In part 1 of our Growing A Healthy SaaS Business webinar series, Josh Bloom of Simon-Kucher & Partners and Flexera’s Cris Wendt discussed Successful Strategies for SaaS Monetization. Here are some key highlights.
3 Levers for Successful SaaS Monetization
Josh pointed out that “Land and Expand” is not just a popular catch phrase. It’s a true principal underpinned by solid economic data and is a critical component of a strong SaaS monetization strategy. Essentially, it’s a lot easier to generate incremental revenue from existing customers than from acquiring new logos.
In the SaaS world, land and expand is the path to success because your customers get value from solutions tailored to their needs. Without it, you’ll have a hard time keeping customers let alone up-selling them.
Successful SaaS players have 3 fundamental levers top of mind
- Up-Sell/Cross-Sell: When it comes to packaging, understand the up-sell path you’re trying to create and drive to that during the entire course of the contract. Focusing on feature-driven up-sell only at renewal time is missing great revenue opportunity. In other words, if you expose customers to advanced functionality as they mature during their life-cycle journey, you can significantly increase up-sell and cross-sell.
- Expansion: Critically examine metering or usage-based monetization models. Find a metric that ties a feature to value and look at how that correlates to customer use of the feature over time. Also, if the per user-metric growth is static, examine other growth meters like number of records being accessed. This leads to a metric that better reflects the value your customer is getting from your product and leads to optimal monetization for you.
- Retention: Create a clear plan for targeted increases in renewals. When focusing on price increases, examine different buyer segmentations like smaller customers who spend less and have shorter contract terms vs. larger customers with more spend and longer terms. In this example, by making pricing and packaging simple and affordable for smaller buyers, you not only facilitate their initial product adoption but also increase retention of your offering.
Platform-as-a-Service: A Flexera Customer Story
To highlight some of the challenges and best practices in developing a SaaS monetization strategy, Cris Wendt presented a Flexera customer case study of a global manufacturer of detection equipment and technology. One division of this company with classic hardware roots is digitally transforming their business by adding a new Platform-as-a-Service offering that includes big data analytics and machine learning. The goal is to dramatically increase their customer’s operational efficiency and effectiveness. Flexera has been chosen as their monetization partner to realize new outcome-based pricing models.
The Flexera monetization platform will make it easier for them to land, expand and optimize by:
- Driving predictable and recurring revenue
- Targeting solutions to market needs and
- Measuring and refining pricing/packaging models based on user insight
To learn more about the complex challenges and the specific monetization plan constructed to grow recurring revenue, you can watch the complete part 1 webinar replay here.
And be sure to register for part 2 of our webinar series – Establishing a Foundation for SaaS Success
In the next webinar, Flexera’s Principal Strategy Consultant, Cris Wendt discusses the operational requirements needed to drive a successful and sustainable software business with SaaS.