SaaS Sales Guide - An Introduction
The SaaS industry is one of the fastest-growing industries today. According to Statista, the software as a service (SaaS) market is estimated to reach 208 billion U.S. dollars in 2023. Therefore, it is the right time to invest in SaaS.
But with an increase in opportunities, there is an increase in competition too. In addition, selling is the only tool that can help you outgrow your competitors. Typically the SaaS sales process is different from the traditional selling software process. The goal of SaaS sales is winning customers for a lifetime as one-time purchases cannot help the product survive for long. Hence, having a good understanding of SaaS sales is a must before you begin SaaS selling.
What is SaaS?
SaaS or Software as a service is a cloud-based software product that allows users to access the program through the internet without the need of downloading it on their device. You can use SaaS anywhere using a web browser.
One of the main advantages of using the SaaS platform is that SaaS providers take care of product updates and security.
You can also integrate these tools with other SaaS platforms to use them effectively. Some of the common examples of SaaS applications are Google Suite, Canva, WordPress, etc.
SaaS platforms follow different pricing models (number of users-based, subscription-based, etc.) which are quite different from your traditional software. It impacts the SaaS selling process.
Let’s dive in.
What is SaaS Sales?
SaaS sales is the process of selling cloud-based software products that users can use by logging in online.
As mentioned earlier, SaaS platforms usually have subscription-based price models or flat rates for each individual user. This pricing model creates a lot of challenges for SaaS sales professionals, especially those who are new to the field.
No doubt, selling SaaS is more complex than selling conventional software. You need to follow a detailed strategy/process to make your clients understand how your software works and how it solves the client's problem and improves customers’ business productivity.
SaaS is usually expensive and selling them involves discussion with multiple stakeholders. In addition, SaaS comes with highly customizable features, so prospects negotiate based on the features they need for their business which makes the SaaS sales cycle longer.
To find out how SaaS sales actually work you must spend some time understanding the SaaS sales process.
Stages of SaaS Sales Process
The SaaS sales process starts with market research to figure out the potential of the opportunity. Once you understand where you stand, you can start with the next step i.e Prospecting.
Find Your Prospects
Start with finding prospects who might be interested to know about your product and add them to the sales pipeline.
This can be done by spreading the word about your product through different channels. You can leverage online platforms and use the following methods to build your brand awareness.
- Writing blog posts and articles
- Using social channels to spread the information
- Online ads
An offline method to find prospects is visiting relevant seminars, conferences, and events.
Once you find prospects, now analyze their needs for your SaaS.
- Does your SaaS platform meet their needs?
- Do they have the budget to purchase your product?
It helps you to find sales-qualified leads and focus on them rather than spending time on unfruitful leads. You can use a lead scoring tool for lead qualification.
Access Prospects’ Pain Points
In this stage, you need to identify your qualified leads’ business problems and present your SaaS platform as a solution.
You can set up a Google meet or face-to-face meeting if possible to learn about their challenges in more detail and explain features of your product that can resolve their problems.
Once you present your product, your prospects might have a few questions about it. If you lack to address them properly, you can lose your chance to convert them to paying customers.
A SaaS sales rep must have a good understanding of the product to handle the objection and convert prospects to customers.
You can use a product demo to explain the product in detail and answer all of their doubts.
Closing the Deal
Once you clear all the doubts of your prospects, you convert them into your customer.
In this stage, you give the final proposal and get it signed after negotiation. You can try different discount methods to encourage their buying decision.
You can ask them to choose annual billing and offer a one-month free subscription.
Nurturing Your Leads
There is huge competition in the SaaS market. So retaining customers is crucial.
Offering post-sale support, updating them about new features, and training them for new features can help you create a successful customer experience.
A happy customer can help you create more opportunities for yourself. You can ask for their feedback and reviews, and ask them to refer your product to their circle.
SaaS Sales Models
The SaaS sales model you adopt defines how you will sell your product. It helps you have a clear idea about the number of sales reps you would need, how long the sales cycle will be, buying process, etc.
There are three SaaS sales models in SaaS sales.
Self-serve sales model
Customer self-service is the simplest SaaS sales model that needs a minimum number of sales reps. This model is suitable for low-priced SaaS products or subscriptions.
It aims at individuals or small businesses. Customers visit your website, learn about your product and decide to subscribe.
For example, Spotify subscription, higher storage plan of Google drive, LinkedIn paid Inmail subscription, etc. work as self-serve models.
In this model, the marketing team is the hero and has to do most of the job. You can even reduce the number of sales teams for reducing operation costs after proper analysis.
The free trial tactic works best for self-service sales models.
Transactional Sales Model
Transactional sales is an old-school way of selling the SaaS platform to small and mid-sized companies. This sales model works for bit costlier and more customizable SaaS products.
Salespersons are required to sell SaaS products under this model as they have to explain the product and its usability.
This model relies on both trained sales and marketing teams. Giving offers and extra features can help sales teams sell products quicker under transactional models.
Enterprise Sales Model
This model is suitable for expensive SaaS platforms that target big organizations. SaaS platforms are complicated and special, and need extensive configuration and proper training.
This process of selling is lengthy and complex. Sales agents might need to meet many different level decision makers and explain the product before selling their product.
Enterprise sales models demand extensive training of sales reps to understand these complex SaaS platforms before selling.
Most SaaS companies use hybrid sales models to target individual and enterprise customers.
What Metrics Should You Track for SaaS Sales
Here is a list of some of the important SaaS sales metrics you must track when selling SaaS products.
Customer Acquisition Cost (CAC)
It is one of the key metrics for SaaS businesses. It helps in calculating the cost of acquiring a customer or end user. You can easily scale your business if the CAC is low.
You can use the below formula to calculate CAC
CAC = Marketing and sales costs / Number of new customers
Customer Lifetime Value (LTV)
The customer lifetime value metric helps you calculate how much revenue you generate from one customer during their association with a company. Simply put, it helps you understand overall customer value. Once you sell the subscription of your Software as a service platform, you can upsell existing customers when adding new features to it.
Higher LTV means longer association and more earnings from customers. It helps you anticipate future revenue.
It helps you calculate how much money you can spend on attracting new clients and retaining existing ones.
The formula to calculate the average Customer Lifespan value is -
Customer lifetime value = Gross Margin % x Retention Rate x Average Revenue per Customer
LTV = Monthly Revenue / Churn Rate
Churn rate is the percentage of customers who stop using a product or service over a given period of time. This metric can be measured by subtracting the total number of customers at the beginning of the month/year from the total number of customers at the end of the month/ year.
It helps you understand how satisfied your customers are. A high churn rate also signals the need of improving the product.
Churn rate formula:
Churn rate: Number of customers lost / Total number of customers at the beginning
Lead velocity rate (LVR)
The lead velocity rate metric helps you measure qualified leads. The qualified leads are leads that have a high chance of conversion.
High LVR shows the increased interest of customers in your SaaS product and the success of your marketing campaigns.
Lead Velocity Rate = (Current month qualified leads - Previous month qualified leads) / Qualified leads of previous month X 100
LVR explains only one side of the sales process. Even a high LVR is useless if you cannot convert those leads, which is why we need to measure the win rate.
Win rate helps you understand how many prospects are converting to customers in a particular period. A high win rate shows that your sales strategies are successful.
You can use win rate metrics to understand the number of leads you must acquire per month to achieve your monthly sales goal.
Win rate formula:
Win Rate = Leads closed / Total Leads
Monthly recurring revenue (MRR) & Annual recurring revenue (ARR)
Monthly recurring revenue and annual recurring revenue are two important metrics to track revenue generated over time for a SaaS company.
It helps you understand if sales are increasing or reducing. Increasing MRR and ARR are signs of profitability.
The formulas to calculate the MRR and ARR are:
Monthly recurring revenue MRR = Active users X Average subscription price
Annual recurring revenue ARR = Active users X Average yearly subscription price
Net promoter score (NPS)
This metric helps the SaaS sales team measure the customer’s experience with your product. It helps you figure out your business growth.
In this, a rating scale is used to ask user’s their experience with the product. If customers give scores between 0-6, that means the customer is not happy with your product and you can also expect negative reviews.
A customer who gives a 7-8 score is a satisfied customer but still looking for a better solution. However, if you get a 9-10 score then you have a loyal customer and they will refer your product to more people. It helps SaaS companies get more new customers.
NPS = Percentage of promoters/percentage of detractors
Must-Have SaaS Sales Tools
There are many SaaS sales tools in the market that can help you improve your online presence and smooth the selling process. Here are the types of must-have SaaS sales tools for selling web-based software:
Finding the right potential customers is the first step towards successful SaaS selling. With the right prospecting tool, you can reduce many admin tasks of sales reps and save a lot of time for them to focus on core selling.
Email Marketing Tool
Email marketing works best for developing interest in prospects and later nurturing the customers. But, sending similar emails to hundreds of customers can take a lot of time. Email marketing tools help you save this time and send multiple emails in a single click.
Remember, personalization is key if you want customers to give importance to your email.
Customer Relationship Management Tools (CRM)
CRM tools help you collect different metrics about your sales process. It helps you understand your growth and needs of modifying sales strategy. This is one of the must-have tools for SaaS sales.
When choosing CRM, always opt for one that is easy to integrate and use.
Content Marketing Tools
Content is everywhere and when used properly it can help you strike a chord with your target customers. There are many types of content marketing tools available in the market, so you have to choose which helps you improve your SaaS content marketing efforts and improve your strategies.
Social Media Tools
Social media tools help you take full advantage of available social media. It improves your social media presence and branding. Choose a social media tool that helps you schedule posts on multiple platforms at the same time and saves you a lot of time and effort.
Team Communication Tools
To work efficiently, your sales teams need to stay in contact with each other. It demands a team communication tool that keeps your SaaS sales teams unified and well-informed. And help them work smoothly with marketing and other departments.
With an effective sales strategy, a predictable sales cycle, and the right SaaS sales tools, you can achieve your SaaS sales goal easier.
Salesken is an AI-powered sales assistant that can help you sell your SaaS platform with an improved productivity and higher revenue growth. You can empower your sales team with this assistant and help them provide better customer experiences.
To learn more about Salesken, book a demo today!