How to Sell Software As a Service

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According to a July 2010 Gartner report, SaaS was expected to capture about 16 percent of the enterprise software market by 2014. (See Reference 6)
According to a July 2010 Gartner report, SaaS was expected to capture about 16 percent of the enterprise software market by 2014. (See Reference 6) (Image: Hemera Technologies/AbleStock.com/Getty Images)

Technology research firm Gartner defines software as a service (SaaS) as software that is owned, delivered and managed remotely by one or more providers. The software is rented, not purchased. The fee usually includes installation, use and periodic upgrades. Traditional software comes either in boxes or installed on your computer server. SaaS comes over the Internet and resides on the vendor's server. Selling SaaS solution requires a different approach because it’s a newer business model.

Develop a marketing strategy that fits your SaaS solution. This means differentiating your offering from your competitors’, not just on the lower price, but on what makes your solution more value-added than others. For example, if you are selling a new customer relationship management solution, convince customers why it offers better value (e.g., better social media integration) than a well-established solution from Salesforce.

Educate the customer community, including information technology and procurement professionals, on the reduced cost of ownership for SaaS solutions compared to traditional software products. SaaS pricing is generally pay-as-you-go, with some variations. For example, there might be a per-user monthly license or subscription fee for the SaaS solution, plus additional fees for database storage and premium support services. In a traditional on-premises software solution, a customer typically buys a site license for the product and then has to invest in support staff, integration, training and infrastructure (e.g., computer servers, network hardware). The vendor is responsible for most of those costs in an SaaS solution.

Manage customer acquisition costs by spending your sales and marketing dollars where they will have the most impact because, unlike traditional software site licenses, there are no up-front fees in SaaS that can quickly recoup large marketing expenses. This means that traditional selling techniques such as trade shows and expensive media ad campaigns might not work. Instead, focus on more cost-effective ways to build out your brand identity, such as social media and other forms of Internet marketing.

Get your existing customers involved in the product upgrade cycle through online feedback tools, newsletters and Web-based seminars on upcoming changes. Do not take your customers for granted; instead, get their input on how your SaaS solution can be improved to better suit their needs.

Synchronize the selling and customer support process with the development process because the SaaS development-to-sales cycle tends to be shorter than that for traditional software products. SaaS product upgrades happen more frequently (e.g., once every three months), which means that your sales and customer support staff need to be trained and ready with sales and support strategies at almost the same time as your engineers are developing and testing a new product version.

Tips & Warnings

  • Avoid common SaaS marketing mistakes such as inadequate pricing information, missing links to partner sites and no references to corporate and management team history.
  • Cloud computing includes any subscription-based or pay-per-use service that uses the Internet to extend existing information technology capabilities. This includes SaaS solutions, utility computing (e.g., storing data at a third-party site) and Web-based services (see Resource section).

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