Choosing the right sales model for your product will greatly influence your business’ growth rate and overall success. It will dictate how many sales representatives you need, which sales strategy to use, and how big your customer support team should be.
What should influence your decision?
Well, everything from your product type, your market, and your target customers.
In case you need any guidance in choosing the best sales model for your SaaS company, we’re going to talk about the three main ones and help you understand their uniqueness.
Let’s get started.
Jump to a section:
Choosing the right sales model is going to determine how you will generate revenue. If there is a mismatch between your sales model and your audience’s expectations, you’ll struggle to meet your sales targets.
Sales models also indicate a growth potential of a software company. Choose the right one, and your growth potential will wow your investors and secure more funding.
On the other hand, a wrong sales model will increase your customer acquisition costs (CAC) and quickly burn your cash reserves.
Different SaaS sales models also have different sales, marketing, and support tactics.
Since two main factors differentiating these sales models are product price and the complexity of the sales process, when you pick a model, you’ll be able to make a good sales plan for your company.
You’ll drive your decisions toward the type of sales and marketing activities needed for that model.
For example, some sales models are characterized by shorter sales cycles and a higher volume of signups. They don’t usually require a lot of dedicated personnel to onboard new users.
With that in mind, should you misunderstand the requirements for your chosen sales model, you might set up your product’s onboarding process wrong, decrease the user experience, and lose potential revenue.
We’ll walk you through every SaaS sales model so you can understand how it works and if it’s the right fit.
Sales models correlate with your product’s pricing and complexity. We’ll start things off with the model that’s most applicable for lower price software products.
It’s called the self-service SaaS model.
The Self-Service Sales Model
The core principle of the self-service model is that the user decides whether to try the product without guidance from a dedicated sales rep.
This means customers are in control of their own customer journey instead of having to talk to a sales professional who will help onboard them and explain the full benefits of your software.
Because of this, the self-service model relies heavily on marketing to generate revenue.
If your marketing efforts are on point, potential users will come across your product, educate themselves on what it can do for them, and try it out.
Therefore, your marketing materials must provide insightful information that shows the value of your product.
Those could be anything from:
- Blog posts
As you can see, you don’t need a strong outbound sales team with a self-service sales model.
Rather invest your resources into marketing and onboarding materials. Since the users will teach themselves how to use your product, you should help them through various content types.
The self-service sales model is suitable for products with low monthly prices and those that offer free plans.
Low pricing, in this case, means less risk to customers. And when there’s less risk involved, users are more likely to try a product, regardless of whether it’s a perfect match or not.
What’s there to lose?
If they don’t see the value of the software, they can stop using it without losing too much money. It’s one thing to lose a few dozen dollars and another to pay thousands for a SaaS solution that didn’t help their business.
Because of the lower pricing, there’s a lower barrier to entry for new customers, so this model attracts a high volume of them.
One fantastic example of a self-service SaaS company is Airtable. They have a free plan with limited features and storage, while their paid plans start from $12 a seat for monthly subscriptions.
Pretty affordable for a small business, wouldn’t you agree?
As an affordable team management SaaS solution, Airtable doesn’t require specialists to onboard their customers. Instead, they rely on their content and tutorials to do that for them.
They offer a plethora of learning resources, ranging from webinars, guides, and tooltips to pre-made templates and a community page.
If your software’s pricing is on the lower end, and the product is simple to master without requiring excessive onboarding efforts, this should be the right sales model.
Transactional Sales Model
The transactional sales model is a combination of a self-service model equipped with some automated lead generation and a small sales team.
It works well for products with higher ASPs where the perceived value is higher. The price for a product in this sales model usually is between $1000 and $3000.
The higher selling price also calls for a better service, so this model uses automated onboarding while also offering human support to those customers who run into problems with the product.
This SaaS sales model strives to be efficient and lock down high-volume sales while still keeping the sales cycle relatively short.
If you’re aiming to convert higher-paying customers such as medium or large businesses but have shorter sales cycles, the transactional sales model will fit you.
Keep in mind that whenever a solution costs more, users will hesitate to invest money in it. They’ll have higher expectations, and it won’t be as easy to convince them to sign up as with more affordable monthly subscriptions.
Also, users will want more interaction with a company than those paying lower prices, so you will have to invest in customer success representatives to onboard new customers and show real people behind the brand.
Overall, the transactional sales model involves more effort to onboard customers and build a relationship with them.
When it comes to sales, sales and marketing teams work side by side on lead generation, where marketing enables sales reps by providing excellent supporting content.
The last model to discuss is the enterprise sales model.
Enterprise Sales Model
The most expensive SaaS solutions use the enterprise sales model, as they target enterprise customers who can afford it. You’re right to think that this sales model is the most ambitious of all on the list.
In this case, companies deal with smaller sales volumes but make up for it with high product pricing. In enterprise sales, a customer can spend even $100,000 per year on a SaaS solution.
The enterprise sales model works well for companies with multiple products, complex products, or innovative solutions that are at the forefront of the industry. Such solutions require extensive and personalized user training, and cannot handle a high volume of accounts.
Usually, when SaaS providers switch to the enterprise sales model, their software has grown gradually over the years to attain an industry-wide reputation for innovation.
To succeed with the enterprise sales models, you’ll need to rely on two things: innovation and a first-class sales force.
First, your product has to offer something cutting-edge to be able to capture the highest-paying customers. Second, your revenue will depend on the skill of your sales team.
The sales cycle of the enterprise sales model has to be carefully mapped out. Nurturing enterprise leads and their long sales cycles takes a lot of time, patience, and endurance.
To achieve enough revenue with this sales model, your sales representatives need to fully understand your product and your prospects’ problems so they can successfully close the sale.
Overall, choose this sales model if your target customers are big companies ready to spend top dollar. But keep in mind that reaching this sales level can take years and there are many pitfalls along the way that can happen, which we will discuss next.
After you’ve picked a sales model for your software, there are still things you have to watch out for. Let’s go through the most common problems you should avoid.
Underpricing Your Product
Failing to set the right price for your product can be detrimental to its future.
If your software is undervalued and underpriced, you’ll be under pressure to sell and your marketing and sales team will have to work tirelessly to reach as many prospects as possible.
However, they will likely have to work with a limited budget and compete with other companies that have much more resources at their disposal.
But if you set the appropriate price for your product right away, you wouldn’t have to obtain as many paid users. You’d be under less pressure and wouldn’t need to stretch your resources.
If you’re thinking about reducing your prices, consider offering annual billing with a discounted price instead. Or even better, invest in training your sales representatives so they become great at educating prospects and close deals at non-discount rates.
Neglecting Existing Customers Over New Ones
When under pressure to grow, some SaaS companies focus on acquiring new customers so much that they stop paying attention to existing ones. That’s a mistake!
Additionally, know that upselling to your existing users costs less than acquiring new ones.
So, instead of neglecting current customers in your rush to attract new ones, grow your revenue by strengthening your relationship with active users and upselling them into more expensive subscription tiers.
So, how do you keep yourself from neglecting current users?
Focus on the long run.
Your company will grow one user at a time. But it’s never going to get there if you neglect your users the moment they sign up for your product because they’ll eventually leave, and you’ll have to find more new customers to replace them.
Don’t just try to reach a target number of new users. Instead, make it your goal to inspire loyalty among the users you already have. Loyal users will stick with your product longer and have the potential to upscale. They’ll support your growth.
In sum, implement customer retention strategies to truly grow your user base. One of the best ways to do that is to have a loyalty program to reward your most loyal customers.
Finding the most suitable sales model is a big task for any SaaS business.
However, SaaS companies are usually lean and can change their prices and pricing models to keep up with market demands. If that’s the case with your company, you might even try all of the abovementioned sales models and experience their pros and cons firsthand.
And if you don’t want to learn from your mistakes, but rely on already tried and tested best practices, then, we hope we’ve given you some insight into what might work best for your product.