The Biggest SaaS Sales Mistake - And It's NOT the AEs Fault.

We're making expensive mistakes when selling Software as a Service (SaaS) products, because we're approaching our transactions like they are physical goods, but SaaS is different.

Let me first give you context and then elaborate further.

How we got to B2B "as a Service ('aaS')"

Years ago, buying an important software tool (CRM, ERP, etc.) was a high risk leap of faith. It required servers and infrastructure and a big investment in terms of time/attention, and money. Therefore the decisions were reserved for C-Level Execs that spent 6 -24 months on due diligence and 6 figures in consulting to "get it right". Implementations also took 3 - 18 months, and the ROI wasn't seen until much later.

Then the market shifted. Buyers got tired of $$ Million dollar mistakes $$ after failed implementations. Software companies also realized that they could make more money long term by offering their Software as a Service (SaaS). Instead of charging 7-figures up front and "selling" the software, clients pay $150K/yr and "rent" it for as long as they want. The implementation was also easier as it was cloud based and not on-premise.

Salesforce.com took over the CRM market using the slogan of "No Software" (where they meant "don't buy software, rent it" aka SaaS). Oracle's Siebel bit the dust.

Why Did "aaS" Work?

Why did Salesforce win so many deals so fast?

SaaS reduced the risk of failed implementation to the buyers.

Risk = time + effort + money

Imagine yourself as a CRM buyer. Even if you felt Siebel was slightly better, would you pay $1 Million to buy Siebel and hire an implementation team to set up servers in your office, or would you rather just "rent" the cloud SFDC version for $150K per year?

Consider this, the monetary breakeven is in ~7 years. However, you'll know if you made the right choice in 2 years or so... If you go with SFDC and it's a mistake, the switch to Siebel would cost $300K (two years of SFDC payments), while if you go with Siebel and you make a mistake it's a $1 Million mistake, plus you have servers in your office and an IT hire that you probably no longer need.

Salesforce.com is the right choice!

The shift to SaaS also sped up sales cycles and increased win rates! Clients were willing to move faster and no longer needed to evaluate things so in depth as the cost of failure (aka. risk) was much lower (70% lower in this case). Call it "agile buying" if you'd like.

The provider that lowers the risk of failure, tends to earn the business of clients who are new to the market.

I would like to argue that when a company is buying a product in a new category (be it CRM, ERP, Sales Engagement, Call intelligence, Data Analytics, etc.) they are most likely to pick a "good" provider with low risk than pick the "best" provider if the risk is high.

Let's dive deeper using an example that we can relate to, buying a car.

Buying "aaS" in New Categories is Hard

Within the Sales Engagement category you have the Ferrari's and the VW Beetles. Outreach, SalesLoft, Apollo, ToutApp, MixMax, Yesware, etc. are very different when it comes to functionality and performance, yet every week I see people asking the same question... "I'm about to start my 'race' for increasing revenue as fast as I can...

Should I buy Outreach, or is Yesware / InsideSales / MixMax good enough?".

I've been in that situation before and I get it. It feels like you're leaving the Amish community to buy your first car for a drag race. You look at VW, Toyota, Mercedes, Ferrari. (remember, you don't even have a driver's license, and all you knew before looking at these cars was to ride in carriages... picture yourself there)

You try compare the products as diligently as you can... Rubber Tires? check. Blinkers? check. Comfy Seats? check. Steering wheel? check. Engine? check. Speedometer? check. Rearview camera? check. Wait, wait wait! I almost forgot... iPhone charger port?...check.

You see, when you've never driven a car, comparing different models / brands makes no sense! The VW and the Ferrari look like the same thing!

So the question "should I buy the Ferrari or is the VW good enough for my race?" makes sense.... at least until you get into the race track and see the Ferrari perform much better.

My Sales Engagement Journey - and what I learned

This is exactly what happened to me. My Sales Engagement journey went like this. I bought MixMax first, because it was $9/mo. Then I moved to Yesware where I paid $25/mo. Later on I used ToutApp at $70/mo. I then bought SalesLoft at $120/mo, and finally after many frustrations I got to Outreach for $170/mo.

I feel like I went from VW to Toyota, to Mercedes to Ferrari.

The biggest reason I went with MixMax? Low risk. Paying $2K/yr per license for Outreach felt like a big risk. Paying $108/yr for MixMax, no big deal.

From my "ignorant" analysis, I felt like both had the same functionality. I could add people to a sequence and schedule meetings. As time went by I upgraded slowly from tool to tool.

I disliked MixMax's notifications and within-email design. Yesware wasn't great at Mail Merge and didn't have a dialer or phone integration. ToutApp was buggy and broke when executing complex sequences. SalesLoft didn't have custom dispositions for phone and the analytics were limiting. Finally I got to Outreach.

However, I think this is a lost opportunity for Outreach.... If only Outreach had a way for me to try the product for a lower risk after I had used MixMax. I probably would've gone straight from VW to Ferrari. Win-win for both of us.

Reducing risk is key to increasing sales! This was first shown by Salesforce but it continues to be true.

Suddenly Everyone Shifts to "aaS"

Quickly most companies started changing their pricing and going to an "aaS" model. Risk reduction for clients meant faster sales cycles and higher revenue per client long term (also known as Lifetime Value (LTV)! Everyone learned from Salesforce! Go! Go! Go!

However, as the perceived cost of products was lowered due to them being SaaS ($150K per year instead of $1MM for our CRM example), many purchases also got pushed down the chain of command to the VPs, Manager and even the users.

Even worse, many times "buying committees" were created where many players chimed in (Challenger Customer, anyone?). The risk tolerance is different according to seniority of the decision makers and company size.

What the market doesn't seem to understand yet, is that buyers at all levels of the organization are trying to minimize risk. A C-level exec of a Fortune 500 company wouldn't be fired over a bad $100K purchase, so technically they should move fast, except that they're no longer making those purchases.

The Director of Sales is making the decision alongside 5-8 other people, and that $100K can jeopardize their jobs. Even though the Director "decides" which solution they want, the VP is still the one giving the final thumbs up, and wants a detailed evaluation of options (perhaps the procurement team will ask for this too).

So... How do you help companies buy faster?

We have hit the same wall again. The perceived risk of buyers is preventing them from moving forward. In addition, we need to help them convince their peers that this is worth investing in. Deals are slowing down again as committee sizes increase.

"No Decision" is the biggest reason why companies don't buy. Moreover, these companies are just endlessly kicking the tires until either the pain is so big that the risk is worth it, or they find a vendor that lowers the risk enough...

Soooo, if you want to speed up sales cycles, lower the risk of buying. This can be done in many different ways, and get ready because we're getting tactical in a minute.

Risk = time + effort + money

How to Lower Buyer's Risks

Here are some tactics that have helped me sell "aaS" products with ACVs of $100K+ via Outbound with sales cycles under 4 weeks!

The key is to minimizing the time, effort and money that the potential client has to invest to get value from your solution. Once they are seeing value, they'll be willing to invest the time, effort and money to maximize their investment. You're creating "Need" by giving them candy and taking it away (anyone here a drug dealer? kidding! but you get the point).

Let's dive into my Enterprise sales tactics from most to least favorite. After these, I'll give you an example of why these work.

Feel free to combine strategies.

1. Send them the on-boarding schedule, step by step. This eliminates the anxiety of "what happens after I buy? How long does it take to onboard? How quickly can I see which results?" and it shows them how much effort it'll take them to get the outcomes they are looking for.
2. Handhold them through onboarding to minimize their time and effort to get started. Make sure they're using the product in the best way possible. If you did discovery well you'll know what they're trying to get out of it. Make sure they have an 'on-boarding manager' on call 24/7, or at least 8 am to 6 pm their time zone.
3. Offer a Sandbox account for free (just like Salesforce), so that clients can play with your product using fake data. This is the equivalent to taking a car for a test drive. It'll help clients understand what the product does at a granular level and increase the perceived value of product before real results come in.
4. Discounted (but never free) trials. Money = commitment. Allow clients to buy 1-6 months worth of service at a discounted price (until they get value). Make sure the contract says that if you are able to hit certain metrics, the cost will revert back to normal (no discount given after a discounted trial). For Salesforce, a 1-year contract was reasonable, for you, it might not be. Do shorter if that lowers their risk (monetary investment) yet gets them value.
5. Lower the monetary cost of failure / cancellation. You can go from "1-year contract paid up-front" to "quarter to quarter contract" or even "buy 3 months first, then we renew to annual contracts". This turns a $36K deal risk to just $9K for the buyer by paying quarterly.
6. Rolling 60-90 day cancellation. Rather than having to "renew" their contract, it just does automatic ACH or credit card payments, yet if they want to cancel they must give you a 60 or 90 day notice and agree to meet with you so you have one last chance to save their account. This allows you to forecast churn and save some clients by retraining them if your champion leaves the organization.
7. Offer a 30, 60 or 90 day out clause from the time of signature. Contrary to intuition, shorter isn't better as people might panic days before the deadline and cancel. Make sure this gives them enough time to get value from the product. However this also lowers their monetary risk to "0", just like the "money back guarantee" on many commercials has shown to increase sales a lot.

An Example of Why This Works

Imagine you're the VP of Sales for a fast growing company and I am a data vendor. You are not in the market for a data vendor, it's "not a priority" and suddenly I call you and tell you I can take your 5% phone connect rate to 10%! This will double the number of demos your SDR team sets, therefore double sales. This would help you a ton, and take the company to the next level. You own 3% of the company, so you have a further interest in it growing.

I'm a reputable vendor with 4.7 star rating on G2. I can offer a few references if need be, and you ask around and your friends tell you "I'm a reliable vendor". My company offers 3 packages, and you have to pick the one you'd like. You know that any "big purchases" require the CFO, CMO and CEO's approval:

Package 1:

We offer you a data platform where your team has to go and source their own data. This means you need to train your team on a new tool, where they manually source data and you have to make sure the team adds the data to your CRM, and then sync it with Outreach. Our pricing requires annual contracts, and for your team of 20 sales reps it will cost you $50,000 per year and you can look up 30,000 contacts. If you want more, you pay extra (you dont think you'll need more).

Package 2:

We offer a tool that connects to Salesforce/Outreach. Your reps don't need to learn a new platform or anything. They follow their workflow and at the click of a button they get the right data in the right place. Pricing for 20 reps is $100,000 per year paid up-front.

Package 3:

We offer a fully integrated platform. All the contacts you have get automatically enriched, and we constantly verify all your CRM emails and phone numbers, archiving any wrong / old data and refreshing it with the freshest data. I guarantee you a 100% lift in connect rate and a 100% deliverability on email, else we don't charge you for the month. The cost is $17,000 per month, paid monthly, yet for the first 3 months I allow you to buy at $5,000 per month, on your credit card. Cancel anytime. The condition is that we agree to a meeting where we put together the ROI argument for your CEO to pay the $17K if we achieve these metrics.

What would you do?

Platform 1: As a busy executive, the time to train your team on a new platform would be too painful, and you don't even know if the team would like it, you probably need to ask them. $50K is also way too much to pay without talking to the team, and you're busy. Sure the "double connect rate" sounds amazing but you probably need to ask the SFDC admin if this would work, and you want a reference from the vendor as well. Evaluating this will take a ton of time and you're busy. There's also not a guarantee this will work. Chances are "call me next year" is what the vendor will get.

This example was high time, high effort and medium money.

Platform 2: Great! Less training for my team, but this also means the product is expensive! $100K requires a meeting with the team and maybe even evaluate this with the board. It's not a top 5 priority. More like a nice to have, and I don't have time. Call me next year, I'll evaluate whenever "data" becomes a priority.

This example is low time, low effort, and high money.

Platform 3: No way! I don't believe you. I had "hire a sales trainer" as a priority to increase sales (that's my job as a VP, increase sales). You're telling me you can drive my most important KPI up 100%. It's just $5K to try.... so I don't need my team to approve this (yet)...

You also guarantee results and we have an easy way to look at connect rate and email deliverability and see if it's working.... if this works, this is a slam dunk. I'll double sales overnight, there's no risk to try it. I just need to check some reviews for a minute and give you a thumbs up. If you can double sales, $17K per month is cheap! I have 10 sales reps that cost me $10K/month each. $17K is really a drop in the bucket.

This example is zero time, zero effort, and low money (despite the high price, the risk is just $5K, or $10K, instead of $50K+.

Final Thoughts:

The above example is exactly what happened with Marpipe.com. We've been offering companies a low effort, low time, guaranteed results way to drive their main KPI (ROAS) up a lot!

Our close rate (from 1st meeting to close) is 35%! Clients are all willing to test the product for low 4 figures, and once we deliver results, they don't mind paying $30K+ per quarter, which gives us 6 figure ACV deals... we know that as long as we perform, we have an amazing business!

How are you changing the way you sell?

Sellers trying to speed up sales and increase win rates need to find a way to reduce risk for buyers.

So Go Do It!

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