October 7, 2008
What Does It Take To Sell SaaS?
Sometimes, even a free trial isn’t good enough to convince potential customers to buy a Software-as-a-Service (SaaS) solution.
A case in point is LucidEra’s on-demand business intelligence (BI) solution. Even though the company is undoubtedly the thought-leader in this segment of the SaaS market and has experienced some success selling its solutions, the company has discovered that it takes more than the standard ‘try and buy’ sales approach to get customers to take advantage of its capabilities.
This is because LucidEra is aiming its on-demand BI solution at small- and mid-size businesses (SMBs), as well as those large-scale enterprises, which have not deployed BI products in the past because of their costs and complexities. Therefore, these prospective customers have little experience using a BI solution and need some hand-holding to fully understand how to utilize even a relatively easy solution like LucidEra’s.
To remedy this issue, LucidEra unveiled a new Pipeline Healthcheck Service today which is based on a beta version which was tested over the summer. The Pipeline Healthcheck Service is a free consulting engagement in which LucidEra uses its on-demand BI solution to quickly analyze a prospective customer’s Salesforce.com sales data to identify ways they can generate better sales results and decrease potential sales risks.
While some SaaS vendors and VCs might cringe at the idea of giving away free consulting services in order to sell subscription services, LucidEra has seen a substantial increase in customer ‘take’ rates along with shorter sales cycles during the beta trial of the Pipeline Healthcheck Service. The net result has been greater sales productivity despite the appearance of a more labor intensive sales process. And, LucidEra’s executives are convinced they can automate and streamline the Pipeline Healthcheck Service delivery process to reduce its costs and increase its scalability.
This is a perfect example of the creative sales techniques which a growing number of SaaS companies are going to have to adopt in order to convince prospective customers to adopt their SaaS solutions.
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Hi Jeff — Thanks for a great post. I want to point out that the LucidEra Pipeline Healthcheck is really about a “consultative” sales approach, rather than a “consulting” engagement.
At LucidEra, we’ve found that the true fundamental challenge with BI solutions isn’t the complexity of traditional BI solutions. In a recent blog post I stated that although complexity is certainly an issue, it’s really just masking the real issue: most people aren’t yet familiar with how to use analytics effectively in their business. The SaaS model takes away the complexity barrier, and lets us focus on the real issue of making people aware of how much of a positive impact analytics can have on their company. Most people know that analytics allows them to get answers to questions they might have, but the real issue is that they aren’t sure which questions they should be asking. That’s why a simple trial won’t be very effective. A more consultative sales approach helps the customer differentiate between the metrics that are meaningless and the metrics that matter.
Ken Rudin — October 8, 2008 @ 11:19 am
Great post Jeff. In the end, whether you call it a “consultative” sales approach or a “consulting engagement”, the result is that the customer acquisition cost is driven up when a significant amount of consulting needs to be done on the front end of a sale. This presumes the customer won’t pay for this work.
The smart services operator (and VCs) will load this into their estimate of customer acquisiton costs and analyze it in relation to the lifetime value of a customer to determing whether or not the economics of the business work. All too often, the core customer-level economics of SaaS don’t work. Some software should simply not be delviered as a service and it usually boils down to customer acquisition and implementation costs that are too high relative to the customer’s willingness to pay recurring monthly fees.
Derek — October 29, 2008 @ 3:53 pm
The logical business model here is for companies like LucidEra to partner with and use local consultants (such as myself) on their dime and then leverage them via revenue sharing partnerships.
For example, suppose LucidEra pulls experts such as myself twice per year to their “summit”, keeps us up to speed, then sends us back with collateral and support in our local markets.
I sell 1-2 customers per month, at a monthly rate of $2,500. I pocket 10% of the first year, 30% of the second, and 20% of the 3rd year (back load contractually to encourage solid customers are the focus)- $30k over 3 years and LucidEra only needs a small team to train the field instead of a large sales force. Also, I become their primary support contact, which I will want to perform as the big payoff is years 2 and 3…
One big catch is the need to properly vet to people who really will meet the criteria cited here…
Stephen McDaniel
Author- “SAS for Dummies”
Stephen McDaniel — November 30, 2008 @ 7:04 pm