Building Healthy SaaS Revenue: 4 Keys for Landing New Logos
Cloud computing, and the evolution of software as a service (SaaS), has transformed the technology industry. According to IBM, 85% of all new software is now being built for the cloud, and by 2016, one-quarter of all applications being used around the world will be available in the cloud.
At the same time, SaaS solutions have transformed how businesses select, buy, and use software. At least half the time, if not more, SaaS vendors will sell directly to functional or business-unit stakeholders rather than just to IT people. The sales emphasis is now on a SaaS solution’s value to the business — not on the underlying technology. The nature of the sales dialogue between SaaS vendors and customers looks and sounds very different than it did in the days of on-premises applications.
Traditionally, software licensing models were also based on one-time, upfront licensing fees, along with the inevitable (and expensive and painful) installation services and support packages. Such purchases committed organizations to their decisions, often for years at a time.
It’s a very different world for SaaS vendors. Pay-as-you-go pricing and very low installation costs make it essential to deliver lasting value, keep customers engaged and satisfied, and generate stable long-term revenue streams.
This transformation poses major challenges for many sales organizations. New buyers, changing business models, and shifting expectations require innovative new tactics to win deals, build strong relationships, and deliver the long-term value that SaaS customers demand. These tactics also provide a vital competitive advantage in a SaaS market where firms are under constant pressure to stay ahead of the competition.
Phase One, in a manner of speaking, is landing the customer. We believe that two key activities and two key dialogues are essential for success.
Key Activity 1: Understanding today’s SaaS buyers. According to a December 2013 study by Gartner Group, nearly half of all IT buying decisions are made or influenced by business-unit stakeholders. We believe an even higher percentage of these business users are involved in SaaS buying decisions given the ease with which these users can evaluate, select, and implement SaaS solutions.
Most IT organizations still play at least an advisory role in SaaS buying decisions. Nevertheless, it’s important that your sales team develop the processes necessary to identify today’s SaaS buyers, to reach them with effective messaging, and to establish the value of your solution in terms that make sense to them.
Key Activity 2: Establishing a repeatable sales process. Successful SaaS organizations are able to absorb and apply lessons learned from every customer contact function. Sales, marketing, customer service and support, and product development must treat organizational learning as a formal discipline. As customers use the product and achieve business value, the SaaS vendor uses these insights to improve its products and processes to add even more value. The SaaS sales team is a vital part of this organizational learning curve. The sales team must align with marketing and product design, understand how customers buy and use the product, document and validate its sales processes against that knowledge, and finally scale what it has learned for use by the whole company sales force. Organizations that establish a repeatable sales process are better prepared to position their SaaS offerings in the marketplace and to make the best use of sales resources.
Key Dialogue 1: Learning to speak the buyer’s language. We already know that miscommunication between sales teams and buyers can be costly. According to Forrester Research, just 1 in 10 executives say they get value from meetings with salespeople. This problem is quite a handicap to overcome, especially in the SaaS market, where sales teams may be accustomed to speaking the language of IT buyers — not the business-unit buyers they increasingly encounter.
Effective communication isn’t just a matter of speaking “business language” or avoiding technology jargon. The shift to SaaS and the cloud also requires the ability to address decentralized departmental buying centers. Salespeople have to frame the conversation in terms of operating budgets rather than CapEx. They have to focus on productivity, flexibility, usability, and other business-related impacts.
Key Dialogue 2: Communicating value without overpromising. For better or for worse, over-promising on traditional on-premises applications was a low-risk proposition. Once a customer committed to a solution, they typically had little choice but to forge ahead. SaaS applications, by comparison, give customers the opportunity to continually hold vendors accountable for their product claims. If customers are disappointed, they’re less likely to renew their subscriptions.
Successful SaaS sales teams know how to engage buyers in open, honest, and transparent conversations about a solution’s capabilities and benefits. A well-trained sales team will understand how to explain and demonstrate a solution’s business value without resorting to exaggeration or unsustainable claims. They also understand how to begin a dialogue with customers that is based on trust, honesty, and a shared vision of success.
The key thing for SaaS salespeople to remember is once their sale is made, the selling process is not over.
Click here to down load our new brief, Selling in the Cloud – 10 Best Practices for Sales Strategy Execution.