Choosing the perfect SaaS sales model for your business can be a daunting and challenging task. A transactional inside sales organization features the most common sales model. The organization is often split into two: retention focused account managers and new business focused sales reps. While this is the most common sales model, it is not the only one. Moreover, it may not be best model for your business or organization. Because SaaS businesses come in many shapes and sizes, choosing the right sales model is a tough decision, as second chances are hard to come by in the fast moving IT world. In addition, with the growth of SaaS product offering and customer base, it could get confusing trying to make the right decision.
Price is Paramount
The average selling price (ASP) is the single statistic that delivers more insight on any SaaS startup or business. So, fixing the right average selling price is essential for any business, especially SaaS. ASP is the point of intersection between supply and demand. It also measures key metrics such as customer value and competitiveness, while constraining operational metrics such as cost, risk, and volume.
Conversely, price directly correlates with risk: high ASP equal high risk. This means that the more the risk involved the more your customers will demand a direct, personal relationship. It is rare that a customer will part with over $50,000 through a self-service portal (except for the one who feels the presence of brand security such as the Google AdWords customer). Established players like Google and Salesforce.com have the brand security that makes the customer feel safe. Otherwise, a SaaS startup has to put a human face on a service for customers to overcome this fear. Fortunately, high ASP can pay for both sales and support labor needed to develop the much-needed personal relationship.
Eliminate Complexity Constrains
What bars your customer from buying your product? How easily can they find your SaaS offering? Is your SaaS offering easy to understand, try, buy, and use? Answering these questions will bring you a step closer to removing the barriers that prevent customers from finding, trying, using and even buying your product. Remember that every hurdle standing between your customers and your product increases your costs, reduces sales velocity and close rates. The more complex the purchasing process, the more your prospect will require your help. This also means that you’ll have limited choices regarding the SaaS sales model that you can use.
While you can make a significant amount of effort trying to eliminate complexity, your sales model must surmount the remaining amount at any given time. For instance, a new social collaboration may look so exotic that your prospects will have a difficult time trying to understand it, leave alone what the product can do for them. And onboarding a SaaS ERP could mean that the customer has to change internal business processes before realizing any value. Both ways, it falls to your sales model and you have to assist prospects navigate this complexity.
3 SaaS Sales Models
Both price and complexity play a significant role in defining a strategic spectrum of SaaS startups’ sales approaches that assist to navigate toward the 3 sales models: transactional, self-service and enterprise. Mature SaaS businesses have the resources to employ all three, but a startup has scarce resources for mastering just one. By finding a balance between price and complexity, you can easily create or enter a new market. These two are natural adversaries, as higher complexity translates to higher costs, requiring higher ASP. However, just because buying your product is complex does not necessarily mean your prospect will be willing to pay more. Failure to find a balance between price and complexity could lead you to the Startup Graveyard.
To achieve substantial revenue at a low price, it means removing complexity and cost from the purchase to prepare the ground for high volume. Complete customer self-service is the ideal sales model, but customers have to be able or willing to service themselves, where able customers completely understand the value of the product, including purchase and use, while willing customers find little risk or frustration in the purchase. 100% customer self-service – the holy grail of SaaS –gets everybody looking for it, but no one ever finds it. And even if your product is so simple that it can provide 100% self-service purchase, you can never get away with 100% self-service support, as your customers need you to solve their problems, or you risk ruining your reputation.
The higher the price the less willing customers are to part with their money without the assurance that there are real trustworthy humans behind a website URL. In addition, higher ASP raises expectations from the business relationship: signed contracts, invoicing, premium SLAs, and the ability to reach a human being when a problem arises. A more interpersonal business relationship is driven by risk, moving the sales model away from self-service to transactional sales model, which is efficient and has high volume sales, support operations, rapid onboarding, and short sales cycle – all supported by automation, allowing for customer self-service where customers are able or willing to service themselves.
While many SaaS startups will find themselves gravitating toward customer self-service or transactional sales, some of them have products that offer more value per customer and are so complex to purchase that traditional enterprise sales forms their natural starting point.
Selecting the most suitable go-to-market sales model for a SaaS startup is often a make or break decision. Choosing right will see you grow smoothly, while choosing wrong will result in spending precious cycles trying to chase your tail as you run out of cash. A transactional sales model is characterized by inside sales and inbound marketing, and most B2B SaaS startups offering recurring revenue subscriptions try to gravitate toward it. This guide provides a simple yet powerful strategic framework for picking the right SaaS sales model for your enterprise, as well as valuable insight and wisdom that will help you set the right average selling price and overcome the complexity that customers face when attempting to purchase and use your SaaS product.