If you’ve spent any time working in the software as a service (SaaS) industry, odds are you’ve heard that “SaaS products sell themselves” — but this idea does a huge disservice to the hard work SaaS sales and marketing teams have put in to take their companies from fledgling startups to household names.
In fact, building a sales A-team and developing a foolproof sales strategy for that team to follow are two of the most important things any SaaS company can do to ensure its continued growth and success. That’s why we’ve packed this post full of helpful advice and best practices on how to sell SaaS, from how to spot a SaaS sales all-star to tips for closing sales.
Let’s get right to it.
Table of Contents
Software as a Service Glossary & FAQ
What is SaaS?
Long gone are the days when clunky on-premises systems hogged valuable storage space on your server; with the advent of SaaS-based systems, the world went cloud and never looked back.
Per its “as a service” suffix, SaaS introduced us to the concept of remotely hosting, securing, and managing software. We’re about 10 years out from that now, and nearly every man, woman, and child has at least a rudimentary understanding of what software as a service is — after all, SaaS-based technology plays a vital role in just about everything we do, from how we listen to music to how we communicate. As such, software as a service occupies an interesting space in the growing subscription economy, delivering software directly to your computer the same way other subscription services deliver physical goods to your doorstep.
What is SaaS sales?
From a sales perspective, B2C and B2B SaaS sales are two very different beasts.
Most B2C SaaS companies use the “freemium” model, in which they either offer their service for free on a trial basis, or offer their service for free in perpetuity, but require users to pay for upgrades or add-ons. For an example of the freemium model in action, look no further than Spotify: The streaming music service lets users create an account and listen to unlimited music for free, but requires them to sign up for premium service in order to skip songs and eliminate advertisements. B2C SaaS products also operate on a self-service model. Spotify customers never receive a call from a salesperson trying to convince them to upgrade; instead, they simply decide whether or not they’d like to upgrade to the company’s premium service on their own.
Compared to B2C SaaS sales, B2B SaaS sales is highly consultative. Before they can close on a sale, B2B SaaS sales teams must receive approval from multiple stakeholders, leading to a considerably longer sales lifecycle. In order to convince these stakeholders of the value of what they’re selling, B2B SaaS sales teams need to know their product inside and out and be able to explain its technical specs, how it fits into the prospect’s existing systems, and how it will meet the prospect’s specific requirements. Which takes us to our next point…
What is customer-centric selling?
Gone are the days when companies would spend millions of dollars in capital expenses on applications and servers, only for them to depreciate over time; today’s SaaS customer expects applications that are easy to use, affordable, that solve for their specific business challenges, and that will grow along with their company. These heightened expectations are indicative of a larger shift that’s occurring across multiple industries, a shift toward customer experience rather than products as a key competitive differentiator.
To that effect, rather than just sling a bunch of servers (the way they would in the heyday of on-premises systems), SaaS sales teams must deliver apps in a way that enables them to better understand their customers’ needs and solve for their pain points. In a nutshell, customer-centric selling is an agile type of selling that prioritizes how customers use SaaS systems to drive the needle of innovation forward rather than worry about the infrastructure that’s going to run it.
What are some common SaaS sales models?
There are, as it stands, three SaaS sales models:
- Self-service: As mentioned above, the self-service SaaS sales model relies on customers taking the initiative to sign up online for a service on their own. Since the customer is the one effectively closing the sale, the self-service model generally can’t support a full sales team. Additionally, the customer must independently understand the value of your product, how to buy it, and how to use it. The self-service model is best-suited for companies that deliver lower-priced products at a high volume; freemium service is popular with companies that utilize the self-service SaaS sales model.
- Transactional: The most common — and scalable — of the three SaaS sales models, the transactional model places more importance on human interaction and personalization than the self-service model and therefore supports a full sales team. Compared to the enterprise model, the transactional model involves a relatively short sales cycle. Best-suited for small-to-medium-sized businesses that sell software at a low volume for a high price, the transactional SaaS sales model is most efficient when combined with thorough sales representative training, online content, automation, and incentives.
- Enterprise: This SaaS sales model is highly consultative and emphasizes the importance of building long-term customer relationships. As a result, it supports a full sales team and necessitates a longer decision-making process than either the self-service or transactional models. The enterprise sales model is often accompanied by high-end marketing and high-touch support.
What are some common SaaS sales metrics?
There are numerous ways to measure SaaS sales, but only a few key metrics that really matter:
- Sales-qualified Leads: The number of prospects who have demonstrated an intent to purchase your company’s product and have been evaluated by your company’s sales team as likely leads.
- Lead Velocity Rate (LVR): The rate at which qualified leads grow month over month. Your company’s LVR is a good indication of future growth.
- Revenue per Lead (RPL): The amount of money generated (on average) by each lead. You can calculate RPL by dividing the amount of revenue generated by the number of leads.
- Customer Acquisition Cost (CAC): The amount of money it costs (on average) to turn a prospect into a customer. You can calculate CAC by dividing the costs spent on acquiring customers over a given period of time by the number of customers acquired in that same period of time. Given that acquiring a new customer can be anywhere from five to 25 times more expensive than retaining an existing one, this is an incredibly important metric to track.
- Closed-won or -lost: The number of deals closed with either a contract signed or the prospect going a different route, alternatively. Tracking the total number of deals a SaaS sales rep has closed-won or closed-lost is a good way to monitor their performance.
- Monthly Recurring Revenue (MRR): From an accounting perspective, your sales team is in charge of fueling the proverbial business engine — but, for subscription-based SaaS business, recurring bookings are where the real money’s at. This metric represents the amount of revenue generated from bookings on a monthly basis.
- Annual Recurring Revenue: This metric is effectively the same as MRR, with the exception that it represents the amount of revenue generated from bookings on an annual (rather than a monthly) basis.
- Quality of Earnings (QE): An assessment of the accuracy of your business’ financial results based on factors such as revenue, expenses, and net income. QE also accounts for external factors, such as one-off events that could skew earnings’ numbers.
- Churn: The number of customers you lose in a given time period (typically a month or a year). You can calculate your churn rate by taking the number of customers you lost over the course of that period and dividing that by the number of customers you started with at the beginning of that period.
- Net Promoter Score (NPS): Per the official site, the NPS “measures customer experience and predicts business growth” based on the number of individuals who report that they would recommend your product to a friend or colleague. Respondents who score your business 9–10 are “promoters”; 7–8 are “passive” and 0–6 are “detractors.” You can calculate your total NPS by subtracting the percentage of detractors from the percentage of promoters.
How can SaaS sales teams map the customer journey?
Most customers follow one of two paths on their SaaS journey:
- The customer is aware that they have a problem but isn’t sure how to solve it. They consult a trusted expert, who recommends a SaaS solution. The customer takes the expert at their word and purchases the solution on their recommendation.
- The customer has a problem but isn’t aware of it, or of their need for a SaaS solution to solve it. SaaS marketing and sales teams work together to educate the customer on what the problem is and how their company’s software can be used to solve it. After going through the sales cycle, the customer purchases the product.
For SaaS sales teams that find themselves guiding customers along this second path, it’s important that they work closely with prospects and leads, not only to raise awareness, but also to understand what is important to them. When introducing their company’s product to a prospective customer, reps must start small and gradually build on the customer’s knowledge through consistent engagement; by planting the seeds of a relationship and nurturing it over time, SaaS sales reps can better map the customer journey and more easily lead customers down the path to their company’s product.
7 Things to Look for When Assembling Your SaaS Sales Team
No one said assembling the perfect SaaS sales team would be easy, but it is possible. Most SaaS companies tend to focus on hiring millennials (and, more recently, Gen Z kids fresh out of college) to join their sales team, which makes sense: Having grown up with technology, younger generations are more likely to implicitly understand your product. Plus, the SaaS industry is an ideal place for fledgling sales representatives to get their start. That said, anyone from any generation can make an excellent SaaS sales rep so long as they:
- Know their company’s software stack inside and out. It isn’t enough to have a general idea of what a solution does and how it works. SaaS reps need to have a comprehensive understanding of their company’s entire software stack, including how to use each solution and how different solutions integrate with one another. That way, reps can better demonstrate the specific value each solution provides and can become nimble enough to answer technical questions from prospects on the spot.
- Are on top of the latest industry trends and developments. Innovation moves at a breakneck pace in the SaaS industry, and reps need to demonstrate a desire to learn and the ability to quickly adapt to change. In this regard, the more fluent a SaaS sales rep is with technology, the better.
- Have a clear picture of who the ideal customer is. When it comes to sales, you might think, “The more customers, the merrier” — but you’d be wrong. Closing a sale with a customer who isn’t the exact right for a solution might be a short-term win but is more likely to lead to eventual customer churn, which hurts the company in the long run. SaaS sales reps need to be able to quickly figure out which prospects would make qualified leads based on predetermined characteristics and, if a prospect doesn’t match those characteristics, close out the sales process so they can focus on more suitable prospects.
- Really demonstrate the solution’s value. For every prospective customer who approaches your company to learn more about how your solution (or solutions) can help resolve their business challenges, there’s a prospective customer who doesn’t know that they need your product — yet. A good SaaS sales rep should be able to convince prospects who fall into this second category that even if their current systems are fine, they have the potential to be better, and that their company’s solution is the key to unlocking that hidden potential. A great SaaS sales rep will take this a step further, drawing upon their truly comprehensive knowledge of the product to show — rather than just tell — prospects why they need this solution.
- Downplay discounts. If the most compelling reason for customers to purchase your product is a discount, you’re in trouble. Even if you’re solution is so amazing that it practically sells itself, offering a discount cheapens its value by making it seem as though it isn’t worth its price tag and ultimately hurts your bottom line. SaaS sales reps need to keep their eye on the prize and sell prospects on the value of the product, not on its price.
- Build strong, long-lasting customer relationships. Customer loyalty is a precious (and profitable) thing. But in order to earn that loyalty, SaaS companies must first build solid customer relationships — a process that begins as soon as a prospect enters the sales lifecycle. Without the ability to meet face-to-face the way they would with traditional sales, SaaS sales reps need to leverage all forms of contact at their disposal — phone calls, emails, even text messages — to connect and engage with each qualified lead on a personal level. It’s key that, when looking for SaaS reps to add to your sales team, you specifically seek out candidates with excellent communication skills.
- Invest themselves in the customer’s long-term success. In order to thrive, SaaS companies need to have more than just their bottom line in mind — they need to have a vested interest in their customers’ success. The same is true for SaaS sales reps. Beware of reps who will promise prospective customers the moon — although that approach might fly in traditional sales, in SaaS sales it’s a recipe for customer churn. Instead, look for reps who are honest and will put in the time and effort to align customers with the right solutions to meet their business needs.
Tips for Closing SaaS Sales
You’re assembled your SaaS sales A-team, each member savvier, more knowledgeable, and more driven than the last — now it’s time to build a strategy based on industry best practices to help them close on every qualified sale. Take a look at the following tips for a bit of SaaS sales inspiration:
- Optimize email marketing campaigns. It’s one thing to get a prospective customer’s attention, and another thing entirely to keep it; make sure your company stays top of mind by running an automated drip email marketing campaign. For best results, send emails out from an address attached to a person’s name (think “firstname.lastname@example.org” instead of “email@example.com”) and leverage customer relationship management (CRM) technology to make sure that the right emails are sent to the right leads.
- Don’t bother with trials. Though it might seem counterintuitive, software trials are actually more trouble than they’re worth. Most SaaS solutions are too complex for prospects to get acquainted with, let alone use in a meaningful way, within the trial window, which means you’ve just wasted 30-or-so days. Ultimately, trials introduce unnecessary interruptions to the SaaS sales cycle and slow it down considerably, so it’s best to away with trials entirely.
- Pick up the phone from time to time. It might seem hard to believe but, even in our highly digitized world, there are still customers out there who value personal connections — and, short of a face-to-face meeting, the best way to engage with these people is over the phone. A phone call can add more color and candor to a sales interaction than any email ever could, so it’s important that sales reps keep this valuable tool in their arsenal. For reps who are unsure whether a particular prospect would appreciate a call, consult your company’s CRM to view that prospect’s personal preferences.
- Tailor each demo to the customer. Once a sales rep has qualified a lead, they’ll likely proceed with a product demo. Rather than deliver a one-size-fits-all demo that showcases all of the amazing things your solution can do, show customers what your solution can do for them. More often than not, customers aren’t interested in bells and whistles — they just want to know that your solution will resolve their specific business challenges and that it can integrate with their existing systems, so it’s important that each demo be tailored to the individual customer.
- Follow up again and again. Only the very best (and, sometimes, not even the very best) SaaS sales reps can close on a deal after a single conversation. On average, it takes six to eight touches to generate a sales lead, so the sooner —and the more frequently — your sales team follows up on that initial contact, the better. Although some sources might lead you to believe that there’s a specific formula to following up, there isn’t, so feel free to experiment with it a little and see what works and what doesn’t.
- Qualify every prospect. One of the easiest ways to reduce customer churn is to thoroughly vet every prospect before moving them to the next stage of the SaaS sales lifecycle. Unqualified prospects are more likely to cause problems than qualified ones: They’re more likely to encounter challenges, to complain, and, eventually, churn. Create an ideal customer profile for your sales team to use as a reference point when qualifying prospects, so they can make better use of their time and zero in on the right leads.
- Experiment with pricing. Some SaaS companies swear by setting their prices low, while others insist that high prices communicate high value; both approaches have their detractors. Although pricing, whether low or high, shouldn’t be the determining factor behind whether your product is competitive, there is room to experiment with pricing to see what works best for your company.
- It takes a lot to earn a customer, so make sure you keep them. It’s a well-known fact that it’s easier to retain existing customers than it is to acquire new ones — but did you know that businesses have a 60–70% chance of selling to an existing customer, but only a 5–20% chance of selling to a new prospect? It’s easy to see, then, why it’s vital that your SaaS sales team make a concerted effort to capitalize on their hard work by retaining their hard-won customers.
- Create a consistent stream of revenue. To really hammer home the value of customer retention, think about it in relation to prepaid annual plans. Prepaid annual plans are a more stable form of revenue than MRR and enable your company to have more cash on hand to reinvest in your product or to scope out new markets — and the more customers you’re able to enroll (and re-enroll) in annual prepaid plans, the more substantial that cash flow. Although discounts are typically discouraged, they can be useful when incentivizing customers to sign up for prepaid annual plans.
- Consistently upsell to your existing user base. Once again, an existing customer is a valuable customer. In addition to email campaigns and automated surveys, you can increase each customer’s lifetime value by equipping your sales team with a CRM solution that they can use to analyze customer data and identify potential upselling opportunities.
- Know when to say goodbye to customers. There comes a time in every SaaS company’s life where its business team realizes that a particular customer is a poor fit. Whether that customer wasn’t properly qualified, or their needs have changed over time, it sometimes makes more sense to cut your losses and “fire” that customer than it is to have them continue to drain resources with limited payoff. Knowing when to say goodbye to difficult or unprofitable customers will also help your company earn a reputation for being discerning, which could make you more competitive.
And there you have it: everything you need to know about how to sell SaaS products — and then some. Need even more help increasing your SaaS sales? Salesforce can take you there, and VennScience can help you get started. Our team specializes in delivering Salesforce solutions designed to help SaaS companies such as yours find new ways to target customers and boost their bottom line. It all starts with a conversation, so drop us a line and talk to one of our consultants today.