SaaS Sales Strategies

By Subraya Mallya - June 2009 | Topics - SaaS

As recession rolls on and IT budgets get persistently scrutinized, new sales deals are tough to come by. Although SaaS companies are benefiting in this environment (relatively speaking) thanks to the low-cost subscription model, they should still be smart about adopting new SaaS Sales Strategies. The key tenet for selling a SaaS solution is that the sales cycles are small and customer acquisition costs (CAC) are kept low. But to achieve that goal you will have to implement a few key sales strategies and have the discipline to follow through.

Given that everything with Software-as-a-Service(SaaS) is different from traditional software wouldn’t you assume the  same should apply for sales and marketing? It is. But majority of the companies are not recognizing this and continue to follow the traditional sales model.

The key difference in the SaaS sales model is the structure and focus for the sales organization. Sales organizations in traditional software companies are used to pursuing large deals (with large upfront license + ongoing maintenance contracts), but in SaaS everything that is charged to a customer is rolled into a monthly subscription fee. The typical contract size is 1yr to 3yrs and the contract value might be considerably smaller than a traditional software deal. This makes it very important to keep upfront sales costs down and increase the sales velocity. Having a hunter-and-farmer model is another key requirement. Closing as many sales deals as possible in the least possible time for the least possible cost should be the mandate to the sales force.

Given that your business operates online entirely, large part of your sales and marketing should too. To that end here are some strategies I offer

  • Let them find you: Unlike in traditional software space, you should expect majority of your leads to come through the online channels. This in effect collapses the walls between marketing and sales to a large extent. The responsibilities of marketing and sales should overlap in a SaaS operation. To make your online presence strong, here are some strategies that must be followed
    • Presence: Make sure you have an engaging website. Your corporate website is the face of your company. Just like you adapt yourself to different situations  a website should also be able to assume various persona depending on the situations. This should be considered as part of the lead qualification process in some respect. The longer you engage someone on your website the better the chances of you funneling that interest into an opportunity. There are lot of free tools available to conduct A/B testing on various formats of site for various scenarios that would convince customers to engage with you.
    • Engage: Provide multiple ways for visitors/prospects to reach you from your website. Telephone, Chats all encourage prospects to reach out. When they do reach out make sure you have automated processes to contact the prospect in a timely manner. Industry stats show that the sooner you connect with the prospect that reached out to you, the better the possibility of closing a deal.
    • Qualify: It is cheaper to generate leads online with SEO/SEM than the traditional lead generation process. So spend the necessary resources to generate quality leads. Once the leads come in have a well-defined process to score, rank leads and razor-like focus to qualify those leads so sales finds the leads warm for close. Remember keeping sales cycle to a minimum is the goal.
  • Let them know you: Establish thought leadership with blogs, webinars and workshops. If you are a startup you might not have the luxury of demonstrating elaborate case studies and live implementation proofs. Use your blog to articulate your understanding of the business that you are trying to sell into and make a compelling case for why your offering hits the mark. For good measure, host demonstrations to the industry experts or expert industry bloggers and get them to write independent opinions about your offering. People trust independent opinions more than marketing mumbo-jumbo. (Tip: Spare the money you spend on analysts and use it for roadshows and outreach.)
  • Get to know your customers: Just like your prospects find you and do research on you, you should do the same on them. Check their websites, 10K filing (Management & decisions section), online customer community, case studies on their websites. The more you know about their business, the industry they are in, their key competitors, it will help you get closer to their real business problems. You will learn more about their company this way, than anything you will know from the team on the customer side you are interacting with.
  • Help them through the decision: Try-before-you-buy, evaluation versions are always great way to eliminate the initial hurdle. Customers love to try the software before they make the commitment and it speaks volumes about the way you think and reducing the risk for them. Supplement that with videos, demos to guide the customer in their evaluation process. Lesser the risk for them, shorter the sales cycle for you. I am a big fan of Q&A forum where you can let customers co-mingle and exchange knowledge. Instead of worrying about that becoming a rant-exchange, you can make it work for you by having happy customers share with distressed customers. Even better find some champions from the user community and empower then to moderate the forums. If you have one such forums, let the prospect access those as part of the evaluation.
  • Share the vision and ROI: Share the vision and not the current functionality. Remember it takes time for decisions to be made and eventual implementation. So sharing roadmap would really help companies make a decision knowing what is coming. On the flipside, be forthright in sharing things that you don’t do (or well). It is better than the customer finding out (and they will). Sales is notorious in overselling or pushing the envelope sometimes a tad more than they should in their eagerness to close the deal. But remember in SaaS, you need your farmers to delight the customers and open opportunities to expand the account. Remember angry customers don’t make good up-sell opportunities.
  • Continuous Selling: Make sure farmers are doing their job. It is one thing to make a quick sale with the expectation that account manager would up-sell and expand the account in due course. But that needs rigor. Most often the account managers are saddled with fighting fire i.e, managing expectations or product deficiencies. Define intermediate ROI milestones and continuously keep demonstrating the value generated.  Remember your profitability on that customer account might depend on up-sell beyond the initial sale. In SaaS, it takes an average 1-3 yrs before you turn a profit on a given customer. So in a way you are investing (while making loss) in the initial years with the expectation that you will be able capture additional revenue in that account in subsequent incremental sales. Tip: Maintain a diary of the progress in the account and keep documenting the case as you go. You can use this to illustrate the value to the next customer.
  • Sell the value not the cost: Software sales have traditionally been focused on automation, efficiency with cost as the centerpiece. Cost is a tricky thing to sell. When you try to sell the cost benefits to a room full of people (IT people much less) you know where their thoughts go straight away – their jobs. In these bad times, none of us want to be out of work. So unless you are dealing with a senior management, downplay the cost element and instead focus on the value your solution delivers. Any one smart would figure out that a good solution will eliminate resource overheads. So do your homework on what else is bothering that prospect and mention the intangible value your product delivers i.e., “frees them up to do that other project”.

What do you think? Share your thoughts and experiences that has worked for you via comments.

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