How A SaaS Company Can Set Up A Dynamic Sales Function For Success.

To create and deliver sustainable value to the customer, every organisation has to make the effort of connecting with the target audience and selling the value proposition without hesitation.

Even a company with a mediocre product but with an aggressive sales policy can achieve profitability. Which makes Sales a revered function in any business, irrespective of the industry and the product being sold. While every industry has its own fair share of nuances and unique challenges, the way services are sold is poles apart from the way products are sold. The intangibility, variability, perishability, and inseparability of most services make them incredibly hard to sell. And this dynamic changes further when it comes to SaaS Sales. SaaS business models, target customer behaviour, industry evolution, and measurement metrics are vastly different from any other kind of solution. Therefore, to set up a robust sales function that is integrated with all other aspects of the value chain, much care and strategising is required. But before we get started on the ‘how’, let’s understand the what and the why.

Basics - What is SaaS?

By definition, SaaS is Software as a Service, meaning a software or application that is designed to perform a particular function is accessed, managed, and sold in the form of a service. Take Google’s G-Suite of services for instance.

A service as simple and as globally adopted as ‘Gmail’ is a type of SaaS that is available to individual as well as enterprise users. Users can access the service in a freemium model (more on this ahead), with cloud storage up-to 15GB being free with the other mailing functions such as sorting, archiving, composition, search, etc. Beyond 15GB of storage, an individual user has to pay Google for this SaaS service.

Enterprise users can even host independent domains with personalised email IDs for multiple users and enjoy a much larger cloud storage capacity by paying for the G-Suite. The G-suite also includes access to Google Analytics, Google Ads, and other premium features, which are not of much relevance to individual users.

Zoom is another SaaS company that offers solutions for both individual and enterprise users. The cloud based communication platform is designed to create virtual exchanges, a service that skyrocketed in adoption during the pandemic and the lockdown that was imposed due to it. Just like Google’s G-suite, Zoom is also available for free with limited features and for a paid subscription with advanced features.

The Sales Part - It Is Dynamic.

Now you must be trying to recall how you actually started using Gmail or were you ever even pitched to use it by a Google sales personnel. Did you even hear about Zoom before 2020, and if you did, was it through a brand communication? That’s the beauty of SaaS sales! You don’t always realise when you have been presented with a buy opportunity and you have acted on it. And this is exactly what makes SaaS sales different from other forms of product and service sales. Most typically, SaaS sales is the process of selling web or cloud-based software to the customers for solving a personal or business problem. Customers can access the service online and usually purchase the software or the license to use it in a subscription-based model, becoming potentially repeat customers.

This comes with its own set of unique challenges that set SaaS sales apart:

• Intangibility: The core value proposition of a SaaS product remains intangible. It may be realised by the customer in terms of a problem being resolved or via creation of an experience, but it can’t be demonstrated as easily as tangible products can be. Furthermore, when the SaaS product is innovative and unprecedented, it makes it even more difficult for a potential customer to predict its value.
• Complexity: The learning curve for a new SaaS solution can be steep for many customers. A SaaS sales process has to capture this particularly difficult aspect of the customer journey and adapt all communications accordingly. By simplifying the product features, effective adoption can then be ensured. This also means that a SaaS sales team can not be purely functional; there must also be present technical experts to help the customers with complex parts of the product.
• Availability of Free Alternatives: Since there’s no upfront cost of production and distribution (variable costs) for every new customer acquired, SaaS sales can thrive by offering a product for free for a limited period and then moving the customer towards actual purchase. Unfortunately, this means that every other SaaS provider within the same segment can adopt this strategy. The market can be replete with free alternatives and a customer may never feel the need to buy a paid solution.
• IP Infringement Risk: SaaS products hosted and accessed via cloud also have a high risk of IP Infringement. The first mover advantage can last for very little time and the threat of new entrants in a service segment is very high. Furthermore, as the global IP protection laws vary significantly, certain geographic markets can produce complete rip-offs without facing any real consequences. This makes it harder to remain differentiated and maintain a leading position in the market for SaaS innovators.
• Price Opacity: The problem that services face with pricing, is there for SaaS as well. A software service can as easily be sold for $10 as it can be for $149! Once the initial development cost is recovered, every subsequent sale is pretty much pure profit! Or at least that’s how potential customers feel when adopting a popular SaaS solution. As a result, it’s very difficult to create any kind of price transparency and win customer’s trust as a fair service provider.
• Volatile Sales Cycle: Lastly, SaaS sales cycle can be very volatile. While for individual customers, fast adoption has to be pushed; for enterprise customers, customisation and negotiation can happen over months before the sale is actually closed! During all this, a sense of urgency is maintained by the fact that the SaaS solution which is relevant today may very soon become obsolete as newer solutions will keep on coming.

3 Most Important Selling Strategies:

With so many challenges to overcome and a fast-evolving market to capture, some of the most successful SaaS providers have developed and perfected different SaaS Sales Models. These are:

Transactional Sales:

This SaaS sales model depends on a fully-functional sales team to handle pre-sales, convert inbound queries and lead, as well as conduct outbound sales via mail, call, or in person. SaaS products that are complex in nature and require considerable to-and-fro between the buyer and seller to develop a customise solution are best sold with this approach.

SaaS sales teams are trained to handle technical queries, design customised packages as per customer’s needs, offer discounts or tiered pricing and cultivate a relationship for future sales. The SPSS statistics software for enterprises?is sold using this SaaS sales model quite effectively. Regional sales teams manage their respective territories to push the software across industries. Based on number of users, features required, and duration of use, contracts are drawn up with tailor-made terms and pricing.

Despite the effort that goes into closing each sale, the approach is called transactional because there is no need for the customer to keep returning to the seller. Subscription based services are seldom sold in this manner.

Freemium/ Free + Customer Service:

SaaS solutions that can be priced at a low point and pushed for volume sales are sold using this approach. The model is called Freemium because to begin with, customers can access a ‘free’ version of the SaaS solution and then eventually buy the ‘premium’ version to access more features, and benefits.

The target audience is both individual and enterprise customers, but the solution is simple enough that it doesn’t need assisted sales. There is also limited scope for customisation and tailor-made discounting, thus allowing sales to happen on an eCommerce platform with minimal human intervention.

Take WordPress Content Management Platform (CMS)?for instance, that is used across the world by independent bloggers, professionals, small-medium businesses, and a whole host of users. These users find the software on their own, explore it features, realise its application, and determine the package that is most suitable for them to buy. All without interacting with a single person from WordPress.

Enterprise Sales:

This model is suitable for highly specific, complex, and niche SaaS solutions; that may not find diverse application. The software service is sold through a series of steps which may involve strategic collaboration between the enterprise buyer and seller. From the point of product demonstration till the actually delivery of the solution, several changes can be made in the product to better suit the client’s needs.

Take the example of virtual learning and lecture-capture SaaS solutions. With specific application in the education sectors, they are sold through a highly involved sales process. The buyer’s infrastructure, specific requirements and price expectations are worked out in the contract. Continuance and repeat sales are also a given due to the immense input of effort and resources by both parties.

Similarly, Salesforce.com has SaaS solutions that can be bought in a freemium model (e.g. Slack First Customer 360, Sales Cloud, etc.), but they also have high value solutions that are purely sold with the enterprise sales model (e.g. Salesforce Platform, Einstein AI, etc.).??

Setting Up A Dynamic SaaS Sales Function

It’s clear that based on the SaaS solution you are selling and the target audience you wish to capture, your SaaS selling approach can differ. But irrespective of the SaaS sales model you adopt, in order to setup a dynamic sales function that operates as a well-oiled machine, you have to go through the following stages.

• Identification of target audience: This first stage requires collaboration between the Sales and Marketing teams for identification of target customers and drawing up their detailed profiles. Customer profiles can then guide pre-sales and marketing communications, thereby generating a pipeline of leads for sales team to convert.
• Designing demos and trials: Next, the SaaS sales team is responsible for providing product trials (often free) and demos to potential customers. Without technical knowledge and training of the SaaS product, the sales team cannot effectively handle this part of the sales process. Thus, your Product and Marketing teams must collaborate with your sales team to smoothen this stage.?
• Defining channels for lead generation and qualification: Then you need to identify consistent channels for lead generation and qualification. In addition to setting up a website, create an online presence, and running email campaigns; you also need the underlying logic to classify leads and take specific action to guide them towards conversion. This may mean utilisation of sales data analytics for greater impact.
• Lead Nurturing: Leads, once qualified, need to be nurtured through different stages of customer journey. Relevant content to support buying decision, product demos and trials, customisation possibility, and offers can be considered to drive conversions.
• Customer engagement and conversion: Whether your SaaS solutions can be sold online or requires a personalised touch to close every sale, you need to define standards for customer engagement. Furthermore, annual conversion targets must be divided into quarterly and monthly targets, along with clear accountability for each SaaS sales team members.
• Customer on-boarding: Once the customers are acquired, they have to be effectively on-boarded to ensure a smooth customer experience. In collaboration with the Product teams, SaaS sales teams can onboard customers personally or develop an automated process to introduce them to the solution.
• Customer support and CRM: Although these department are separate from SaaS sales, they can be utilised as a pipeline for repeat sales. Customer queries, challenges, and feedback needs to be formally captured and shared with the Product, Marketing, and Sales teams. Subsequent modifications should be then made in the product as well as company communications.
• Stickiness and Retention: Product adoption and usage has to be monitored after on-boarding to closely track potential recurring sales opportunities and customer churn. From time to time, short surveys can be conducted to understand customer experience. The product should then be upgraded to remain relevant and sticky enough to retain customers.
• Up-sell and Cross-sell: Finally, identifying up-sell and cross-sell opportunities and maintaining an active pipeline is instrumental to achieving your sales objectives. Product specific sales teams may also be trained on other products and given soft-targets to promote cross-selling. Existing customers can also be given opportunities to upgrade and buy superior versions of their SaaS subscription or product.

Ensuring SaaS Sales Effectiveness - The KPIs

With the sales function established to push SaaS sales, your final concern should be to ensure the effectiveness of all these integrated efforts. There are certain Key Performance Indicators (KPIs) or metrics that are used across the board to monitor sales performance. While lead generation and revenue remain important indicators of sales effectiveness, SaaS sales effectiveness needs to be measured by much more.

Following metrics can help you do just that as you are setting up your SaaS sales function for success:

• # of Leads Generated: This is a measure of the number of leads being generated by both inbound and outbound sales activities. In order to calculate future sales growth and budget for resources required to scale up, Lead Velocity can be calculated.

Lead Velocity = # of Leads Generated in Current Month / # of Leads Generated Last Month

• # of Leads Qualified: Lead generation in itself doesn’t sufficiently capture the effectiveness of SaaS sales efforts. You also need to determine how many leads are qualified for nurturing in the purchase funnel and subsequent conversion.

Lead Qualification Rate = # of Leads Qualified / # of Leads Generated

This metric also helps you determine the effectiveness of your qualification logic and lead generation channels. Strategic resource allocation for business growth can heavily depend on this.

• Lead Conversion Rate: Once qualified, leads must be converted to generate actual business. Lead conversion rate is a good indicator of sales efforts as well as quality of leads generated in the first place. In SaaS sales, a lead conversion rate can be much higher in freemium model, when compared to enterprise and transactional sales.

Lead Conversion Rate = Total Leads Converted / Total Leads Generated

This metric can be differentially measured for specific channels, territories, teams, and timeframes to determine sales effectiveness.

• Average Revenue Per Lead: This particular metric is a good representative of the SaaS sales productivity. No. of leads may indicate process efficiency, but true scale up is only possible for your organisation when every new lead is also climbing in average revenue.

Average Revenue Per Lead = Total Revenue Generated / # of Leads Converted

• Cost of New Business Acquisition: Cost of acquiring business, also known as Customer Acquisition Cost (CAC) is an indicator of how quickly a business is scaling up and growing in size as well as revenue.

CAC = Total Cost of Marketing and Sales/ # of Deals Closed in a given period

For companies following a transactional model of SaaS sales, the CAC value will be low as number of deals closed would be higher. Whereas for companies going for enterprise sales, the CAC value would be high as the number of deals would be less (even if the absolute business volume would be high). By comparing CAC against industry standards and pre-defined targets, the effectiveness of SaaS sales and marketing can be determined.

If this cost is too high, then you may be spending too much to acquire new customers and scaling faster than your capabilities. If this cost is too less, then you may no be exploring all the prospects for revenue growth and should consider greater investment in SaaS sales.

• Monthly and Annual Recurring Revenue: Monthly Recurring Revenue (MRR) is the income generated every 30 days from existing clients. Annual Recurring Revenue (ARR) is the income generated every year from existing clients who may or may not be part of a multi-year contract. Both metrics indicate the SaaS sales effectiveness in negotiating contract terms and closing on the final price as well as payable with clients.
• Churn/ Customer Retention Rate: While selling software as a service, you have to come to terms with the fact that software becomes irrelevant quicker than hardware. Software obsolescence can be avoided by continual upgrades, finding newer applications, and versioning. But customers who were convinced about the need for your SaaS solutions a month or a year ago, may not feel the same way anymore. There could be better solutions available in the market that fit to their respective needs or their needs may have evolved beyond your existing capabilities. This can cause customers to leave or churn, effectively diminishing any scope of repeat business.?To keep your sales funnel healthy and alive, you need a strong grasp over the customer retention and churn rate for your company.

Churn Rate = # of customers lost over a period of time / Total customers at the beginning of the period

A low churn rate can, in turn, lower cost of new business acquisition and increase recurring revenue. Thus, sales and customer support functions have to work in tandem to retain customers by resolving queries and catering to emerging needs.

• Net Promoter Score: Often considered as a marketing performance metric, rather than sales performance indicator; NPS can reveal the extent of work needs to be done by SaaS sales teams to improve their other metrics. Using a single question wherein the customers are asked to rate their experience with the software service on a scale of 0-10, the NPS score can be calculated. Customers giving a score below 6 are at a risk of detracting and need immediate attention for grievance resolution and retention. Customers giving a score of 9 and above are promoters and have the potential of giving more business. Based on these two segments of customers, the NPS can be calculated by:

NPS = % of Promoters - % of Detractors

Final Thoughts

In sum, for a SaaS company to take their solution to their desired target group, a focused and dynamic sales function is indispensable. By understanding the SaaS sales model that best fits your solution, category, and target market expectation; you are aligned to set up a sales function to deliver consistent results. Finally, by integrating Product and Marketing functions with your SaaS sales function, you can holistically deliver value to your customers and improve your profitability without compromising on the customer experience.