Software as a service(SaaS) has become the most globally acclaimed business model compared to other enterprises. Unlike the usual marketing where you purchase physical items, SaaS depends on selling web-based software, found on cloud networks. In SaaS sales, a salesperson creates a foundation for ongoing support, benefits, and after-sale services of a product.

As a sales representative, you are supposed to analyze and follow up with a customer after they purchase the SaaS products. This is to strengthen the relationship for future marketing opportunities. With SaaS being a single-sided subscription model of software, it is rapidly developing in the global market with its reliable cost and flexibility. But what do SaaS sales stand for?

What Are SaaS Sales?

The term SaaS means Software as a Service which is the process of selling web-based Software through the internet. The customer service provider must present the application, its benefits, and its features through an online portal to the buyer.

A SaaS sales representative needs to acquire substantial knowledge of the Software. They should also be able to demonstrate and advise while answering questions on a systematic approach to problem-solving of the software.

Software product owners must identify what the customer needs while developing products. In addition, they should focus on creating valuable products since SaaS is a subscription-based business model whose goals are long-term sales cycles.

What Makes SaaS Different From Other Sales?

It is easier to market physical products since they are one-time sales. On the other hand, SaaS products require the owner and marketing team to create awareness of the brand through content that acclaims the prospect’s character.

SaaS owners and salespeople should focus more on building a relationship with clients than just making a sale of a specific product. To succeed in sales, the salesperson must build trust between themselves and the customers.

Whether you are beginning to make SaaS sales or you want to promote your existing SaaS services and products, it’s important to adjust with the primary SaaS models, which are:

• The customer self-service model: Ideal for a passive sales funnel without sales representatives. The sales process mainly relies on attracting more prospects into your business.
• Transactional SaaS sales model: In this sales process, the sales representatives need to convince your potential prospects of the price and quality of the product or service offered. Also, you need to advise on the reasons for increased prices when you implement new product features.
• The enterprise sales model: Where you use exclusive marketing tools to increase awareness on the product and build relationship with prospects. To achieve the targeted prospects, the marketing team should use internet marketing tool strategies.

With the software market’s rapid growth, your products should have a difference in the value of services compared to what your competitors are offering. It would help if you based your prospects on your strengths and also focused on your weaknesses.

To succeed in sales, you should understand the sales cycle and funnel of marketing. A sales cycle will guide you in attaining prospective customers. Also, you will understand every step and what to improve in your product.

What Are The 5 Stages Of The SaaS Sales Funnel?

• Awareness
• Interest
• Evaluation
• Engagement
• Purchase/commitment

A sales funnel is a gradual process that SaaS software buyers undertake before they make a purchase. To lead a buyer, you must identify their journey to push them to the next level.

It involves search engine optimization (SEO), advertising, blogging, email campaigns, conversion rate optimization (CRO), copywriting, social media campaigns, and SMS marketing, among other strategies. Below are five stages of the sales funnel that act like a tool to guide us through the process:

Awareness Stage

Before you sell any products and services, it is essential to create awareness. Using different sales funnels like social media platforms and search engine optimization (SEO) marketing strategies, your potential clients will become conscious of your product’s existence.

Investing in paid advertising platforms can help get your users interested in your products. It is also important to have metrics that track your prospects, like website follow-up, and determine what you are doing wrong.

Interest Stage

After establishing your brand and forming a relationship with customers, potential prospects who believe in your product’s credibility will show their interest. In this stage, you should offer the user a free trial of your product to test and verify the quality and lure them into paying for the full version.

Here you should follow and see the number of customers testing your product and those interested through the messaging platform. Another way to entice them is through custom presentations or free product demonstrations. Focus on retargeting campaigns, email campaigns, chatbots, and lead magnets to get into contact with prospects.

Evaluation Stage

At this stage, you require a prominent call to action(CTA) to increase users’ understanding of your content. People will take more interest in the products, and then you should request their information, like their email address, to learn more about their shortcomings.

Here you should nudge the prospect to make a purchase. In addition, you should respond to clients’ grievances regarding the software price and proficiency. You can learn this through testimonials, case studies, discount promo codes, pricing pages, product comparisons, and tutorials.

Engagement

After you make contact with the customers and they have shown their interest in purchasing your software, they need to get more involved with your company. Due to competition in the SaaS market, continue conversing with the prospects and follow up with them using emails. You can also have special offers on specific packages to help build an effective relationship with the customers.

Purchase/Commitment

At this stage of the SaaS marketing funnel, your focus should be on the existing customers and ensure they continue with the subscriptions. You need to find other means to retain the customers. You can create SaaS videos to update your customers on the upgraded version of the products.

Keep your customers motivated through referrals, upsell campaigns, and promotional campaigns. For those recurring customers who refer your products to others, offer them incentives like promo codes and newsletters.

The Six Stages Of SaaS Sales

• Customer Identification
• Prospecting
• Connection
• Demos and Trials
• The Initial Sale
• Nurturing/Continued Sale

Understanding the SaaS sales process helps in creating conventional revenue. When sales representatives sell subscription access to enterprises and customers, they aim to provide long-term transactions.

By understanding the sales cycle stages, you stand to break the challenge of achieving your marketing goals. It will help increase the performance of your product in the market and boost customer comfort. These stages include:

Customer Identification

The first step in every sales process is identifying your target market before generating the leads. You create a channel connecting you to the consistent ideal customer profile (ICP) by identifying your potential market.

As a SaaS sales owner, you must use personnel like product managers, UX designers, independent contractors, and marketers. These will help in knowing the target market and audience to help the company achieve the set goals.

Prospecting

Prospecting involves knowing the target market and planning strategic marketing tools to reach and influence sales. You can use channels like social media, advertisements, and blogs to gain extensive exposure.

Since SaaS marketing targets the technology user’s audience, ensure that you enhance your presence on all the possible social media platforms. In addition, consider inbound marketing to seize SaaS leads and increase your visibility among your customers.

Display your expertise, connect with your potential prospects, and strengthen trust. Funnels like social media, Google Ads, company newsletters, Linkedin Ads, expert blogs, and downloadable e-books are ideal for increasing your market approach. Also, you can get your marketing team involved in trade shows and conferences.

Connection

It is essential to understand the potential visitors to your websites who will consider your products and services. Despite the high number of people visiting your website or blog, you can find that only a few might be interested.

Connect with potential leads to identify which visitors are interested in your service. You can have an expert analyze your traffic data and list them depending on their buying intention. The listed data will help you understand who the potential buyers are and connect with them.

In addition, you can discuss your customers’ concerns by answering their questions. Focus more on the benefits that your product or service will bring your customers. Also, involve them in concerns regarding pricing and product essential features.

Demos And Trials

Once you identify an interested lead, you must demonstrate that your service or product will satisfy their needs. Depending on your product, use various skills to persuade potential buyers and guide their buying intent.

Free trials are suitable for competitive services. For complicated and expensive services, sales representatives should run demos. In addition, you can have some presentations through case studies and paid trials.

After the potential customers have tried your software, you can contact them. While speaking with them, you can evaluate their buying intent.

The Initial Sale

Here is where your prospect becomes a paying customer. You will need to negotiate the price, give your final bid and finalize the sale. If the prospect hesitates, you can offer them a discount, especially when the price becomes an issue. Discounts are highly effective in preventing your prospects from turning to your competitors.

Alternatively, you can offer those who bill for more extended periods at least a month of free services. It will keep them on board for longer. For some prospects like enterprises, you can stretch their trial period and inform them of upgraded features and the benefits they will get for their business.

Nurturing/Continued Sale

Lead nurturing can add value to the relationships you have with the prospects. Here you get to address the questions and uncertainties that may prevent users from proceeding with purchasing your services.

You can develop a reliable domain and retain your customers through professional customer after-sales services. When you have new users, it is best to provide them with training or develop more advanced features on your software to meet the customer’s specific needs. Also, include a channel for your clients to give feedback on your products or service to help you advance in solutions.

The Most Important Metrics For SaaS Sales

• The Monthly Recurring Revenue and Annual Recurring Revenue
• Customer Acquisition Cost (CAC)
• Customer Lifetime Value (LTV)
• The Churn Rate
• The Average Revenue Per Account (ARPA)
• Win Rate
• Deal Velocity
• Market Data

Metrics in SaaS sales are ways to track the overall revenue in a SaaS business. They act as the key performance indicators(KPIs) to the overall growth of a business continuously. In addition, they help you identify how a business distinguishes itself from its competitors.

Once you create strong client retention, you can improve on the revenue input and still prolong your relationship with clients. In the SaaS market, the essential metrics should focus on marketing, sales, and finances.

Below we explain the most important metrics for Saas sales:

The Monthly Recurring Revenue And Annual Recurring Revenue

These are financial metrics used to measure the profitability of a business, and digital products relying on a recurring revenue model. They include monthly recurring revenue (MRR)and annual recurring revenue (ARR).

Monthly recurring revenue (MRR)- MRR measures the monthly income a SaaS company anticipates. MRR is measured by the number of clients a SaaS provider has and the amount they pay in that particular month. To calculate MRR use the formula:

MRR = total number of monthly accounts x payment rate per account

For example, if you have a total of 500 clients and each pays a rate of $40 per month, your total MRR will be $20 000.

You can also base your MRR on the average monthly revenue and multiply it by the number of clients.

Annual Recurring Revenue (ARR) - ARR is a metric used by subscription-based businesses or SaaS businesses to determine the value of annual recurring revenue. Compared to MRR, most B2B subscription businesses use ARR more frequently. To calculate the annual ARR, take the average MRR and multiply it by 12 months.

Customer Acquisition Cost (CAC)

The customer acquisition cost (CAC) defines the sales and marketing costs required to acquire a new user within a specific period. Low CAC helps build the user/client base at a cheaper cost. To calculate the total CAC, add the total sales at a given marketing period and divide it by the number of new clients.

CAC = marketing and sales cost / number of new clients

Customer Lifetime Value (LTV)

Customer lifetime value(LTV)  is the total revenue a SaaS business earns from a client over the existence of an account. LTV is a more accurate indicator than the customer’s cost of acquisition(CAC). To calculate LTV for a SaaS business, divide the monthly revenue by the churn rate.

LTV = Monthly Revenue / Churn Rate

If you have a higher LTV rate than your CAC, it is proof that your SaaS business is profitable. On the contrary, if your CAC is higher than your LTV, it is an indication that your business is losing money every time you get more customers.

The Churn Rate

The churn rate is the average number of SaaS clients who call off their subscriptions within a specified period. The churn rate is crucial because it shows how SaaS users are satisfied or dissatisfied with a product or service.

Churn Rate = called off subscriptions / total customers at the beginning of a period.

Depending on the churn rate, the SaaS provider can improve the services or increase the induction to keep additional users from canceling the subscription services.

For instance, if a SaaS business experiences a small percentage churn, it will increase SaaS profits remarkably. Satisfied clients will increase the LTV as well as the product referrals.

The Average Revenue Per Account (ARPA)

The Average Revenue Per Account (ARPA) is the amount of income produced per account within a specific time, usually one month. Some clients own multiple accounts with SaaS businesses; thus, the analyses on the accounts will vary depending on the revenue generation.

A business should calculate ARPA on either a monthly or annual basis. To calculate ARPA, divide the monthly recurring revenue (MRR) by the total number of accounts. You can also use annual recurring revenue.

ARPA = MRR / number of accounts or ARPA = ARR / number of accounts

Win Rate

To calculate your SaaS business win rate take the number of won deals and divide it by the number of qualified opportunities given by prospects. A reasonable win rate should be at least 50% in SaaS companies.

In those SaaS sales where the services and products require demos or trials, calculate the win rate depending on how many trials and demos resulted in closed or won deals. If the result is lower than the recommendable rate, identify the flaws in your product and find solutions.

Deal Velocity

The deal velocity metric measures the number of qualified leads in a business. A high deal velocity rate in a SaaS channel shows the product’s reliability. It also helps increase consistency through the high number of prospects around paying customers. Low deal velocity proves the need to work on your software to create more awareness and upgrade the product.

Market Data

While the SaaS valuation highly depends on future growth, the sales representatives should help increase the win rates. If customers tap out, it can significantly impact the sales prices.

SaaS business representatives do market research to understand clients, competitors, and the industry. The data attained will be beneficial in evaluating the effectiveness of your products in the market.

Through global value chains (GVCs) in SaaS sales, International production across different countries is restructured by outsourcing products and services.

How Does Christoph Janz’s SaaS Sales Model Help?

Consider studying the Christoph Janz SaaS model, which teaches us about internet startups on SaaS and early-stage investment templates. You will learn about different ways to grow your SaaS business to be successful in the digital market.

He explains the different SaaS metrics and their impact on your business. Learn more on how to improve your business market value.

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