Search goodExperience goodand Credence good There are many ways to classify services. One classification considers who or what is being processed and identifies three classes of services: The classification scheme is based on the ease or difficulty of consumer evaluation activities and identifies three broad classes of goods.
Written by Joel York Choosing the right go-to-market sales model for your SaaS startup can be a make it or break it decision. Choose right and you grow smoothly from seed funding to A round to B round and beyond. Choose wrong and you spend precious cycles chasing your tail as cash runs out.
While most B2B SaaS startups that offer recurring revenue subscriptions gravitate toward a transactional sales model characterized by inbound marketing and inside sales, this is not always the case as pointed out in this recent article entitled the Debunking the SaaS Sales Model Myth by my esteemed colleague Jeff Kaplan.
But, how do you go about choosing the right SaaS sales model for your particular SaaS startup? Price and complexity define a strategic spectrum of sales approaches for SaaS startups that gravitate strongly toward three distinct SaaS sales models: Average selling price is the intersection of supply and demand and as such it measures external factors like customer value and competitiveness, while it constrains operational metrics like costs, volume and risk.
Your ASP places a ceiling on your customer acquisition cost, which in turn limits your SaaS sales model options. Price has an inverse relationship to deal volume. Models of service marketing volume requirement implied by ASP flows back through the sales process to put pressure on every upstream metric.
Low ASPs require large target markets, more leads, more pipeline, higher conversion rates, shorter sales cycles, and so on to deliver a high volume of customers.
High volume also requires more customer self-service, more automation and less labor, because labor is expensive, slow and has poor economies-of-scale. Conversely, price has a direct relationship to risk.
High ASP means high risk. The more risk, the more your customers will desire a personal relationship. Lacking the brand security of an established player like Google or Salesforce. Luckily, high ASP pays for the sales and support labor required to create the personal relationship.
Complexity Constrains How difficult is it for your customer to buy your product?
Is your SaaS offering easy to find, easy to understand, easy to try, easy to buy and easy to use? Every hurdle that stands between your product and your customer reduces your sales velocity, decreases close rates, and increases your costs. The more complex the purchase, the more help the prospect will need.
And, the fewer choices you will have regarding your SaaS sales model. You can make every effort to eliminate complexity, but at any given time the amount remaining must be surmounted by your SaaS sales model.
For example, a new social collaboration SaaS may appear so foreign that prospects have difficulty understanding what it is, let alone what it can do for them. Onboarding a SaaS ERP might require the customer to alter internal business processes before any value is realized. In both cases, it will fall to your SaaS sales model to help prospects navigate the complexity.
Three SaaS Sales Models Price and complexity define a strategic spectrum of sales approaches for SaaS startups that gravitate strongly toward three distinct SaaS sales models: While a mature SaaS business may employ all three, a SaaS startup will have the resources to master only one.
However, this choice is not always straightforward when you are entering or creating a new market, because you must first find balance between price and complexity. Price and complexity are natural adversaries. Higher complexity means higher costs, thus requiring higher ASP.
Getting the right alignment between price and complexity means ensuring the value customers place on your product always exceeds the price, time, fear and frustration they must pay. Once you achieve the right balance for your market, your choice of SaaS sales model will be obvious.
Fail to find it, and you end up in the Startup Graveyard. Customer Self Service Achieving significant revenue at a low price point naturally entails driving complexity and cost out of the purchase to clear the floodgates for high volume. The ideal SaaS sales model is complete customer self-service.
However, this requires that your customers be willing and able to service themselves. Able such that they understand the value of your product, how to buy it and how to use it.
Willing such that they see little or no risk or frustrated effort in the purchase.Summaries of over + MBA methods on strategy, performance management, finance, valuation, change, corporate governance, communication, marketing, leadership and responsibility.
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