In designing or conducting software as a service models, SaaS profit margins are one of the most dicey but key things to plan strategies and business models around. The truth of it is, SaaS isn’t brand new, but it’s new to the public infrastructure, and as such, it’s still getting its legs in how to best monetize and implement SaaS concepts of various applications.
We’re met with many obstacles that work against us for profitability in SaaS such as churn rates, conversion problems and of course the technological barriers of today’s world. Such barriers include bandwidth, computing power and the limited capacity of web interfaces for the moment. All of this together makes for a bit of a rock and a hard place. We all know SaaS is the way of the future but if we can’t make it profitable, it’s never going to get off the ground properly, or get the movers and shakers to work their magic in advancing its power in the future.
There is hope however, so let’s look at three ways to increase SaaS profit margins while working under these current conditions. They’re not going to make challenges go away, but if everyone heeds this advice, we can push SaaS into a profitable enough contemporary model so that it can get the clout and steam to move forward.
#1 – Overcoming Bandwidth and Churn with Onboarding
Onboarding is greatly reducing the hurdles of web interface and bandwidth issues with SaaS, as well as serving to make the software more robust and attractive. Onboard systems are interpretive systems often powered by HTML5 and AJAX, which allows for desktop software styling in the interface and layout of SaaS.
Comparing this to static HTML forms, it looks like something from the distant future. The nice thing, aside from these being easy to set up and what we just said, though, is that they’re much gentler on bandwidth, an issue which causes a lot of profit loss due to the prohibitive bandwidth limitations many still endure.
In stead of loading bulky Flash interfaces, or cycling through PHP, ASP or the like thus creating slow, clunky computing, onboard systems are made of web page, just really slick web page. They’re capable of handling any complex computing needed aside from data storage/retrieval thus making the bandwidth issue moot.
Being attractive and smooth to deal with reduces churn rates as customers will value it, in their terms, as being “like real software”. Don’t tell them that all SaaS is real, let them have this moment and enjoy it!
#2 – Ad Integration in Freemium/Trial Models
Another great way to boost SaaS profit is to literally squeeze blood from a stone. Now, you may be thinking this is a bit cutthroat, but honestly, everyone’s come to accept the ad infrastructure of the internet, as long as things like interstitials and pop ups are left out of the equation.
When it comes to freemium models where there is a free account available, integrate some ads. This will reduce overhead which will in turn bring more profitability from paid accounts. Doing this on free, perishable trials is also viable, if toned down. It won’t make a direct profit unless you model your SaaS around it as a main income, but the reduction of overhead adds up to significant profit causally.
Don’t be ashamed, you’re not selling out, you’re just selling!
#3 – Self-Service for Better CRM
Self-service is in fact best facilitates by looking into onboard systems, but they are not mutually one and the same. Onboard can be done without encouraging self-service, and self-service can be done without onboarding (but don’t).
Self-service is the concept of users being empowered to handle everything dealing with their account, such as configuring it, modifying it and managing it all on their own. This is something a lot of businesses are afraid to try, but it reduces the workload on CRM and tech support people exponentially by not requiring their babysitting or intervention nearly as much.
This improves SaaS profit two ways. First, it will add to the reduction of churn rates with customers, who feel empowered and more productive. Second, with CRM and tech support free to handle real crises, customer service resolution will be immensely faster and more effective, which will in turn reduce churn further and increase overall profit.
When looking to boost SaaS profit, you have to be willing to be a bit daring and a bit less bashful about what you will and will not do in order to squeeze an extra penny from benign sources. It’s a frontier, so grit up and do what must be done so SaaS can prove itself while the time is right.