Software-as-a-service (SaaS) has grown exponentially in recent years. Thirty-three percent of companies used more SaaS applications in 2017 than 2016, and experts predict the SaaS market will be worth $132.57 billion by the year 2020. Still, some SaaS products are more popular than others. Between 2011 and 2016, business operations comprised just 15 percent of all SaaS launches. Marketing made up more than two-and-a-half times that — nearly 39 percent.
It seems, then, that SaaS is a hard sell.
Some customers are still reluctant to shift from on-premises to SaaS. But why? Here are three SaaS business challenges you can overcome.
Challenge #1: Customers Think Business SaaS Provides Them With Little Value
Customers often have concerns about SaaS integration. Thirty-three percent of enterprise software decision-makers believe SaaS is too expensive, while 29 percent fear migration and implementation issues. In the business software SaaS segment, however, customers seem to be extra cautious.
Perhaps these customers see too little value in what they will receive from you, the vendor. They already have an on-premises system, and the functional gap between this software and your brand-new SaaS might be just too big. Or maybe software-as-a-service as a whole is just not compelling enough for them.
This is one of the toughest challenges to do, but you need to improve the way you market your product.
- Just hone in on a specific challenge that your new SaaS product can solve uniquely or provide a smarter solution than the on-premise software they currently use. It’s a good way to shift perspectives and mindsets.
- Educate customers about the benefits of shifting from customized to standard software and how they can benefit from continuous innovation.
- Most importantly, stress the real potential (both in your product strategy and communication) of cloud technology and how it delivers an exponential impact.
Business SaaS shouldn’t be a hard sell — it provides customers with a heap of benefits when compared with on-premise systems — but you should optimize your marketing for better success. Reimagine what you’ve done in the past, and think up new ways to build, market and sell your service.
Challenge #2: Customers Think Business SaaS Is Just Too Expensive
The average small business spends 6.9 percent of their revenue on IT; the average mid-sized business spends 4.1 percent. As IT budgets get tighter, decision-makers want to disburse their cash wisely. There’s a perception out there that business SaaS is just too expensive — This problem magnifies if the problem described above is felt as well i.e. they believe you SaaS solution doesn’t justify the expense because it does the same thing as their current on-premises system. That’s all wrong.
You don’t need to change your pricing model. Instead focus on the following three things:
- Focus your value proposition on how your solution impacts mid- to long-term topline and bottom-line benefits, and how it helps them achieve their aspirations faster
- Sell them on the value they get by comparing it to the most granular element: The fee per [metric] / per month. It’s very simple to convince someone they’ll get 10x more value than the €30,- fee per user/per month they’ll pay – every month again.
This might even showcase the price you charge is too cheap. I’ve seen too many ISVs converting their old on-premise license model into a SaaS model and end up squeezed because they start negotiating the ACV or even the TCV amount (which might be hundreds of thousands of € or 4) without taking the true value they deliver into account.
Across all industries, subscription-based services rely on customers sticking around for multiple billing cycles. If the value is compelling customers will retain and be advocates for your solution. Your task is to convince them of this value.
Challenge #3: Customers Think Migration Is Too Much of an Issue (Bad Communication Is the Culprit)
Migration is another one of those tricky challenges to do because IT downtime set back even small businesses $1.5 million a year. Consequently, they think migration will cause too much of a headache — they will lose revenue, customers will abandon them, their business will suffer. This couldn’t be further from the truth. Business SaaS migration is a relatively simple process — you just need to convince them of that.
- Ensure you spend enough time on pre-configuring your SaaS solution. Ideally think about this upfront when you start developing your solution, not 2 weeks before you launch it. As they say “The devil is in the defaults” – many of your customers will stick with the defaults for years, and as such this also influences they experience they’ll have for a long time.
- Create a compelling migration policy — one that addresses your customer’s pain points and outlines the implementation schedule in full. Customers like to know what’s going to happen so they can plan accordingly. It’s safe to say that communication is key here.
- Last but not least (and this especially helpful if you are migrating your existing on-premise customers): segment your customers properly. Targeting prospects who already have a good knowledge of SaaS, but also have the optimal functional, fit will make your life easier.
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