How companies can keep up with the evolving market for software-as-a-service offerings.
As more companies introduce subscription and software‑as-a-service offerings, they are finding they must transform their go‑to‑market approach to achieve expected growth prospects.
Where the traditional on-premises model has relied heavily on sales representatives and personal relationships, subscription and software-as-a-service (SaaS) solutions are empowering customers to be more autonomous as they try, buy and use the software. This is changing the relationship between software sellers and buyers, and it’s creating attractive opportunities for both.
The changes require more than superficial adjustments to the go-to-market model. Customer-led buying requires reorienting the company sales strategy, marketing initiatives and investment in customer experience. Software companies need to rethink sales and marketing from a customer-centric perspective, which in turn may entail new approaches to hiring and retaining talent and innovative use of new digital capabilities, such as machine learning and analytics.
Based on the survey findings and our experience, we’ve identified three areas that software companies can focus on to improve their go-to-market model and increase sales:
1. Redesign the sales model
SaaS offerings require a sales model that is customer lifecycle-led. This requires expanded collaboration with marketing and customer-success teams and an increased use of low-touch direct sales and channel-led programs. Companies should consider increasing multiyear contracts, introducing consumption-based pricing and designing effective sales incentives. Rebalancing the portfolio of channel partners can also help reach a broader ecosystem of agents, VARs, MSPs, integrators and marketplaces. In fact, this change is underway. High-touch direct sales have decreased in recent years, according to the survey data, suggesting that companies are relying more on channel and technology enablement tools. Nearly half of survey respondents also indicated 26% of sales are now coming from partner-led activities.
2. Make better use of digital tools to improve lead and demand generation
Companies can reinvigorate lead and demand generation using digital tools and techniques such as campaigns that focus on buyer personas, supported by business development teams to develop qualified leads. Lost time with low-potential prospects can be a significant productivity issue. Companies can address this through better targeting and lead-qualifying. Sales teams can use social media to improve targeting by educating customers, nurturing leads and understanding customer needs. Many companies are using tools such as artificial intelligence, machine learning and predictive analytics to increase lead generation, promote upselling opportunities and grow sales. Most of our survey respondents cited outdated technology and lack of useful data as significant barriers to success, and over 80% said they have implemented or plan to implement new data analytics to improve insights and sales effectiveness.
3. Rethink customer success and talent
Successful companies are developing dedicated customer success functions to enhance customer experience, with metrics focused on adoption, use and expansion. The link between customer success (CS) and revenue is evident, as organizations continue to prioritize investments in dedicated CS functions. Nearly half of our survey population has also begun changing their recruitment approach to look for talent with SaaS sales experience. Coupled with this, adjustable sales compensation is an effective lever to promote subscription and SaaS sales, with 62% of companies citing total contract value as the most important sales metric, followed by cross-selling, upselling and renewals. More than 80% of companies use compensation incentives, such as sales performance incentive funds and cloud-deal multipliers, to help transition their business models.
During the transition period, significant change is needed in the sales and marketing function, even as customers may continue to use legacy processes in purchasing. Many software companies find it necessary to manage legacy and new processes in parallel, especially in cases where there have been acquisitions of SaaS start-ups that have not invested significantly in large account coverage and channel partners.
Traditional, in-person sales aren’t dead. In fact, as the online experience empowers customers with do-it-yourself capabilities, the customer relationship remains paramount. Companies navigating the change successfully are learning to combine low-touch, online capabilities with a steady, ongoing customer relationship approach.
Summary
As software companies shift to subscription and SaaS business models, many will need to update their go-to-market model from an on-premises-only approach as customer buying patterns and needs change. Companies that redesign the sales model, enhance marketing with digital capabilities and build fit-for-purpose customer success functions to optimize potential stand to generate greater customer loyalty and stronger sales. Organizations that have successfully adapted are seeing positive impacts on growth, customer experience, renewals and win rates.
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