Your startup has finally landed on its feet, but something still seems off?No wonder, since the SaaS industry is a unique one – though expected to reach a whopping $157 billion by the end of 2020, the cloud application service market remains a huge challenge for all newcomers. A question may arise, what is sales model or what's the difference between it and sales process. Well, we will keep it short and simple and let you know that sales process is how your prospects become your customers (from awareness to decision making stages). While sales model is your company's fundamental approach to sales.
According to SaaSX, businesses who sell into the enterprises generate 50%+ of their ARR through field sales. Self-service accounts for a very small percentage of enterprise sales.
Bill Gross, an American investor and fund manager, mentions 5 elements that lead a startup to success: ideas, team, business model, funding and timing. It's a different question which element will play the most significant part in the most cases but the sales model your SaaS business employs will play a crucial role in your SaaS business survival. We’ll introduce you the three main ones, and share some tips on how to choose and what challenges to expect.
When you’re looking to generate significant revenue as a newbie in the SaaS market, your product prices shouldn’t go above $5000. In fact, recommended prices for the self-service model are in between $1 and $1000, since that’s how much your target audience is ready to pay.The self-service sales model is thus all about low-priced products accompanied by a fully automated customer journey. Most commonly, startups that employ it sell their products completely via ecommerce, so that they can remain focused on quality of the product and design.
Focus: Product and Customer Journey
In order for this model to work, both your product and your customer acquisition strategy need to be absolutely frictionless. The product itself should be developed with single users or small teams in mind, while every touch point between the potential customer and the actual purchase should be lean and optimized for self-service.The same goes for the website, customer support, and user onboarding.
With such low SaaS product prices, you can hardly afford large investments in lead generation, which means that the customer experience you provide should be streamlined and infallible enough to generate leads and convert customers on its own.
Since you’ll need to be frugal with marketing as well, a viral message or an outstanding content marketing campaign can help you a great deal.
Being a hybrid between self-service and enterprise, the transactional sales model requires a product that’s a bit more expensive than $1000 and a provenly efficient lead generation strategy. Typically, the price point for this model is not higher than $3000.The product price is not the main difference between these models, though.
When compared to those that employ the self-service model, SaaS companies with a transactional sales model offer expert customer onboarding as well, in addition to an automated ecommerce site.
Focus: Customer Onboarding and Face-to-Face Conversion
Thanks to the higher priced products, SaaS startups that choose the transactional model have more money to spend on customer acquisition.
This means that such companies are product-oriented as well, but also include a small inside account management team to help them catch and convert by providing real-time assistance during the software purchase process.
That way, potential customers can browse the website and make a decision on the spot, but they must reach out to a company’s dedicated account manager or a sales engineer face-to-face in order to complete the purchase.
The transactional model will suit your goals if the target audience you’re addressing is comprised of medium-sized and large businesses, and if the product you’re trying to sell has a high revenue expansion potential (if a customer is likely to pay more and more over time).
With this sales model, a SaaS service provider can earn more than $100,000 per year for a product, but only as long as the company is equipped to meet all the requirements of enterprise B2B sales. By definition, this includes a number of things, all equally important for making this model work. First, both the product itself and the customer service that comes along should be enterprise grade. Then, your company’s sales team should be skillful and experienced enough to handle the delicate, long-cycle sales process that’s usually associated with enterprise B2B sales.
Focus: B2B Enterprise Sales
Selling to enterprises is never easy, simply because these businesses make their purchasing decisions for a long time, and not until a majority of board members feel confident enough to give their vote. As salespeople have a whole lot of work to do, it’s easy to understand why they have to be nothing but experts in their niche.
It’s also the reason why SaaS companies that employ the enterprise sales model have to be able to rely on both in-house and field sales reps, which doesn’t come cheap.
On top of that, dealing with high-class clients means that your company’s website content and customer service should be spot-on as well. For startups that are still making their way, the enterprise model is for all of these reasons considered to be too expensive and risky.
How to Choose the Best Sales Model for Your SaaS Company?
With the enterprise sales model being so unsuitable for self funded SaaS startups, your decision should fall somewhere in between the self-service and the traditional model if you don’t plan any.