Software as a service, SaaS for short, is a growing industry and the future of software as we know it. Unlike your run-of-the-mill enterprise software, SaaS requires a very specific type of selling strategy, especially if you’re hoping to land major deals at higher price points.
In this 101 guide to selling software as a service, we’ll provide you with some valuable lessons that will help you to sign those big “enterprise” deals at the SaaS price point you’re hoping for.
What Is SaaS?
Before covering the selling and signing lessons, let’s quickly go over SaaS and how it compares to traditional enterprise software (often called software as a product).
With enterprise software, a corporation buys the software outright before installing it throughout the organization’s servers. It’s a one-time deal that involves a single purchase of the software for continuous use in the future.
In contrast, SaaS is hosted in the cloud and accessed over the internet. It’s not just software, it’s a service. A company “rents” the service from the SaaS provider and pays a monthly or yearly subscription to access it.
Benefits for Buyers Investing in SaaS
A lot of companies are ditching old-school enterprise software and moving towards the SaaS model instead. Why? There are 5 big advantages of software as a service:
- Less Time to Benefit from SaaS: Compared to traditional software, SaaS is already installed and configured. That means you can typically start using the application right away and start benefiting from the service ASAP.
- Lower Costs: The cost of accessing and maintaining SaaS is generally much lower in the long run than installing a traditional software model and paying for updates.
- More Scalability & Better Integration: SaaS solutions generally live in cloud environments that are highly scalable and can be integrated with other SaaS options.
- Easy Upgrades: With SaaS, upgrades to the service become available to customers right away. With traditional software, handling upgrades usually involves an additional purchase or lengthy installation period.
- Easy to Use: The best SaaS solutions are designed with ease of use in mind. Plus, it’s usually possible to test the service before buying it or get a free trial period, so a potential customer can learn the solution before making a payment.
A Big SaaS Challenge: Pricing
When it comes to selling SaaS, one of the biggest challenges is determining the proper price points for your customer base.
All of the companies who are interested in accessing SaaS solutions are different. They have different needs, different budgets, and different goals. It’s up to a SaaS provider to meet all of these needs, budgets, and goals with a pricing model that makes sense for everyone, including the provider itself.
To top it off, selling SaaS involves additional challenges like regular billings, managing multiple accounts, smart advertising, and maintaining customer satisfaction. Your pricing model plays a role in how well you achieve each of these tasks.
Needless to say, pricing is definitely an important aspect of SaaS.
10 SaaS Lessons for Signing Deals at Higher Price Points
On that note, let’s get into the most valuable SaaS lessons that will ultimately lead to signing big “enterprise” deals at higher price points.
Lesson 1: Invest in Legal Help to Draft the SaaS Agreement
Since there’s no exchange of physical goods, SaaS agreements are very different from licensing agreements for traditional software solutions. SaaS contracts have clauses and T&Cs that are specific to the provider as well as the service being provided.
For that reason, it’s best to hire a lawyer to draft the agreement for you. Most legal professionals who specialize in this sort of work already have an agreement template to work from, so this lesson is a fairly easy one to put into action.
Lesson 2: Define Clear Limitations with Each Pricing Level
Your service needs to have clearly defined limitations to protect you when customers have issues or complaints.
For instance, say that a customer experiences a problem with the service. As long as you’ve provided a very clear list of service limitations for that specific price point, you’ll be able to say “Here’s what you bought, and here’s where the limit for what you bought was enforced.”
Lesson 3: Avoid Listing “Unlimited” Features for Standard Pricing
Listing your standard services as “unlimited” can lead to a world of trouble. Going along with lesson #2, it’s extremely important to define limitations, and describing your service as “unlimited” doesn’t do that.
Even if you don’t define every service limitation in bold text for all to see, all of the SaaS limits for each price point should be clearly defined in the Terms of Service. Doing this will be especially helpful when customers are trying to determine which service price point is best for their needs.
Lesson 4: Charge for Changes
After going over the SaaS agreement, many companies will try and push for changes to that agreement to work in their favor. Your default response should always be “no”, but if you do agree to agreement changes, charge for them!
It takes time, money, and manpower to make changes happen, so letting them slide without charging is not the way to go. And remember, the bigger the change requested by a customer, the more you should be charging to implement it.
Lesson 5: Provide Suggestions for Higher-Level Plans
One of the beauties of SaaS solutions is that a provider generally offers different services at different price points. So while a small business owner can go with the lowest-level pricing plan, a major enterprise is probably willing to pay more for full access to all the bells and whistles.
When communicating with customers about pricing options, always make an effort to suggest higher-level plans that they could benefit from. This is one of the easiest SaaS giveaway resources to establish deals at higher price points.
Tip for Lesson 5: Ask Questions
The best thing you can do to figure out the needs of your customers (and potentially upsell your service) is to ask basic questions, like:
- What are your current and future marketing plans?
- How do you plan on promoting your brand?
- How many people are you hoping to reach?
- How many employees are involved in the project?
- How much are you willing to spend on advertising?
Getting answers to questions like these will give you more opportunities to make suggestions for higher-level plans.
Lesson 6: Don’t Underestimate the Cost of Your Team
Your team is quite possibly your most valuable asset, which brings us to our next lesson: never underestimate the cost of running your team.
It will take more time, effort, and money for your team to support large enterprise deals, so make sure to factor that into your pricing model.
Lesson 7: Don’t Underestimate the Cost of Your Time
Not only is your team valuable, but so is your time. As the age-old saying goes, “time is money”, so try not to underestimate the amount of time it will take to keep your customers happy.
When factoring in the cost of time spent to run your operation, consider everything that could potentially run up the clock. This includes time spent negotiating, time spent reviewing agreements, time spent setting up the service, time spent organizing, and time spent dealing with issues.
The prices you charge should reflect all of these time-consuming tasks.
Lesson 8: Ensure that Pricing Math Works in Your Favor
Lesson 8 is all about crunching the numbers. Make sure that whatever you’re charging for services, overages, and add-ons works in your favor.
Lesson 9: Consider Offering Training/Implementation Services
This next lesson really depends on the level of difficulty of learning and implementing your service. If it’s a simple cloud-based software that you’re offering, then this lesson might not apply to you. But if there’s a lot of technical stuff involved, then it might be worth it to offer training courses on how to effectively use your SaaS.
This is an amazing way to get to that higher price point you’re hoping for. By charging a small fee for training or implementation services, you’ll be killing two birds with one stone - first, making more on enterprise customers and, second, helping customers to avoid training-related headaches.
Lesson 10: Charge More Than You Think It Will Cost
In many cases, your enterprise customers are working with a large-scale budget. So why not aim high and shoot for the moon with your pricing model?
Even if you aren’t sure that customers will take the bait and pay for your high service costs, it can’t hurt to try. You can always go back later on and change your pricing scale if need be.
Bonus Lesson: Don’t Be Afraid to Negotiate
One thing that many SaaS providers have learned is that there’s lots of room for negotiation in this industry.
A beneficial point of negotiation when working with enterprises is to ask for usage of the company’s logo for your own marketing purposes. We’ve all seen those “As seen on” sections of SaaS websites, showing that the provider has worked closely with big brand names, so try to build your “As seen on” page with the power of negotiation.
In exchange for using a company’s logo or writing a case study about your relationship with the corporation, offer a discount. Most companies will jump at the chance for a lower monthly payment.
The Takeaway on SaaS Pricing
Keeping these SaaS lessons in mind while creating your pricing model will not only help you to meet customers’ needs, budgets, and goals. It will open the door for signing large enterprise-scale deals - and do it at higher price points.
Once you’ve nailed down your SaaS pricing model, you’ll have more time to focus on growing your business through tasks like lead generation, social media engagement, email marketing, and landing page conversion, and KickoffLabs can help.
See what we can offer your SaaS solution by creating your free KickoffLabs account today!