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At a Glance
SaaS enterprises need to identify a suitable SaaS sales model at the commencement of the operations as this decision has a direct implication on the company’s future prospects. A well-informed decision can go a long way in helping the growth plans of the enterprise.
Choosing the right go-to-market sales model for your SaaS start-up can be a make it or break it decision.
For selecting a suitable SaaS sales model, every SaaS enterprise must undertake a series of decisions before reaching the correct decision.
If you are a new entrant in the highly competitive SaaS industry, then you might be struggling to define your SaaS sales model. There are several options for any SaaS enterprise when selecting a suitable sales model and selecting the most viable option is not as simple as it may seem to be. The entire prospects of your business are dependent on the selection of these models. To help SaaS enterprises identify a suitable SaaS Sales Model, Joel York categorized them into the following three types: –
From the above illustration, there are three SaaS selling models that every SaaS start-ups need to understand before selecting the right one for their business. Choosing the right SaaS selling model is very crucial as this will determine the future of your business. Herein, we will look at the three SaaS sales models in detail, the importance of evolving your SaaS model with time, and the challenges faced during expanding your business or changing the model.
What Are The Different SaaS Selling Models?
For choosing the right SaaS sales model for your start-up, two main elements need to be considered. The first one is the price and the second one is complexity constraint. In monetary terms, the average selling cost (ASP) plays an important role in the intersection between supply and demand. The ASP of your product provides an upper boundary for customer acquisition cost, limiting your choice for picking up a SaaS model. Next is the complexity constraints, which means determining the feasibility of buying and using your product. If your product buying procedure is complex, most potential buyers will back off from attempting for a second time. So, you need to make sure your SaaS software is easy to try, understand, buy, and learn.
Depending on these two factors, SaaS selling models are divided into three categories. They are the self-service SaaS model, enterprise SaaS model, and transactional SaaS model. Let us have a better look at each one of these.
Self Service SaaS Model
Self-service SaaS is an ideal SaaS sales model as it promotes customer interaction. To achieve high revenue through self-service transactions or self-service SaaS models, strike off high complexity and high cost out of the window. For engaging a high number of customers through a self-service SaaS model, you need to make sure that the customers are willing to self-service themselves. To do so, you need to make sure that your target customers understand the importance of your SaaS product, and the entire process of buying and using it should be remarkably simple. There should be supporting educational content in self-service SaaS product’s websites so that even if the customers have any problem, they can resolve it on their own.
Transactional SaaS Model
The transactional SaaS sales model is the next step of evolution from the self-service SaaS sales model. Once you start receiving a high volume of customers and your sales increase, you will introduce more new features in your SaaS product, which means increased complexity. Increased complexity also means that it would increase the price of your product. If your ASP goes up, the customers will expect better service from your company. In the transactional SaaS model, the business starts becoming more interpersonal, and you need to create a trusted relationship between your company and the clients. While you are thinking of evolving your SaaS selling model from self-service to transactional, include additional services like invoicing, signed contracts, 24/7 customer service, etc., to improve customer experience.
Enterprise SaaS Model
Some businesses whose product values are too high and complex cannot go either for the self-service SaaS model or the transactional model. In this case, the business owners need to go for the traditional SaaS enterprise model, i.e., grandly doing everything. Businesses opting for the enterprise SaaS model, the enterprise sales and service needs high-end marketing, creating an extraordinarily strong trusted relationship, and providing educational tools for the customers.
Importance Of Evolution Of SaaS Sales Models
Your start-up will not always be stuck at the same stage. With higher volumes of customers, you will think of expanding or changing your SaaS sales model. Here is why it is important to change your sales model for your SaaS business.
● When you start your SaaS business, you have a product and a set of target customers. After some time, you find that your acquisition strategies have been successful, and your business is booming. Though this is the best or ideal case scenario, you will think of either introducing a new product to target new customers. This is when you must think once again about your SaaS selling model and decide if you need to evolve or not.
● When you started small, you most certainly would have started with a self-service SaaS model, but with time, you realize that your low ACV customers lead to high cash burn. So, now your target would be to acquire bigger accounts and need a model change.
For example, a SaaS business started at an enterprise level and successfully landed some big customers. SaaS sales enterprise model is known for having a long duration of the sales cycle that might sometimes annoy you. Now, you might think of expanding your target customer base and bring onboard SMBs as well. But if you want to target SMBs, you cannot keep the product price too high. So, you need to bring some changes to your SaaS sales models.
These are some of the common situations for any business and when one needs to think about switching models.
While it becomes essential for your company to evolve and adopt a new SaaS sales model, there are certain obstacles in the way. For example, in the given situation above, it has been explained how an enterprise SaaS business wanted to target SMBs. This comes with two major difficulties. One, you must bring the price down for them as they are not large companies that can afford your product, leading to making your product less complex. All the features you provide in your product might not be useful for them, and they will not agree to buy heavily priced products unnecessarily.
In a nutshell, it takes a lot of thinking and wise judgment before you can switch from one SaaS sales model to another. So, never rush into deciding. Gather feedback from your customers, analyze it with your team, and determine the future course of action.
Financial management holds the key to success for all SaaS businesses. By monitoring the key finance metrics mentioned above, you will be able to effectively monitor your SaaS business’s health. If required, you will also be able to take corrective actions as and when required.