Software as a service (SaaS) has become extremely popular due to its scalability and ability to address almost any individual or business need. But having the wrong strategy can mean losing subscribers and leaving large amounts of money on the table.
The concept is simple, customers pay a monthly or annual fee to use the software, often hosted in the cloud, rather than a one-time sale, and they get access to new features and updates as they roll out. However, just because the concept is simple doesn’t mean implementing it is.
As a sales leader, it’s your responsibility to secure paying customers for the platform and make sure existing subscribers remain subscribed. Because the core product isn’t changing, and because SaaS can accommodate an unlimited number of users (in many cases), the potential for growth is infinite — as long as you have a good SaaS sales strategy in place.
In this guide, we’ll explore the SaaS sales process and the steps you can take to improve your SaaS sales strategy. We’ll look at:
- 3 SaaS sales models you can follow
- The relationship between Sales and Marketing in SaaS
- The 6 stages of SaaS Sales
- 7 key metrics to track
- 7 common challenges with SaaS to overcome
Let’s get into it!
3 SaaS Sales Models
There are generally three SaaS sales models you could use for your organization, depending on the nature of your product and your target audience.
Traditional sales: For SaaS companies, traditional usually means marketing the company as much as possible, building brand awareness, and generating interested prospects. Once you have a pool of prospects who have heard of the brand and might be interested in the product, you can begin working with them individually to close the sale.
For example, when someone who read about your product on a blog signs up for a free trial, a sales rep will reach out to that person and persuade them to fully subscribe.
Enterprise sales: Some SaaS companies focus more heavily on enterprise sales. Rather than engaging with individuals, sales reps engage with entire companies, attempting to close bigger, more complex, and often more expensive contracts.
SaaS companies that offer expensive, complex products like ERP software that costs $50,000 per year often use this sales model. Closing these deals is a much more intensive process, often requiring many phases and approval from multiple departments, but the end result is more revenue.
Customer self-service: Other SaaS companies prefer a self-service model. Here, sales reps rarely enter the equation. Instead, the sales process is a kind of self-running extension of your marketing and advertising.
Your content and website walk users through the prospecting stage and encourage them to sign up for their own product. Sales reps may be available to answer questions, but for the most part, users sign up on their own. This is usually an effective approach for low-cost SaaS services.
Keep in mind that it’s possible to have multiple sales models operating under the same brand. A SaaS company that offers enterprise-level packages, high-level packages, and entry-level packages, for example, may engage in all three methods simultaneously.
The Relationship Between SaaS Sales and SaaS Marketing
No matter what your SaaS sales model is, you should know that a large part of your success will depend on your Sales and Marketing strategies and teams to work together.
While you’ll likely treat Marketing and Sales as separate departments, it’s vital these teams work collaboratively toward their common goals — especially if you’re using a hybrid sales model that relies on both website signups and sales interactions to get new paying customers.
Marketing is responsible for increasing brand awareness, improving brand reputation, and attracting prospects and leads. Sales is responsible for persuading leads, closing deals, and retaining customers.
Neither can perform well without the other. Marketing relies on Sales for information, direction, and feedback, and Sales relies on Marketing for distributing brand knowledge effectively and producing high-quality leads.
Work to create a culture of collaboration between the two teams, and consider using a CRM to unify data between them.
The 6 Stages of SaaS Sales
Each SaaS company will slowly perfect their own sales approach, but generally, the SaaS sales process follows these steps:
First, you need to know who your customers are. This is sometimes a one-time process, but as your SaaS company grows, you may discover new audience segments you need to target. You may also discover your current audience is changing and evolving with new or different attributes.
In any case, you’ll need to create customer personas so you can generate higher-quality leads and speak more directly to individuals’ wants, needs, and experiences.
Next, work on getting prospects. Oftentimes, the heaviest prospecting burden falls on marketers, but sales professionals can also get involved in the process.
Content marketing, SEO, community engagement, and cold email outreach are all common approaches here, but there are many ways to conduct sales prospecting for leads.
Depending on your sales model, connection could mean organically attracting a prospect to your website, or reaching out to them with an email or automated chat message on your website with a tool like Intercom.
If customers contact you through your website, be sure to respond quickly — research from Xant.ai found that 35-50% of sales go to the vendor who responds first, so make sure you’re monitoring and optimizing your team’s email response times.
In any case, you need to introduce prospects to your brand and give them something to do next, whether that’s reading more about your product or taking some key action such as starting a free trial.
Demos and Trials
Most SaaS companies attempt to get users to start a free trial, then guide them through several steps to introduce them to the product. This often includes showcasing the product with a demonstration (via video, automated guided tour using software such as Intercom, or via a personal guided tour by a sales rep). Some SaaS companies promote a demo rather than a free trial. What you choose will depend on your product and overall sales strategy.
The Initial Sale
This is when sales reps usually become the most active, and it’s often the first customer touch point for a SaaS sales rep. The rep will reach out to individuals who have tried the software and attempt to close the deal.
This outreach usually occurs via email, but it can also be effective via phone calls or SMS messages. A report by Hubspot found that 86% of professionals choose email as their medium of choice. I like to use Intercom to send an automatic email series over the course of a couple of weeks to everyone who has signed up for a free trial, educating them on ways to use EmailAnalytics and offering them incentives to upgrade to a paid account.
Make sure your sales reps act as advisors and provide friendly, timely communication. One report from Salesforce found that 79% of customers prefer salespeople who act as advisors.
The Upsell/Continued Sale
From here, SaaS sales teams are responsible for ensuring that active customers remain subscribed. After all, it’s usually much less expensive to keep a customer than to find a new one.
This may also be an opportunity to upsell existing customers to buy a plan with new features or entirely new products. Friendly, timely, thorough customer service is key to maintaining happy, loyal customers. 73% of customers will remain loyal to a company with friendly customer service reps.
7 Key SaaS Sales Metrics
The only way to improve your SaaS sales strategy over time is to measure and analyze your efforts. Otherwise, you’ll have no idea whether your strategies are working — and whether they’re resulting in more revenue.
So let’s look at the seven metrics you need to measure.
Churn is the rate at which you lose subscribers. SaaS companies strongly benefit from long-term customer retention, since paying customers continue providing revenue each month.
If your churn rate is too high, it could be a sign that your product isn’t a good fit, or that your customer retention strategy (or customer service quality) needs improvement.
MRR stands for monthly recurring revenue, and it’s a measure of how much revenue you can expect from paying customers each month. You may also calculate this annually, depending on how you charge.
Overall, you want to see an iterative increase of this value over time, though some volatility is to be expected.
NPS is your net promoter score. This metric seeks to measure how happy or satisfied your current customers are, and it’s usually calculated on a scale of 0 to 10. If the number is too low, it could be a sign that you’re finding poor fits for the product, or that your product or customer experience needs work.
CAC is your customer acquisition cost — how much you’re spending to acquire a new customer. This is a combination of your marketing, advertising, and sales strategies. And you need to pay close attention to it. Spend too much, and your profitability will sharply decline.
Close-ratio measures the percentage of deals you ultimately close. This is often compared to the number of leads you generate or the number of people who signed up for a demo or free trial. If your close-ratios are too low, it could be a sign of low-quality leads or a bad follow-up process.
Revenues per lead
With close ratios and customer value, you can calculate the amount of revenue you generate per lead. Combined with CAC, you can calculate the average return on investment for a given lead.
How many people sign up for a free trial from your product demos? This is often a precursor to your close ratio, and it helps you measure the flow of individuals on their journey from prospect to lead to customer. This can help you identify what parts of your customer journey needs to be improved.
7 Common SaaS Sales Challenges to Overcome
Things are never going to be perfect for any business. There are seven common problems in SaaS. So, let’s look through them and see how you can identify and solve each one.
If the core product isn’t satisfactory, even the best sales team will struggle to acquire new customers. Make sure your product is fully functional and useful for the tasks you claim it’s useful for.
You’ll also want to do some research and make sure your pricing and positioning are competitive. Otherwise, your target customers may simply choose a competitor instead of you. This may seem obvious to some, but you’d be surprised how many people miss this step.
Finding the perfect customer fit isn’t easy. You may have a great SaaS product, but it may be unclear who the product is for. Even after doing your market research, the results could be ambiguous.
Keep a close eye on your Net Promoter Score. If it’s low, and you don’t believe the issue is with your product, then you likely have a bad customer fit. You may need to change your marketing or adjust your customer profiles to fix this.
Your sales reps won’t be able to close deals if all they have to work with are low-quality leads. High-quality leads have been previously qualified, have a real need for your type of product, and have a genuine interest and familiarity with your specific product.
If your lead quality is low, it’s usually the result of weak marketing and advertising efforts. It could also be because of a lack of collaboration between your sales and marketing teams.
One of a sales rep’s biggest responsibilities is to find a way to overcome customer objections. But if those objections are too challenging or too diverse in nature, it may be hard to come up with a cohesive strategy.
It’s your job to figure out why people aren’t willing to close the deal and address those concerns with new information or logical reasoning.
Sales teams rely on motivation for performance as much as any other tool. If your reps don’t care about your company’s success, or don’t have anything to work for, they’re not going to do their best.
Oftentimes, this requires a combination of tangible incentives and abstract ones. For example, you can offer monetary bonuses to high performers, as well as setting goals and special privileges for achieving those goals.
Your team is only going to perform as well as they’re trained to. It’s your job to provide them with the education, training, and resources necessary to achieve their goals.
If they don’t understand the product, don’t understand your customer base, or don’t know where to go to get their questions answered, they’re not going to succeed — and it won’t even be their fault. Invest in high-quality training, and remember that training isn’t a one-and-done thing.
One of the SaaS model’s key advantages is its ability to scale, but scaling can still be an issue depending on your sales model. For example, if you rely on individual interaction to close deals with solo subscribers, you’ll have to hire more and more salespeople to handle bigger lead pools. This may or may not be sustainable.
There are several solutions available to this problem. One solution is to introduce more automation and customer self-service, or you can encourage salespeople to follow a different process — one that allows them to close deals faster and more efficiently.
Perfecting your SaaS sales strategy is a marathon, not a sprint. Remain patient throughout the process as you learn more about your product, your target customers, and your sales reps.
Keep these things in mind as you create your SaaS sales strategy.
- Choose a SaaS sales model that fits your product and business goals.
- Integrate your sales and marketing teams so they can work together effectively.
- Implement inbound and outbound lead generation tactics.
- Provide excellent customer service at all stages of the sales process.
- Work hard to retain your customers. It’s cheaper to retain them than to get new ones.
The more time you invest into your SaaS efforts, and the more you optimize for your unique qualities and goals, the closer you’ll get to achieving high-momentum growth.