Tuesday, December 21, 2010
Accelerate SaaS revenue by cutting features & lowering price
A primary allure of SaaS businesses is clearly the recurring revenue. But the very nature of Software as a Service businesses is that you don’t have to rely on a single sale, or single product delivery. The first time your customer says “yes” should be the very beginning of a series of purchases that maximize their success and lifetime value.
It’s curious, then, that many SaaS businesses continue to build more and more features, and hence more and more complexity, into their products. Customers are inundated with features, sales reps take forever to walk through them. The further you get into the sales process, the more complex your product (and their decision) feels to the buyer.
That’s not good, and is wholly unnecessary for a SaaS business.
Study the SaaS businesses with the most rapid acceleration of market adoption and you’ll find products that are easier to buy, lower priced, and lighter on features. These “entry” products are easy to buy, focus on a core differentiating problem, and allow the buyer and seller to deepen their relationship over time.
As your customer gets comfortable with this core offering, they’ll be ready to step up to richer product offerings, add-ons, services and more. Your monitoring of their activity and early product usage can help you understand which customers might be ready for that upsell activity and when.
In this model, your initial sale is important but account management and upsell is what drives profitability and growth.
In many nascent SaaS markets, a hefty amount of education and direct consultative, discovery-based selling is still required to even get that first entry sale. But as your markets mature, those entry products can more often be sold in an automated manner, or be completely marketing-driven.
Your sales team, in this case, is starting with warm leads that are already paying you, and your path to profitability on the acquisition cost just got a whole lot shorter.
If your business is already there, congratulations. You’re in the minority. For everyone else, make sure your product portfolio is built such that you’re helping buyers say yes faster. I bet your sales & revenue yield over the following 6-12 months will improve as a result.
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