Selling SaaS is different from traditional software - it's not a one-time transaction, but a long-term relationship. To succeed in this relationship, you need an approach that prioritizes nurturing customer connections over just closing deals. With the global public cloud application services market expected to reach $230+ billion by 2024, it's an amazing industry, but one that requires a shift in sales strategies.
For example, instead of focusing on closing more deals, nurturing relationships with your leads and customers may lead to better outcomes and higher revenue overtime. SaaS sales requires a consistent focus on strategies that improve recurring revenue.
In this blog post, we'll explore the nuances of the SaaS sales process, the changing customer buying behavior, and the strategies that successful SaaS companies are employing to navigate this dynamic market.
What is SaaS sales?
SaaS (Software as a Service) is a software delivery model where the software is hosted and managed by the service provider (the SaaS vendor) and made available to customers over the internet, typically through a subscription-based pricing model.
In the SaaS model, the software is not installed on the customer's premises, but rather accessed through a web browser or a lightweight client application. This model leverages a multi-tenant architecture, where a single instance of the software serves multiple customers, allowing for more efficient resource utilization and cost savings for the customers and the vendor.
Unlike traditional software sales, where sales reps would focus primarily on one-time license sales, in SaaS, sales reps' activities revolve around a subscription-based model, where customers pay a recurring fee (typically monthly or annually) to access and use the software.
Difference between Traditional Software Sales and SaaS Sales Process
In a traditional software model, customers would purchase a licensed copy of the software and install it on their own computers or servers. This means they would be responsible for maintaining and updating the software themselves, which often required dedicated IT resources and infrastructure.
SaaS, on the other hand, eliminates the need for customers to handle software installations, updates, or maintenance.
Here are the key differences between SaaS and traditional software models:
Delivery and Access
Traditional software: Software is delivered as a packaged product and installed on the customer's premises.
SaaS: Software is delivered over the internet and accessed through a web browser or a lightweight client application.
Deployment and Management
Traditional software: Customers are responsible for deploying the software on their own systems and managing updates, patches, and infrastructure.
SaaS: The vendor handles all deployment, updates, and infrastructure management, making the software available to customers through the cloud.
Pricing Model
Traditional software: Customers typically pay a one-time license fee, plus potential maintenance fees.
SaaS: Customers pay a recurring subscription fee, usually monthly or annually, based on usage or the number of users.
Scalability and Accessibility
Traditional software: Scaling often requires purchasing additional licenses or hardware, and access is limited to specific devices or locations.
SaaS: Customers can easily scale up or down their usage as needed, and the software can be accessed from anywhere with an internet connection.
Customization and Upgrades
Traditional software: Customizations and upgrades can be complex and may require additional development or consulting services.
SaaS: Vendors typically handle customizations and upgrades centrally, making them available to all customers seamlessly.
By leveraging the SaaS model, businesses can enjoy the benefits of lower upfront costs, reduced IT overhead, automatic updates, and greater flexibility and scalability. However, they also need to consider factors like internet connectivity, data security, and vendor reliability when choosing a SaaS solution.
Now that we understand how SaaS sales differs from traditional sales, have covered a quick revision, let’s understand how SaaS has changed the buying behavior of your customers.
How has SaaS changed the buying process?
The unique aspects of the SaaS model have not only reshaped the way software is delivered and consumed but have also profoundly impacted the buying process and customer behavior.
Here's how:
Lowered Barriers to Entry and Exit
In the traditional software model, high upfront license costs and complex implementation acted as significant barriers to entry for customers.
With SaaS, the subscription-based pricing and ease of deployment lower these barriers, making it easier for customers to try out and adopt new SaaS solutions.
Similarly, the lack of long-term contracts or significant sunk costs makes it easier for customers to switch between SaaS providers, lowering the barriers to exit. This increased flexibility and lower switching costs mean that SaaS vendors need to continuously demonstrate value and focus on customer success to retain customers.
Educated and Empowered Customers
Review websites, social media, and online communities have made it easier for customers to research and compare SaaS solutions before making a purchase decision.
Customers are more aware of alternatives, pricing models, and the experiences of other users, empowering them to make informed choices. Word-of-mouth and peer recommendations carry significant weight in the SaaS world, as customers rely heavily on the experiences of others in their industry or network.
SaaS sales teams need to be prepared to address concerns raised by online reviews, provide transparent pricing information, and leverage positive customer testimonials and case studies.
These significant changes in customer behavior and expectations have far-reaching implications for how SaaS vendors approach their sales strategies.
Changes in buying behavior and SaaS Sales
From a SaaS sales rep's perspective these factors have significant implications for SaaS sales:
Emphasis on Free Trials and Freemium Models
Offering free trials or freemium plans allows customers to experience the product firsthand, lowering the initial risk and facilitating easier adoption. Sales teams need to focus on converting free trial users into paying customers through effective onboarding, value demonstration, and addressing objections.
Importance of Customer Success and Renewals
With lower barriers to exit, retaining existing customers becomes as crucial as acquiring new ones. SaaS sales teams need to work closely with customer success teams to ensure high levels of customer satisfaction, adoption, and value realization. Renewals and upselling/cross-selling to existing customers become critical components of the overall sales strategy.
Leveraging Social Proof and Advocacy
Positive customer reviews, case studies, and testimonials serve as powerful social proof and can significantly influence buying decisions. Encouraging and amplifying customer advocacy through referral programs, user communities, and social media engagement becomes essential for SaaS sales teams.
Consultative and Value-based Selling
SaaS sales teams need to adopt a consultative approach, focusing on understanding the customer's specific needs, pain points, and desired outcomes. Value-based selling, where the sales process emphasizes the tangible benefits and return on investment (ROI) of the SaaS solution, becomes paramount.
Three Types of SaaS Sales Models
While the SaaS model itself is distinct from traditional software sales, there are different approaches to selling SaaS solutions, each catering to specific target markets and business needs.
The three primary SaaS sales models are:
Self-service model
This model targets individual users or small businesses with a low-touch, highly automated sales process. Customers can sign up, access the product, and manage their subscriptions entirely through the website or app, with minimal human interaction. Examples include productivity tools, project management apps, and personal finance software.
Transactional sales model
Suitable for small-to-medium businesses, this model involves a more hands-on sales approach with direct sales representatives guiding prospects through the evaluation and purchase process. However, the sales cycle is typically shorter, and the contracts are less complex compared to enterprise sales. Examples include marketing automation tools, CRM systems, and collaboration software.
Enterprise sales model
This high-touch, consultative sales model targets large enterprises with complex needs and longer sales cycles. It involves multiple stakeholders, custom negotiations, and often requires significant integration and implementation efforts. Examples include enterprise resource planning (ERP) systems, customer relationship management (CRM) platforms, and business intelligence solutions.
Each of these models requires a tailored sales strategy, team structure, and performance metrics. Choosing the right model is crucial for aligning your SaaS sales efforts with your target market and achieving sustainable growth.
Understanding the SaaS Customer's Mindset
For SaaS sales professionals, understanding the mindset of their potential customers is crucial for success. SaaS customers have unique perspectives and expectations that shape their decision-making process throughout the sales pipeline.
Prioritizing Value over Features
SaaS customers are primarily focused on the value and outcomes your solution can deliver, rather than just the feature set. They want to understand how your software tools can address their specific pain points, streamline their operations, or drive tangible business results. SaaS salespeople must be adept at articulating the value proposition and demonstrating a clear return on investment (ROI) during sales demos.
Emphasis on Customer Service and Support
With SaaS, customers are not just buying a product; they're entering into a long-term relationship with the vendor. Excellent customer service and ongoing support are essential for ensuring customer satisfaction and reducing churn. SaaS sales reps should highlight the company's commitment to customer success, highlighting the resources available for training, troubleshooting, and continuously improving the customer experience.
Evaluating Costs Over Time
SaaS customers understand that the pricing model involves recurring costs, often billed monthly or annually. As a result, they tend to evaluate the total cost of ownership over a longer period, considering factors such as potential price increases, additional user licenses, and integration costs. SaaS salespeople must be transparent about pricing structures and help customers understand the long-term value proposition.
Seeking Ease of Use and Adoption
SaaS solutions are typically adopted by multiple users within an organization, and seamless onboarding and adoption are critical for achieving the desired outcomes. Customers want to understand the learning curve, training resources, and the overall user experience. SaaS sales reps should highlight the intuitive user interface, robust documentation, and any resources available to facilitate smooth adoption.
Valuing Flexibility and Scalability
One of the key advantages of SaaS is the ability to scale usage up or down as needed, without incurring significant additional costs or infrastructure investments. SaaS customers appreciate this flexibility and want to know how the solution can grow with their business over time. Sales reps should emphasize the scalability of the SaaS offering and its ability to adapt to changing business needs.
By understanding these mindsets and priorities, SaaS sales professionals can tailor their approach, messaging, and sales experience to resonate more effectively with potential customers. This level of customer-centric selling can help SaaS businesses nurture long-lasting relationships, drive higher annual recurring revenue, and achieve their sales goals more consistently.
Traditional SaaS Sales Funnels and Their Limitations
For years, businesses have relied on traditional SaaS sales funnels to visualize and manage their customer acquisition process.
The most common model is the linear sales funnel, which represents the journey from generating leads at the top (wide end) to converting them into paying customers at the bottom (narrow end).
While this approach has been widely adopted, it falls short in several ways:
Linear and One-Sided
The traditional funnel only focuses on the customer acquisition side, neglecting the equally crucial aspect of customer retention and expansion.
Finite Process
The funnel ends abruptly after the customer conversion stage, failing to capture the ongoing relationship and potential for further growth.
Outdated Terminology
Terms like "closing deals" and "signed contracts" reflect a transactional mindset, which is less relevant in the subscription-based SaaS world.
Lack of Metrics
The traditional funnel lacks a comprehensive system for tracking and measuring key performance indicators (KPIs) throughout the customer lifecycle.
Enter the Bowtie SaaS Sales Funnel: A Modern, Holistic Approach
To address the limitations of traditional funnels, the SaaS industry has embraced the bowtie sales funnel model, which offers a more comprehensive and customer-centric view of the sales process.
The bowtie funnel is a closed-loop, horizontal model that encompasses both customer acquisition and customer retention/expansion. It consists of two interconnected loops:
Customer Acquisition Loop
Awareness: Generating interest and familiarity with your product or service.
Education: Providing valuable information and resources to nurture leads.
Selection: Helping prospects evaluate and choose your solution.
Customer Retention and Expansion Loop
Onboarding: Ensuring a smooth transition and successful adoption for new customers.
Achieving Impact: Delivering on the promised value and desired outcomes.
Recurring Impact: Encouraging renewals, upsells, cross-sells, and customer advocacy.
The Typical SaaS Sales Cycle
While the bowtie funnel provides a high-level framework, it's essential to understand the specific stages of the SaaS sales cycle in more detail. A typical SaaS sales cycle includes the following stages:
Lead Generation: Identifying and capturing potential customer leads through various inbound (content marketing, SEO, social media) and outbound (cold outreach, advertising, events) strategies. Lead generation software are usually employed to help.
Lead Qualification: Evaluating and prioritizing leads based on their fit, need, and buying potential, typically through lead scoring and nurturing activities.
Product Demonstration: Presenting the SaaS solution to qualified leads, showcasing its features, benefits, and value proposition tailored to their specific needs.
Evaluation and Negotiation: Addressing any remaining questions or objections, negotiating pricing and terms, and guiding the prospect through the decision-making process.
Closing: Finalizing the agreement and converting the prospect into a paying customer.
Onboarding and Implementation: Ensuring a smooth transition for the new customer, providing training, support, and assistance with integrating the SaaS solution into their existing systems and processes.
Customer Success and Retention: Continuously delivering value, monitoring usage and adoption, and proactively addressing any issues or opportunities for expansion to maximize customer lifetime value and minimize churn.
It's important to note that this cycle is not always linear, as customers may move back and forth between stages or skip certain steps altogether, depending on their specific needs and buying journey.
Key Advantages of the Bowtie Sales Funnel
Here are a few key aspects of successfully implementing the Bowtie Sales Funnel and getting the most out of your sales strategies.
Customer-Centric Approach: The bowtie funnel prioritizes customer success and long-term relationships over transactional sales.
Closed-Loop Model: By incorporating both acquisition and retention loops, the model emphasizes the importance of retaining and expanding existing customer relationships.
Comprehensive Metrics: The bowtie funnel introduces a set of metrics (volume, conversion, and time) that allow for comprehensive tracking and optimization throughout the customer journey.
Flexibility and Non-Linearity: The model recognizes that customers may move back and forth between stages, reflecting the dynamic nature of the buying process.
Emphasis on Lifetime Value: By focusing on customer retention and expansion, the bowtie funnel helps businesses maximize customer lifetime value (CLV) and drive sustainable revenue growth.
Implementing the Bowtie Sales Funnel
To effectively implement the bowtie sales funnel, businesses should:
Align their sales, marketing, and customer success teams around a shared, customer-centric philosophy.
Adopt the appropriate terminology and metrics (volume, conversion, time) to track and measure performance across the entire customer lifecycle.
Leverage customer data and insights to optimize each stage of the funnel, from lead generation to customer advocacy.
Invest in technologies and processes that support a seamless customer experience and enable cross-functional collaboration.
Foster a culture of continuous improvement, regularly reviewing and refining their strategies based on data-driven insights.
By embracing the bowtie sales funnel model, businesses can gain a more holistic understanding of their customers' journeys, maximize customer lifetime value, and drive sustainable revenue growth in the dynamic SaaS landscape.
Key Metrics in SaaS Sales
To effectively measure and optimize SaaS sales performance, it's crucial to track and analyze specific metrics throughout the customer lifecycle. Some of the most important metrics in SaaS sales include:
Customer Acquisition Cost (CAC): The total sales and marketing expenses incurred to acquire a new customer over a given period, divided by the number of new customers acquired during that time.
Customer Lifetime Value (CLV): The projected revenue a customer will generate over the entire relationship with the company, taking into account recurring subscriptions, upsells, and churn rate.
Monthly Recurring Revenue (MRR): The predictable, recurring revenue generated from active subscriptions each month, which is a key indicator of business health and growth.
Churn Rate: The percentage of customers who cancel or fail to renew their subscriptions over a given period, which can be divided into revenue churn and customer churn.
Conversion Rates: The percentage of leads or prospects that successfully move from one stage of the sales funnel to the next, such as lead-to-opportunity, opportunity-to-close, and trial-to-paid conversions.
By continuously monitoring and optimizing these metrics, SaaS companies can make data-driven decisions to improve lead generation, sales effectiveness, customer retention, and overall revenue growth.
Building a Successful SaaS Sales Team
Team Assembling the right sales team is crucial for executing an effective SaaS sales strategy. A typical SaaS sales team structure may include the following roles:
Sales Development Representatives (SDRs): Responsible for generating and qualifying leads through outbound prospecting activities, such as cold calling, emailing, and social media outreach.
Account Executives (AEs): Tasked with managing the sales process from initial contact to closing, including product demonstrations, negotiations, and finalizing contracts.
Customer Success Managers (CSMs): Focused on ensuring high customer satisfaction, adoption, and retention through onboarding, training, and ongoing support.
Sales Operations: Responsible for supporting the sales team with tools, processes, data analysis, and other operational aspects to drive efficiency and productivity.
The composition and specialization of the sales team may vary depending on the SaaS sales model (self-service, transactional, or enterprise) and the target market segments or product lines. For example, an enterprise sales team may have dedicated solution consultants or industry-specific account managers.
Effective collaboration and alignment between these roles, as well as with marketing team and product team, are essential for delivering a seamless and consistent customer experience throughout the SaaS sales cycle.
As the SaaS model continues to gain traction across industries, understanding the evolving sales landscape is crucial for both vendors and customers. The bow tie approach, with its emphasis on customer acquisition, retention, and expansion, has emerged as a powerful framework for SaaS companies to maximize customer lifetime value and drive sustainable revenue growth.
Looking ahead, the SaaS sales landscape is poised for further disruption, driven by factors such as the rise of artificial intelligence, increased focus on data privacy and security, and the growing importance of verticalized solutions tailored to specific industries. Successful SaaS vendors will be those that embrace these trends, prioritize customer success, and continuously adapt their sales strategies to meet the ever-changing needs of the market.
Creating the Perfect Bowtie with Visdum
Once you have integrated the Bowtie into your SaaS sales process, you will need to tie the different stages of the funnel with sales compensation plans. The secret sauce of every successful SaaS sales bowtie funnel is a highly customized and transparent sales commission plan.
It acts like the life and blood of your SaaS sales strategies. By integrating your sales commission with specific activities and outputs, you motivate your sales reps to focus on things that matter to the bottomline. Visdum is a sales compensation software that is specifically designed for SaaS sales funnels.
Visdum takes the complexity out of managing complex sales compensation plans through:
Automated computation of all commission plans
Seamlessly integrate your HubSpot or Salesforce CRM and track deals
Resolution of disputes and adjustments in real-time
Insights into plan performance and optimization areas
Capability to make changes and overrides on-the-fly
SaaS stands for 'Software as a Service' and it is the business model in which software is sold on a subscription basis. Customers can pay a monthly or annual subscription fees in order to get access to the software and use it.
Is SaaS sales B2B?
SaaS Sales refer to selling SaaS subscriptions. It can be both B2B or B2C, depending on whether the product is designed to be used by businesses (B2B) or household consumers (B2C).
How much do SaaS sales reps make?
According to revenue.io, Salary.com, and Payscale.com, SaaS sales reps usually make a base salary of $60,000 and with sales commissions, their OTE (on target earnings) reach around $90k to $100k.
Is SaaS easy to sell?
SaaS sales, especially in the B2B space, are focused on solving the problems faced by businesses and by fitting in or integrating the software solution in the existing tech stack of the business being sold to. Hence, it is very targeted and focused, but like all sales, building a client base is tough and traditional volume-based approaches fail.
What are SaaS jobs?
SaaS jobs refer to jobs in the SaaS (software as a service) industry. It is the selling of software as a service you can subscribe to via monthly payments (for example).
What is a SaaS sales strategy?
Tailor solutions to client pain points, emphasize value propositions, leverage data-driven insights, and prioritize customer success to drive conversions and retention in the subscription-based SaaS market.
How do you break into SaaS sales and win?
Master product knowledge, nurture relationships, demonstrate ROI, and employ consultative selling techniques to establish credibility and win in the competitive SaaS landscape.
What are the elements of SaaS marketing strategy?
Segment target audience, create compelling content, optimize user experience, employ data analytics, prioritize customer satisfaction, and iterate for continuous improvement in SaaS product promotion.
How to structure sales team SaaS?
Define roles, foster collaboration, provide ongoing training, leverage technology for efficiency, and empower teams with autonomy to adapt and excel in the dynamic SaaS sales environment.
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