I’ll apologize now for the length of this blog, but this is something I’ve felt the need to write for some time. If your company sells SaaS – what I commonly refer to as “Something as a Service”, then I believe this blog is for you. The question I want to answer, is selling SaaS different, and if so, then how is it different? What so many technology companies forget is that the operative word here is Service. And it is the right service that will produce the critical outcomes the customer ultimately wants to achieve.
It is this emphasis on outcomes that I argue is essential to selling SaaS and does make it different from selling software, storage, security, etc. It is also the criticality of producing the right outcomes that should inform the focus of other parts of the organization as well as how we should manage the customer after the sale. For instance, delivering or over delivering on the outcomes will have a significant impact on renewal rates. This is key as excessive customer churn can be lethal to any SaaS subscription model.
Implications of Selling SaaS
When contacted to consult on sales campaigns and opportunities for clients, I often find the account team primarily focused on presenting the offering as well as its features and functions. But seldom does the team understand and then effectively link these to the actual outcomes the customer was looking to achieve. This is the classic case of confusing the “drill and drill bits” for the “holes”. Too many technology sales organizations forget that while customers are paying for the “drill and drill bits”, they are actually buying “holes”.
However, in the case of selling SaaS, the construction analogy can be taken one step further for the customer is, in a very real sense, contracting out the “drilling of holes”. How your organization performs on drilling these holes against the customer’s success metrics will determine how much value the customer receives from doing business with you. And value is the currency of the ongoing relationship. Did you drill more, bigger, and better holes and do it faster and/or cheaper than the customer’s alternative?
When working with buying organizations, I have found before a customer is prepared to commit to a long term recurring expense, they must first believe the seller a) understands the outcomes; and b) is committed to delivering those outcomes. But who at the customer cares about the outcomes? Research shows that more and more IT decisions are being made by the business and that percentage appears to be growing. Is it purely coincidence that this increase in decision making by the business corresponds with the increase in SaaS and cloud based offerings? I don’t know of anyone who has explored the true cause and effect (if there is any), but this certainly has implications for how we should be selling SaaS.
We can therefore infer that more and more outcomes are business outcomes versus technical outcomes. Yet too many technology companies train their sales reps to be proficient in describing the features and functions of their offering (the drill and drill bits). It is rare they make the investment to help the reps be more effective at understanding the business outcomes (holes) the customer really wants so the reps can clearly “connect the dots” between their offering and those outcomes. When done effectively, the customer will clearly understand exactly what they are paying for and how it will contribute to the outcomes they ultimately are buying.
Implications for Other Parts of the SaaS Organization:
If customers are concerned that the selling organization is focused on business outcomes, what does this mean for the Marketing department that is tasked with generating leads? What should be the message and who should be the target? If the marketing message is being product driven (and all too many are), then odds are the target audience is IT. Is this the right message aimed at the right potential decision maker?
Marketing, and Sales for that matter, are not helped by legacy CRM systems that are owned by Sales Operations. Where do these systems routinely capture the problems or opportunities the SaaS organization is actually trying to help the customer with? Where do these systems capture the outcomes and success metrics (value) the customer is expecting? How will Marketing (or Sales) know if the value was actually delivered to the customer? I believe these insights would be invaluable to any Marketing team and future marketing campaigns.
What about Implementation teams or Channel Partners that handle implementation? Do they clearly understand why the customer is buying the service and do they understand the outcomes the customer is expecting? Or is their view limited to understanding what service and how much the customer bought (drill & bits) and their job is simply to handle the implementation and integration? If they too understood why the customer bought the service and the outcomes (holes) the customer wanted to achieve, the question begs could they be even more effective?
Finally, what about the Customer Support, Customer Success and/or Renewals teams after the sale? Do they understand the outcomes the customer is looking for or do they only know what the customer bought? If only the latter, then how can they effectively support the customer? Especially for Renewals teams, how can we expect a high renewals rate if our Renewals team does not understand or have access to the outcomes the customer was expecting and if we actually delivered that outcome?
Implications for Customer Churn, Upselling and Cross-Selling:
Many cloud based SaaS offerings have dramatically lowered the switching costs. This is a two edged sword. It makes it easier to sell the service when the switching costs are minimal, however, when you are the incumbent, it also makes it easier for the customer to drop you and move to another SaaS offering should they determine the other offering may provide more value. As mentioned earlier, customer churn will certainly kill any SaaS subscription model should it get too high.
Why would a customer choose to leave your organization and go with a competing offering? Well the first place to look is did you deliver the outcomes and meet or exceed the success metrics (value) the customer expected? If most of your organization does not understand customer success, then this would be a good place to start. Note the deliberate and continued use of the word success versus satisfaction. Delivering customer satisfaction is nice, but won’t mean a hill of beans if you did not first deliver success. That is how the customer measures value and that is most likely how they are being measured. No customer I’m aware of is measured on the “satisfaction” they have with suppliers.
Perhaps the easiest sale in the world is to a happy existing customer. If the entire SaaS organization is not focused on delivering customer success, how many new upsell and cross sell opportunities are lost? The day a SaaS deal is signed, is the day it has the potential to become obsolete. The reason is that the customer’s business will begin to change in sometimes new and unforeseen ways. These changes may represent a threat to your current offering if you don’t stay on top of them. However, it is these changes in the customer’s business that also generate new cross sell and upsell opportunities. How is your organization managing these changes after the sale?
In summary, its fine to talk about the “drill and drill bits” but only after you understand the “holes” and can clearly relate how your offering is best aligned with and will better produce the outcomes the customer is looking to achieve. Selling and promising outcomes is not the end game. The whole SaaS organization should be focused and obsessed with delivering the outcomes and thus value the customer needs. This will go a long way to reducing or eliminating churn and create new sales pipeline as the customer’s business changes.