Software expert Josh Melick has identified a big problem which software providers are making when they sell their product. In an article which he uploaded to his own personal blog, Josh breaks down the key problems which companies which sell SaaS have, and what the fix is. Josh has made some fantastic points in his piece and it is something which all software providers need to hear. In terms of fixing the problem this is going to be much easier for those companies which are just starting out, and tougher for well established companies. With this being said, given Josh’s breakdown, fixing the issue should be done sooner rather than later.
Here are the common errors which Josh talks about, that those SaaS companies are making.
All Inclusive Sales
Something which many startups will do as they seek to rush their product to market is look to make sales quickly. In order to do this they will offer all-inclusive sales packages, which is a cardinal sin in terms of sales. As Josh discusses, this may make a sale but it serves to completely lose a company’s ability to upsell or gain any further revenue for that client. This is a poor idea which ties the hands of the company which is selling the software.
The point of Josh’s piece is talking about the importance of having three dimensions on the pricing structure, which we will get to shortly. Many companies however focus only on one dimension when they slice up their pricing plans. The bronze, silver, gold standard works well, but only if you separate them in the right way. Many companies focus solely on users, which should be a key component here, yet it is not the be all and end all. The number of users really sin’t as important as other factors.
A two dimensional plan is one which separates each pricing structure with users and usage. This of course makes more sense than just users, yet it is still missing a trick. This particular approach still strangles companies in terms of their ability to raise and lower the price of the plan in the future.
Failure to Cover Costs
The third dimension which Josh rightly focuses on is time, and how each plan should be for a set period of time. This allows the SaaS company to be able to increase costs at the end of the plan, without giving their customers any unwanted surprises. Not only this but companies can also try to upsell to their clients at the end of their contract, in order to help cover costs. Providing software and constantly ensuring that it is fully functional and high quality costs money, and those costs go up over time. following Josh’s suggestions will ensure that each company is able to continue to cover its costs going forward.
Following Josh’s three dimensional approach is what will protect the company’s revenue stream.