What is SaaS Sales? Score Customers, Track Metrics, and Understand Your Market
Patrick Campbell Dec 12 2019
The goal in SaaS sales is not to convince your customer to buy your product there and then—it’s to win that customer over to your product for a lifetime.
It’s a daunting challenge, requiring a thorough understanding of your customer’s needs and wants, and it requires a great deal more commitment on the part of the salesperson than a traditional product sale.
That’s why we’ve put this guide together. We’ll tell you how to use your understanding of a prospect to turn them into a delighted customer, what metrics to lean on, and how to build the perfect SaaS sales team. With SaaS, you’re selling a relationship as much as a product or service. It requires a certain magic to make it work.
1. What is SaaS?
2. 4 metrics to know when selling SaaS
3. The 3 different SaaS sales models
4. The 6 steps of the SaaS sales cycle
5. 5 components of a killer sales team for your SaaS business
6. Subscriptions for life
What is SaaS?
SaaS, or software as a service, is a delivery model in which software is centrally hosted in a cloud environment. It is then licensed to customers for them to use via a subscription plan.
SaaS solutions everything from video hosting to AI to recruitment to e-commerce. It’s one of the fastest-growing, most varied, and most creative industries in the world.
What is SaaS sales?
SaaS sales is the act of selling this cloud-based software to customers or clients, often via contracts that set time periods for usage.
This time-dependent aspect is a key component of the SaaS sales definition. In regular sales, you will probably be selling one product once. In SaaS sales, you sell products over a pre-agreed length of time.
As such, SaaS sales require far more knowledge of the customer’s company, needs, and desires in order to understand if they have a true, long-term need for your product.
4 metrics to know when selling SaaS
The story of any SaaS business can be told by their metrics — they’re the language of the business. All SaaS companies, regardless of product, are looking to maximize their MRR and keep their churn to a minimum. It’s vital that your sales team understands how your product relates to each of these metrics when they’re attempting to make a sale.
P.S. The easiest way to get these metrics and a ton of more useful insight is by signing up for a metrical newsletter or emailing list, like ProfitWell Metrics. It’s completely free!
Your churn rate is how many of your customers leave your service over a given period of time. Every SaaS company is preoccupied with this metric, and effective selling will involve identifying how your product can help fight churn.
Looking at how even a moderate churn rate can impact growth, it’s easy to see why companies prioritize SaaS products that can reduce theirs.
MRR stands for ‘monthly recurring revenue’ and is effectively the lifeblood of a SaaS company. Keeping this number high and in a consistent state of growth is vital for success.
To evaluate MRR, you should be asking yourself:
- How much monthly recurring revenue do I currently bring in?
- What should my target MRR be to meet annual revenue goals?
- How much will each prospect increase my MRR and bring me closer to my target amount?
Because MRR is a recurring statistic, the quality of your leads is decisive—you need customers who are right for your company, not just right now, but in the long run in order to secure MRR growth long-term.
Your Net Promoter Score (NPS) ranks your customers’ willingness to recommend your company and your services. Do your customers rate you 10/10 when it comes to customer service and product use? If so, be acquainted with the most popular aspects of your product/service and use this to your advantage when selling.
SaaS sales is a lot about building a sense of rapport and trust with the customer. Affirming your company’s commitment to a good bedside manner can be important when closing a sale, every bit as much as proof of success can be.
Customer acquisition cost (CAC) is an important metric for the merchant’s side when selling a SaaS product. Acquiring customers is inevitably an expensive process, and this cost needs to be balanced. When evaluating prospects, you need to ask, "Is this customer going to cost above our average CAC and will their contract length/value be worth it?"
If their CAC is too high, consider rethinking your list of prospects and look for ones that are more accessible and conform more closely to your ideal buyer persona.
A solid knowledge of the decisive metrics in SaaS is a vital foreground to success in SaaS sales. Now, on to the fun part.
The 3 different SaaS sales models
Sales models in SaaS are a little different from the norm.
Salespeople following a traditional model rely heavily on their marketing team to generate interest around their product—things like well-targeted social marketing and high-quality onsite content are key in the SaaS model to driving prospects into your salespeople’s reach. Traditional reps in SaaS sales also try to broker deals by contacting prospects directly via phone and through email. Again, onsite forms and email lists are key to qualifying leads for how well matched they are to the product you’re offering.
Acquiring good leads, precisely calculated moments of approach, and a persuasive sales technique are key to success in this model.
Enterprise sales are not uncommon in SaaS. Enterprise sales, also known as complex sales, involve vastly larger contracts and often come about when you’re selling to an entire company. A big company could need a license to use your service on thousands of computers, meaning a potentially huge revenue bump for your company ostensibly off of one deal.
Because the deals in enterprise are so large, the sales cycle can be longer—there are more decision makers involved, and the extensive process creates more risk for lost deals. Patience and persistence in negotiations are key to success in enterprise. As a result, SaaS companies that are further up in scaling are the ones most likely to take on enterprise deals.
Self-Service (often B2C)
Self-service works the way Spotify, Netflix, BlueApron, Dollar Shave Club, and other B2C services work. In essence, a customer comes to the product and chooses a tier they need and decides to check out or not. There are very few salespeople in this role, as these are low-cost services.
As such, marketing plays a much bigger role than pure sales in self-service. Building a strong interest in your product is essential to selling a self-service SaaS product.
The 6 steps of the SaaS sales cycle
The SaaS sales cycle comprises everything from the creation and qualification of a lead (i.e., an appraisal of a prospect who might be interested in your product and how likely they are to buy it) to the closing of a deal with that prospect.
While different SaaS sales cycles can vary considerably in the details, the basic steps remain more or less constant across deals and regardless of what SaaS sales model your business uses. It’s a gradual process of identifying what the customer needs from you and, by one means or another, convincing them that you’re the one to supply it.
Define your customer
You need a detailed idea of your ideal customer before you can go chasing leads. Use demographic/psychographic information to cultivate sturdy buyer personas, and go after prospects who match them. They’ll be easier to win, smoother to maintain, and they’ll get a load out of your product.
Messy or open-ended buyer personas can superficially help you ‘widen the net’ with your sales base, but it’s bad for your company in the end. The lower-quality leads that result can lead to wasted time and resources, as well as a much higher CAC than would be the case with a better-suited customer.
Prospect, actively or passively
Now you know who you’re targeting, you can begin prospecting. Depending on the nature of your product and your company’s profile, either an active or passive approach to winning new custom can be potentially successful.
For smaller companies, or those with a very specific set of buyer personas, active selling is the better option. Isolate leads with high potential and make an initial approach through email or phone.
For self-service companies, or those with a larger profile, a passive approach can be effective. Use content marketing — high-quality SEO content, video series, online seminar—to draw leads to your website, and then offer onsite CTAs for product demos or purchase options.
A hybridized approach is advisable. You can enjoy the best of both worlds by combining good content marketing and other onsite assets with a sales team well-trained to spot customer trigger points and reach out when a customer is engaging with you.
Regardless of the approach, your evaluation of potential prospects should be comprehensive: if this prospect were a customer, would they be a good fit for your product? Does your product integrate easily into their workflow? Will it optimize efficiency for them? Will it make their lives easier and will they accept it?
Because of the degree of commitment involved in a SaaS subscription, closing deals can take a lot longer than you might be used to if you’ve come from trade sales. The value of persistence cannot be understated—it is fundamental that motivation is kept high for your sales team.
Connect with the lead on a discovery call
Perhaps the most decisive stage of the sales cycle—by the time of the discovery call, you have acquired the customer’s interest and will have approximately an hour on the phone/video call to convince them that your product fits into their world.
During a discovery call, you’ll need to make sure you do the following:
Establish awareness of your prospect’s buyer journey to this point. Affirm that you understand where the prospect is in their decision-making process — are they in need of a solution to an urgent problem? Are they scoping out options ahead of an upcoming scale-up?
Discuss the customer’s goals. Managing expectations and determining product-customer fit cannot be done without understanding what the prospect would need to see from your product.
Quantify the ROI they can expect from your product with respect to those goals. Make the prospect aware of how your solution has worked for your past customers.
As we discuss later, discovery calls are all about give-and-take—successful sales reps on discovery calls aren’t afraid of talking at length about their product, but they’re also very capable of listening to their prospect and relating their product’s qualities to the prospect’s needs.
Provide a free trial
The potential customer at this point will most likely want a trial or a free version of the product to see whether or not it is viable for their company/needs. The trial may have been demoed during the discovery call, at which point, the prospect can select which product features they would find most useful to test out.
The sales rep can then agree on a trial duration with the prospect to ensure discussions can pick up again once the prospect has had ample opportunity to test out the product.
Encourage the prospect to subscribe
If your customer has enjoyed the trial/decided they want more from the freemium version, it is now time to try and close the deal. Walk them through subscription options, the various tiers of pricing you offer—a good company will have various packages tailored for all the verticals and industries they serve. Take a look at Hubstaff’s pricing page below for an example of a pretty good one.
There may still be some distance left to run after your free trial stage before a customer is ready to commit. Begin an email nurture campaign, keeping your product and what it can do at the forefront of your prospect’s mind. Your expertise on the issue you’re trying to solve for your customer, and your desire to solve it for them, is paramount. If they don’t know why they need your product, tell them—it can be a key turning point in building your relationship with them.
Allow your prospect to acquire sign-off from their superiors if you’re selling enterprise, and get the deal closed.
Follow Up for the upsell
Your customer has now been using your service for six months, and they may need a nudge to sign another contract—better yet, they might already be in a position to upgrade with you. Contact them and see if there is anything they need help with in order to feel confident in extending their contract.
If they’re having a great time with your product, then this juncture can be an excellent time to suggest how the customer can benefit by upgrading their plan.
A very useful tool for retaining these users is ProfitWell Retain.
The SaaS sales cycle can take up to 90 days on average if your product is at the higher end of the pricing scale. To make a success of this cycle, and navigate the various bends in the road, requires a SaaS sales team with a varied skills profile. Putting your team together the right way and filling it with the right kind of people is vital in making your selling approach stick.
5 components of a killer sales team for your SaaS business
When assembling your company’s sales unit, you need to bear a variety of personality attributes in mind and be careful when implementing a number of strategic approaches for them to follow. This combination of a natural sales disposition and a careful strategy makes for a killer sales team. Combining this with excellent interpersonal skills, a willingness to listen, and high motivational intelligence makes for a killer SaaS sales team.
Whether selling a complex suite or a point solution, a killer SaaS sales rep can articulate why their product is the best. However, they can also articulate why it is the best to solve the challenges and needs specific to who they are selling to.
Because SaaS products are broad and dynamic, in order to tailor to a wider variety of use cases, every sales conversation should be one where the sales rep is listening and internalizing, not just ‘selling.’ When you go into a SaaS sales call, come equipped with the kinds of questions (‘Can you walk me through your business goals over the next x months?’) that will allow you to listen by prompting the customer to give you extensive answers rich in revealing details. That way, you can establish exactly whether or not you and your prospect are suited to one another.
Active listening is its own art, and its utility in SaaS sales is backed up by some of the industry's most prominent experts.
Same side selling
It’s common to think of sales as something adversarial — that, as a sales rep, you need to go into battle with your prospect and ‘win.’ The last 10 or so years have seen big changes to this attitude, and in SaaS in particular. Now, the optimum approach to selling is to present yourself as being on the same side as your customer — that you’re both in league together to try and solve the problem they’re having. This is known as ‘same side selling.’
Alongside active listening and understanding the prospect’s specific challenges, the best sales rep feels like a teammate solving the problem with them, not necessarily hard selling or pitching. Because SaaS sales involve a lot of relationship building, building this sense of alliance with your prospect is key.
Honesty About What you Don’t know
It is easy to fall into the trap of thinking that, as a sales rep, you need to have every answer or else your prospective buyer will lose trust in your expertise. Comprehensive familiarity with your product is important, but a failure to be honest about small details that you don’t know can lead to tricky situations — a deal or a feature promised that you’re in no position to supply, for example.
Be as decisive about gray areas in your knowledge as you would be about things you know back-to-front. Use any flaws in your knowledge as an excuse to follow up with your prospect — an email, for example, containing that missing piece of information and a subtle reminder of next steps. Suddenly, you’ve turned a weakness into an advantage.
Honesty and dedication shown by a seller are two personality traits that make prospects want to buy SaaS — sometimes, not knowing something offers you a chance to show both.
Motivation is always vital
To stay consistent over the several months it often takes to close a deal, motivation is of key importance. This importance cannot be understated, and sales leaders should give over plenty of time and resources to making sure their team’s motivation is sustained.
Explore motivational strategies that go beyond cash incentives — not all sales professionals are motivated by pure financial rewards. Instead, get to know what motivates your team. Is it:
The desire to prove themselves the best on their team? Encouraging intra-team competition too much can be very counter-productive, but if your sales reps are all natural competitors, it can be effective in moderation.
The desire to feel part of a successful team? Reps who enjoy the feeling of being a team player might be more motivated by whole-team incentives or rewards, like a group activity, than by an additional bump in commission.
A non-cash prize for exceeding targets? For instance, a consumer item (a computer, maybe even a car if your targets are of the steeper variety) or sponsored vacation time?
Failure is valuable for your sales team
Treat all failures as a means for growth within your team. Review them collaboratively, and stress their importance as learning experiences. Don’t let your team be counted in the ninety-two percent of all salespeople who give up on a lead after four rejections.
Making failure an easier and more constructive experience for your team can also be done by adjusting your sales goals. For example, prioritize activity targets for your team — in fact, place them even higher than selling targets. This way, any ‘failure’ your team suffers will be more about flaws in their approach rather than the result of a lean month — these kinds of failures are much easier to improve upon.
When those failures do arise, stick by your reps. Listen to their experience, and devote more coaching time to correcting any errors in their method. They’ll reward you in the end.
Through the ranks of a sales organization, emotional and social intelligence plays a key role in successful SaaS sales — in many ways, it’s as decisive as the quality of the tech being sold. The best SaaS sales teams combine that kind of social awareness with the dogged resilience and product awareness of a traditional salesman. With the right approach to recruitment and coaching, you can build that exact profile of a sales team for your business.
Subscriptions for life
Being a great seller of SaaS products is decided more by the intelligence of your approach and the thoroughness of your preparation than in pure sales ability. By the time you’ve picked up the phone to call your prospect, if you've followed our guide to the letter, the battle will already be mostly won. You'll know how your prospect can get value from your product, so you can speak to their circumstances and persuade them to try out your product. From there, it's just a matter of nurturing them consistently, so they're in it for the long game.
By Patrick Campbell
Founder & CEO of ProfitWell, the software for helping subscription companies with their monetization and retention strategies, as well as providing free turnkey subscription financial metrics for over 20,000 companies. Prior to ProfitWell Patrick led Strategic Initiatives for Boston-based Gemvara and was an Economist at Google and the US Intelligence community.