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The SAAS Business Model: 10 Facts Everyone Should Know

SaaS, which is short for Software as a Service, runs in the cloud. It eliminates the need for your company to invest...

Written by Kelly Madison · 4 min read >

SaaS, which is short for Software as a Service, runs in the cloud. It eliminates the need for your company to invest in expensive hardware or a server of your company. It’s a software delivery method that allows your data to be accessed from any device by using an internet connection and web browser. It is hosted by a service provider or vendor and made available to customers over the internet. 

SaaS is becoming an increasingly common tool in business. It contains technologies that support service-oriented architecture (SOA), web services, and development approaches such as Ajax. 

Moreover, the service of high bandwidth broadband becomes available to support the access of users from more areas around the globe. SaaS is closely related to the on-demand computing software delivery model and ASP (Application Service Provider). 

To avoid the maintenance of computer programs regularly, many businesses are using SaaS Software. It’s being integrated with business programs such as Enterprise Resource Planning (ERP), Human Resource Management Software (HRMS), Content Management (CM), Customer Relationship Management (CRM), Management Information Systems (MIS), and many others.

10 Important Facts about the SaaS Business Model

In this article, we’re going to discuss 10 important facts everyone should know about Saas.

1. Treat your Customers Right

This is one of the most important points that you should need to focus on. If you will just minimally interacting with the existing customers of your company such as during their renewal period or when you need a reference, you are taking your business in the wrong direction.  

Don’t forget that the revenue of your business is determined by the customer’s renewal that can take a lot of months or years as well, by depending on your Saas business model that may recover the new customers acquiring cost. Due to lack of attention, the customer won’t renew their subscription with you, and the business model could collapse. 

2. Go With Free Trial

This is a great way to attract customers by offering them a free trial. In this way, the user will get to know about your service or product. However, getting a free user to convert in the future might be costly for you with a low ROI. At startup, you can give a free trial to the users to develop your brand awareness instead of getting conversions. It can be the worst thing for you as a startup, but it will help you to create awareness of your service or product. It will allow the user to test the functionality and assess the usefulness of SaaS in addressing the need. 

3. Align Your Pricing With Business Model

The Saas model that you are using in your company is the representative of your business in the market. All the segments fall under your business model’s audience. So, when you are going to plan your business pricing strategy, you need to think about the difference between various market’s segments such as the inside sales, low touch, field sales and how all these different approaches need the alignment with the sales complexity and the price point as well. 

At the starting you may don’t have a strong past, so calculating the lifetime value can be quite difficult for you at the beginning. But once your SaaS business achieves traction, it can get a strong flow of cash along with the lowest cost associated. 

4. Metrics of Saas Business Model:

SaaS model is all about the metrics, and you can measure the various parameters to increase your business performance. 

Moreover, for the SaaS-only a few metrics are really important that is related to customer retention and revenue generation. When the churn is increased, and revenue is stagnant, your business will be fall then no matter how good the other metrics are. So you need to keep on track your recurring revenue, lower down the customers acquiring cost and minimize the churn. 

5. Use email

Email is one of the best methods that SaaS use to generate demand because it really works. Once you get the contact information of your prospect, don’t just bore them with ads, sales pitches, and the discount announcement, in fact, try to get their attention by telling them your story infused with the emotions and feelings. 

Your prospect has no idea of how useful the SaaS is, and they may not care unless you will give them a reason to care. So, by telling a story, remind them of how painful their situation is and then give them a big solution to their problem. 

6. Use API strategy:

Integration is the key point of your SaaS application. From the first day, you should need to develop an open API that will help a user to easily integrate your application along with the legacy systems and other commercial application that they might be already using. 

Furthermore, the developers of the third party can be integrated with other applications to your product without incurring a lot of extra money. 

7. Use Right Marketing Collateral:

Most of the SaaS research is made online. In an ideal situation, to control the all important information of your company and its goings-on, you can use the right marketing collateral in the form of Whitepapers, Ebook or free digital products. 

These are an excellent piece of value that you can trade to your audience for the contact information. Blog posts, PR, Webinars, emails as well as the trade shows are also the best way to let your audience know about your new SaaS. 

8. Identify the Problem of User:

Your marketing campaign is the main thing that you should focus on protecting your service and averting numerous problems. Find and make the selection of the right keywords that will make the reader feel the pain of their problem. Remember one thing that the problem that your user faces may constantly evolve. 

That’s why it is significant to interact with the sales department of your company before communicating directly with your customers to know the reason that why your users are not turning to you or how should you do better in future. 

9. Security of Application:

While using Saas, you should need to make sure that all the imperative data of your customer is safe such as their credit card payments, their project or usage data. The data center of your company should have the latest security upgrades. 

10. Invest in Lead Generationn:

At the startup of the Saas Business model, it is quite difficult to get the lead generation. For this, you have to find some innovative ways that will help you to make your sales faster and generate your leads without spending a large amount of money. 

For this purpose, you can adopt and invest in some marketing strategies such as offering a discount, free trials, test drives, email marketing, using customer reference and segmented marketing. 

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