, and ready to answer multiple questions. The excellent knowledge of the product they are selling, understanding its value, and being able to communicate this value to customers can help salespeople efficiently manage lengthy sales cycles and often shorten them.
- Managing a high volume of unqualified leads
SaaS sales teams often generate a high volume of leads through various marketing channels, which can be difficult to manage effectively. Without a clear understanding of the target audience, many leads a sales team receives can be unsuitable. At this point, a strong focus on lead qualification and prioritization might help, as well as effective communication and collaboration with the other teams (such as marketing, product team, etc.). Without it, a sales team risks wasting substantial time trying to sell the product to people that don’t need it.
- Keeping up with a rapidly changing industry
The SaaS industry is constantly evolving, with new technologies and competitors emerging all the time. These require sales reps to stay up-to-date with industry trends and changes and be adaptable and flexible in their approach to selling the product.
Critical SaaS KPIs: how to measure your SaaS success?
Measuring success is dramatically important for SaaS sales. We already mentioned that sales reps should be capable of analyzing various data to understand the performance and find ways to improve it. And here’s where KPIs come to help. Knowing what to track can be critical, so speaking of SaaS, what is a KPI in sales?
SaaS (Software as a Service) sales KPIs (Key Performance Indicators) are metrics used to track the performance of a SaaS company’s sales activities. They can be a source of truth for the team to evaluate their work. Below are some of the most important KPIs that allow SaaS sales teams to understand how the company is doing and how efficiently sales work and see the areas where change is needed.
Monthly Recurring Revenue (MRR) – the total revenue generated by the company from its monthly recurring subscriptions. It’s a crucial KPI because it indicates the stability and predictability of a company’s revenue streams.
Customer Acquisition Cost (CAC) – calculates the average cost of gaining a new customer. It includes all the marketing and sales expenses associated with getting a new customer, such as advertising, sales salaries, and marketing campaigns.
Churn Rate – the percentage of customers who cancel their subscription within a given period of time. A high churn rate can indicate that customers are not satisfied with the product, leading to revenue loss over time.
Customer Lifetime Value (CLTV) – the total revenue a company can expect to generate from a customer over the course of their lifetime. It’s a key metric because it helps the company to determine how much it can afford to spend on acquiring new customers.
Monthly Active Users (MAU) – measures the number of unique users who use the product during a given month. It’s an important metric because it shows how engaged users are with the product and how much value they derive from it.
Conversion Rate – measures the percentage of visitors to the company’s website who convert to paying customers. This metric is important because it helps the company to optimize marketing and sales activities.
Sales Pipeline Velocity – measures the speed at which a lead progresses through the sales funnel. A high sales pipeline velocity can indicate that the sales team is efficient and effective at converting leads into customers.
Those are mostly the company-wide KPIs that can display how the business achieves its goals, including sales. It’s worth noting that depending on the company’s objectives, they can set and track other KPIs to assess the contribution of other teams directly or indirectly involved in the sales process. These teams would then have specific internal KPIs to measure their part of the success in the overall business performance.
Five actionable SaaS sales strategies for SaaS reps to improve your sales experience
As mentioned, the success of SaaS sales can be determined by multiple factors, and selling SaaS products can be challenging. Efficient sales require a strategic approach, so we gathered some actionable strategies you might want to consider trying to improve your sales performance and increase SaaS revenue.
Strategy #1: Lead scoring
With unqualified leads being one of the biggest sales hampers, lead scoring is the technique that can tremendously help reduce the number of low quality leads, prioritize prospects, and focus the efforts on those more likely to become paying customers.
Lead scoring for SaaS sales implies evaluating and ranking potential customers based on their likelihood of converting into paying customers. Lead scoring typically involves assigning points to various actions and attributes that indicate a lead’s level of interest and engagement with the company’s product or service, for example, visiting the company’s website, downloading a whitepaper, attending a webinar, or requesting a demo.
Next, the sales team ranks the leads according to their score. The highest-scoring are considered hot and prioritized for immediate follow-up. Lower-scoring leads are deemed less likely to convert and may be placed in a nurturing campaign for further engagement.
Lead scoring helps SaaS companies improve the efficiency and effectiveness of the sales process and ensure that sales reps spend their time on the most valuable leads to the company.
Creating an efficient lead-scoring strategy for SaaS sales involves several steps:
- Defining the ideal customer profile by pointing out the characteristics of the customers that are the best fit for your product or service;
- Identifying the actions and attributes that indicate a lead’s level of interest and engagement with your product or service;
- Assigning points to each action and attribute, where higher values indicate stronger interest and engagement;
- Determining the threshold for a hot lead based on historical data or industry benchmarks.
Overall, an efficient lead scoring strategy requires a thorough understanding of your ideal customer profile, careful selection of the most important actions and attributes, and ongoing monitoring and refinement to ensure that the scoring criteria are effective and aligned with the sales team’s needs.
You might want to monitor the effectiveness of your lead-scoring strategy over time and make adjustments as needed. It’s also critical to share the image of the ideal customer with a marketing team so that they could direct their efforts and tweak campaigns to catch more quality leads.
Strategy #2: Diversification of traffic
Many SaaS products, after launch, leverage big software marketplaces, especially those around bigger and more popular products (if they integrate and help improve user experience with these products) to gain traffic and engage with customers. Frankly, it can be a viable solution for a new product to find its way to the market and reach a potentially interested audience.
However, there are some hidden risks connected with this approach, as it makes you dependent on a single traffic source. Should the marketplace change its algorithms or close, you’ll lose the exposure at once, which can be hard and not very fast to compensate.
At this point, diversifying traffic for a SaaS business can be a strategy that helps reduce this dependence. Moreover, it allows you to increase exposure to a larger audience, providing more flexibility for marketing and lead-generation activities.
Here are some channels you might want to consider to diversify your traffic:
- Search Engine Optimization (SEO),
- Pay-per-click (PPC) advertising,
- Content marketing,
- Social media marketing,
- Influencer marketing,
- Email marketing,
- Referral marketing,
- Partner marketing, and more.
Definitely, not all of them might work for you. Monitoring your sales channels’ performance can help you pinpoint the most efficient ones and focus your marketing efforts on them to gain a constant stream of quality traffic and leads.
Strategy #3: Improving free trial efficiency
A free trial is a great way to attract potential customers and give them a chance to experience the benefits of your product or service. However, determining the appropriate duration of the trial period can be challenging – it can be hard to balance the length of the trial. It should be long enough to let the value of the product instill in users. On the other hand, a shorter trial period might create a sense of urgency, encouraging customers to test the solution and decide on purchasing faster.
The factors that can help determine the most suitable free trial duration for a SaaS product might include product complexity, customer acquisition cost, your pricing model, and more. For example, if a product requires significant setup or customization, a longer free trial period may be necessary to allow customers to evaluate it. If the cost of acquiring a new customer is high, a shorter trial period may be more cost-effective.
The following are examples of some standard free trial periods and the best options:
- A 7-day trial should be sufficient for users to decide whether to purchase the solution if your SaaS product is quick to learn and simple to use.
- A 14-day free trial gives a little bit extra time to test a product if your SaaS offering includes a lot of features that need to be investigated and used.
- Complicated SaaS products (usually aimed at enterprise customers) may need a 30-day free trial to understand their capabilities, pitch them to various stakeholders, and test product integrations.
There’s definitely no one-size-fits-all approach to determining the best free trial duration for a SaaS product. The good rule of thumb here is to monitor user engagement during the trial period to understand how your users interact with your product. You can use this information to adjust the trial duration and improve the conversion rate.
Strategy #4: Beat the churn
High churn is a major challenge for SaaS businesses. Just to recall, it refers to the percentage of customers who cancel their subscription or stop using your product or service. There can be various reasons for the high churn of SaaS products, including poor understanding of the product and its value, lack of customer support, inadequate pricing, and more. High churn prevents SaaS companies from growing, making them invest more and more into acquiring new customers to compensate those who canceled and don’t lose revenue. At this point, having a solid strategy to reduce churn seems necessary for a SaaS business.
Here are some tactics to reduce churn and improve customer retention for your SaaS business:
Improve customer onboarding
Provide a smooth and easy onboarding process for new customers, including tutorials, demos, and support resources, to help them understand the value of your product and reduce the likelihood of cancellation.
Provide excellent customer support
Customer support can drastically improve your churn rate. But if you fail at it, the churn will skyrocket. Consider providing responsive and effective customer support, including live chat, phone, and email, to enable customers to resolve issues quickly and increase their satisfaction with your product.
Offer flexible pricing
Your pricing might depend on different factors, such as product complexity, your feature set, and even your SaaS sales model. However, offering some flexibility can always be welcome. You might offer monthly or annual subscriptions to meet the needs of different customers and allow them to choose the level of commitment they’re comfortable with.
Deliver ongoing value
Continuously deliver value to your customers through new features, updates, and improvements to keep them engaged with your product and remain your customers.
Identify and target at-risk customers
Use data analytics to identify customers who are at risk of churn and develop targeted retention campaigns to keep them engaged with your product. You might want to look at how people interact with your product, how often they use it, etc., to determine those cancellation-ready customers you need to focus on.
Listen to customer feedback
This one should be carved in golden letters. Actively solicit and listen to customer feedback to understand their needs and concerns. You can use this feedback to improve your product or service and show your customers that you value their input.
As you can see, managing churn is an ongoing process that requires continuous effort and attention. By focusing on customer retention, you can build a more sustainable and successful SaaS business.
Strategy # 5: Ongoing communication
Effective communication with customers is essential to improving SaaS sales. Frankly, you need it to sell even a pair of shoes. But for SaaS business, communication is king. Not only does it help sell your product better but overall improves your interaction with customers, allowing you to gain their loyalty and even become your product’s evangelists (which means even more sales). Let’s look at how you can leverage communication to engage more sales.
- Build relationships
As mentioned, communication helps build relationships with customers, which is key to improving sales. By understanding their needs, concerns, and feedback, you can tailor your product or service to better meet them.
- Increase engagement
Regular communication with customers, such as newsletters, updates, and in-app messaging, can increase engagement with your product or service. All this can help customers better understand the value of your product and increase the likelihood of renewing their subscription.
- Upsell and cross-sell
Communication can help identify opportunities to upsell or cross-sell customers to other products or services. By understanding their needs and usage patterns, you can recommend additional products or services that may be of interest to them.
Overall, effective communication with customers is critical, so you might want it to be in your strategic package for improving SaaS sales.
Again, it’s worth noting that not all of these strategies can be of use for your particular business. Neither it is the extensive list of SaaS sales strategies one can think about. Usually, you decide on which to go with based on the goals you want to reach, your typical customer profiles, and the type of your SaaS product. So, using the common sense approach can also be recommended.
SaaS sales strategies: bottom line
SaaS sales have recently become extremely competitive grounds, making salespeople struggle with tons of competitor solutions to win customers. At this point, having a strategic approach to sales can be a competitive advantage.
The most common and helpful strategies a SaaS team can implement include carefully scoring leads, diversifying sales channels, leveraging free trials, beating churn, and building solid relations with customers through communication. The efficiency of these strategies requires a deep understanding of the product and the value it offers, as well as the ability to communicate this value to customers. Ultimately, sales teams should stay on top of SaaS KPIs, analyzing and measuring the success of their efforts.
Andrej Fedek is a digital marketer. He recently started his own blog about digital marketing called InterCool Studio. His passion is to help startups grow and thrive in a competitive environment.