SaaS Companies
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Introduction to SaaS

Maxim Mocanas

Introduction to SaaS

1. What is SaaS? What is a SaaS product?

2. Pricing model explained.

3. Successful SaaS companies.

4. Marketing and Sales for SaaS.

5. Metrics for SaaS companies.

1. What is SaaS? What is a SaaS product?

We will start with the definition of SaaS to help you get a better understanding of the industry and build your new foundations. What is a SaaS company?

SaaS stands for Software as a Service, where customers pay to use the software, you developed instead of paying for a product.

It might be a bit difficult to understand SaaS for beginners. This doesn’t change that you can sell your product because it provides value no matter what type of industry you come from.

Whether you are in the B2C or B2B SaaS industry, this doesn’t change that customers have a problem, and the users want a solution. This is where your product comes in. Regardless of it being iaas, paas, saas, demand is created and your company must supply the customers.
 
However, a B2B software company has an entirely different environment than a B2C one. Sales are significant, as well as knowing your customer in and out. Other than that, the process is quite similar. Recognize a problem, develop software that helps solve said problem, find the best pricing model that works in your industry, and market your product in the best way. Of course, there is a lot of research and analysis of the market and customer behavior, just like any product.

2. Pricing model explained

The price is one of the essential things regarding your revenue. Some pricing models for SaaS companies can be the following:
 
Subscriptions: Customers are billed either monthly or annually to use your product. This can either be a fixed price or something based on their KPIs, like the number of users, customers, etc.
One Time Payment: Usually, for a more considerable amount, customers get access to the product for an unlimited time; this is not as popular since working on new features in an enterprise is costly, and companies need a constant flow of income to survive. SaaS companies also tend to have a more niche target audience, so the last thing you want is to reach your real market potential so that it isn’t possible to create more growth in your revenue.
Cost per feature: This is also less common, but you can’t argue with it when it works. This means that users will pay every time they use more of your product. For example, “each 1GB of storage is X$” or “for every downloaded song, you pay a fixed price.”
 
Subscription companies offer free trials to get the user more familiar with the product. This is proven to lead to more conversions since marketing your product isn’t enough. Their experience will show just so much more than you could ever describe in words. Limiting their features while in a free trial is expected, but it is also essential to clarify what users miss.
 
The choice of pricing strategies differs from company to company, but the bottom line is, know your main value prepositions. If you know your customers need more users, work around that; use it to build your tiers if they need more storage.

3. Successful SaaS companies

What makes a great SaaS company?
Examples of SaaS top companies can include some of the following: Adobe, Netflix, Spotify, PayPal, etc.
 
But how did they get so successful?
 
If we look at their product, they have very high market potential. It is designed for everyone, an excellent opportunity for B2Ccompanies. There will be a very high number of potential customers, and even if they don’t pay as much as enterprises, a considerable number of customers is acritical asset.
 
These companies found the perfect balance between the value they offer customers and the pricing model, and let’s not forget their indispensable product and features. It is no lie that their relationship with their customers played a significant role in their expansion on the market.
 
Netflix is an example of SaaS that removed free trials from their pricing models since they noticed an exploit—losing a great deal in revenue since most customers took advantage of this offer and never converted.
 
Here are some steps from a SaaS enterprise guide from the largest companies in the world:
 
1. Build a great product in an area where you are an expert.
2. Work on your pricing.
3. Define your market. Who are you selling to? What do they want?
4. Construct a journey map and find the best marketing strategy.
5. How will you get your 1st customer? What about your 5th? 10th?
6. What will change when you reach 100 active customers?
7. Create the best customer experience possible: Support, onboarding, product optimization.
8. At 1000 customers, redefine your market. Who is buying your product? Are those the same people from the beginning?
9. Does it provide more value than you thought? Can you reach a broader audience?
10. Get enough requests for a new product and create a different source of income.
11. Repeat it again and again until it no longer works.
12. Never stop investing in customer service, sales, and marketing.
13. Try new things. Failure is not a mistake if you learn from it.
 
Since we are still talking about the top companies out there, we can look at the best saas websites, in my opinion. This is based on its assistance to an entirely new user, readability, resources, onboarding process, etc.

4. Marketing and Sales for SaaS.

 

Marketing for SaaS mainly focuses on finding the relevant decision-makers in a company and creating content. Customer retention is vital and can lead to product-led growth that will allow you to promote your product in an organic way that screams value.
 
Branding. Make customers fall in love with your product and build a strong relationship with them. A SaaS business will only survive if it grows at least 20% a year. This is not possible without correct branding. Find how you can relate to your customers, treat every user as fundamental for your business. In a B2B environment, word of mouth is critical. Don’t try to sell if you know the company doesn’t need your product. This will only lead to churn and a bad reputation. Don’t lie, and be clear about the value.
Understand the relationship between the customer, product, and market.
 
Search Engine Optimization. If a company needs your product, the first thing they will do is a google search- “Best App to invoice my customers.” It is clear why your ranking on google helps you get more inbound leads. This will decrease your customer acquisition costs and improve the total lifetime value.
 
Define marketing channels. You must know your customer personas and create a journey map for them. Rank the channels that best work for you for all journey parts. It should look like this:

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 This will give you correct insights into your customer personas and the most profitable way to market your product. Learn what you need to invest in that has the highest ROI possible.

 

What is SaaS Sales?

 

There will be bumps during the customer journey; some users need more guidance than others. Your sales reps are trained professionals who know your users in and out and everything about the product you offer.
 
If someone needs to be converted from a free trial to a subscription, a trained sales team will ensure that the correct information is clear. If there is a killer feature relevant for one of the customers, contact them and let them know about it.
 
In some cases, a sales-led growth strategy can be applied. This is when your sales reps find prospects and possible leads and turn them into warm leads. One way is to search for companies that match your ideal customer profile. There is software where they can be identified. Then there are multiple options. Contact the relevant decision-maker and recognize the problem that you can solve.
 
Make sure you know what you want from your sales team.  Is it to book demos? Is it to get free trials? Get more awareness and branding? Find the strategy that best works for you and implement it.

5. Metrics for SaaS Companies

 

Since there is a different business model for SaaS compared to physical goods or services, there are also other metrics you need to track.
The most important KPIs that any SaaS company must track are:
 
SaaS Subscription companies have a better ability to measure their success, but why is that?
It’s no longer about the single purchase anymore; it’s about your ability to keep customers interested in your product for as much as possible.
 
Yes, traditional balance sheets and excel files are no longer optimal.
 
Currently, everything is digital and automated; this should include your KPI calculations and visualization. There are many benefits for SaaS companies to come up with their most relevant KPIs and calculate them.
 
If you want to know more about the importance of KPIs, how to calculate and fully optimize them check out our other blog post: