Selling the Cloud: 8 Keys to a Successful “Land and Expand” Strategy for SaaS Solution Providers
Cloud computing, and the evolution of software as a service (SaaS), has transformed the technology industry. In fact, 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 implement software. Rather than selling almost exclusively to IT buyers, SaaS vendors are now more likely to sell directly to functional or business-unit stakeholders. The emphasis ison a SaaS solution’s value to the business – not on the underlying technology. As a result, the nature of the sales dialogue between SaaS vendors and customers looks and sounds very different than it did in the days of legacy on-premise applications.
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.
Legacy software licensing models were also based on one-time, upfront licensing fees, along with the inevitable (and expensive and painful) implementation 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, where pay-as-you-go pricing and very low implementation costs make it essential to deliver an experience that provides lasting value, keeps customers engaged and satisfied, and generates stable long-term revenue streams.
We know this transformation poses major challenges for many sales organizations. New buyers, changing business models and shifting expectations require innovative new tacticsto win deals, build strong relationships and deliver the long-term value that SaaS customers demand. These tactics – a combination ofthe right sales activities and dialogues applied throughout the customer lifecycle – also deliver a vital competitive advantage in a SaaS market where firms are under constant pressure to stay ahead of the competition. Let’s take a closer look at some of these tactics and their implications for a modern SaaS sales organization.
Best Practices for Landing the SaaS Buyer
Customer acquisition is still an important activity for a SaaS sales team – especially since it’s the first step in the process of building valuable, long-term customer relationships. Four success factors stand out here:
Key Activity: Understanding today’s SaaS buyers. According to an August 2013 study by Enterprise Strategy Group, nearly 50% of all IT buying decisions are made or influenced bybusiness-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: Establishing a repeatable sales process. Successful SaaS organizations are able to absorb and apply lessons learned from every customer-facing 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; understand how customers buy and use the product; document and validate its sales processes against that knowledge; and finally scale these learnings across the 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: 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 especially acute 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.
This 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; to frame the conversation in terms of operating budgets rather than CapEx; and to focus on productivity, flexibility, usability and other business-related impacts.
Key Dialogue: Communicating value without overpromising. For better or for worse, overpromising on traditional on-premise 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 hold vendors accountable for their product claims – when they’re 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.
Successful SaaS sales teams know how to engage buyers in open, honest and transparent conversations about a solution’s capabilities and benefits.
Expanding the Relationship: Customer Success Management
While closing the deal is important, the real key to success for SaaS vendors is their ability to generate renewals, maintain cash flow and minimize customer churn. This quest for customer lifetime value depends on four factors:
Key Activity: Mastering the art and science of Customer Success Management. In the SaaS market, a “closed” deal never truly closes. The sales, marketing, customer service and product teams must work together and demonstrate ongoing value to the buyer– keeping them engaged, satisfied and successful. This is the essence of Customer Success Management, and it’s a life-or-death issue for any SaaS provider.
This ongoing quest for lifetime value begins with the customer onboarding process, but it’s far more than simply an implementation issue. The solution provider must serve as a trusted advisor, anticipating the buyer’s needs, helping them to see around corners and enabling them to leverage the platform’s full capabilities.
Successful SaaS vendors know there’s no such thing as a truly closed deal – only ongoing relationships where everyconversation and point of contact contributes to a customer’s lifetime value.
Key Activity: Measuring and reporting on customer business impacts. Customer Success Management also involves knowing whether your customers are getting the value they expect from a SaaS platform. Clear and open communication is important here, but so is the ability to leverage a SaaS platform’s analytical capabilities. The usage and engagement metrics your customers generate are very useful indicators – if you know how to identify the metrics that matter.
Sales teams play a key role in this activity when they help buyers identify and articulate their goals and standards for success. These insights, in turn, support a SaaS vendor’s ability to measure the platform’s business impactand to report back on possible disconnects. Armed with this knowledge, the vendor can help customers proactively address these issues and ensure that they are getting value from their investments.
Key Dialogue: Resolving service issues promptly. Customer service in the SaaS world isn’t just about answering support calls. It’s about maintaining the right relationships with key customer stakeholders, engaging in conversations with these stakeholders, and uncovering potential service issues even before they become sources of customer concern.
The sales team’s responsibility for maintaining and nurturing these relationships extends far beyond the sale. As we said before, successful SaaS vendors know there’s no such thing as a truly closed deal – only ongoing relationships where every conversation and point of contact contributes to a customer’s lifetime value.
Key Dialogue: Uncovering and addressing the buyer’s evolving needs. There’s another important aspect to the customer conversation: Recognizing that the capabilities that make a customer satisfied and successful today may not do so in the future. Instead, a SaaS provider’s sales team and other stakeholders are always prepared to think ahead on the buyer’s behalf – providing insights and positioning value-creating ideas that continue to generate business value.
This is a challenging process; it may require an intimate understanding of the customer’s business environment, growth opportunities, organizational culture and other factors. The payoff, however, is the ability to move the customer to higher-value SaaS products, to ensure that the customer realizes long-term value from these upgrades, and once again to make a compelling case for keeping the customer engaged with your platform.
Conclusion: How Richardson Prepares SaaS Vendors for Success in the Cloud
It’s one thing to recognize the role that each of these sales activities and dialogues plays in allowing a SaaS vendor to build lasting andprofitable customer relationships. The next step, however – putting these success factors into everyday practice – can be daunting for even the most forward-looking sales organizations.
Richardson has helped many traditional software companies make the transition to selling SaaS solutions, and many fast-growing SaaS software companies ramp up sales, marketing and service teams to realize their full potential. We typically start by defining or optimizing the customer-centric sales process, developing the skills of frontline sales and service personnel to engage in the right dialogues across the customer lifecycle, developing the capabilities of sales managers to coach and inspect process execution, and driving adoption of new behaviors deep into the culture of the organization. We have the unique ability to create and deliver highly customized solutions for clients to meet their exact needs and win in a disruptive and competitive market.
The cloud has created a once-in-a-lifetime opportunity for today’s SaaS platform vendors, but it has also set the stage fora fierce and unforgiving competitive landscape.
The cloud has created a once-in-a-lifetime opportunity for today’s SaaS platform vendors, but it has also set the stage for a fierce and unforgiving competitive landscape. An educated, empowered and motivated sales team – and one that is aligned with other customer-facing functions – is absolutely essential for success in this landscape. For more information about how Richardson can help your firm build and execute a successful land and expand sales strategy, or for more information about Richardson’s award- winning training programs developed to execute sales strategy and improve sales performance in the technology industry, call (800) 526-1650.