What Are The Stages Of The SaaS Sales Process?

If you ask any sales rep, they’ll all tell you the same thing: the SaaS sales process is absolutely grueling!

That being said, having a firm grasp on each distinct stage and the various tactics you can use throughout the sales cycle can make the endeavor a lot easier. Today, we’re going to walk you through the top techniques you should implement into your SaaS sales strategy.

We’ll also go over how to improve essential SaaS sales metrics like customer acquisition cost, annual recurring revenue, average purchase value, and expansion MRR so you can make the most out of your SaaS product. Let’s get right into it!

TL;DR

• SaaS sales can be broken down into three models: self-service, transactional, and enterprise.
• A self-service SaaS sales process is best for companies with a simple and/or affordable product.
• SaaS sales compensation tends to be higher when targeting enterprise customers since it takes longer to close deals and each contract brings in more annual recurring revenue ARR for the company.
• The SaaS sales cycle takes 84 days on average but can be shorter (around the 40-day mark) if your product is priced below $5,000.
• Creating a user persona will help you target the right prospects and later use the same data to segment your in-app marketing.
• Nurturing new customers is the best way to reduce churn and increase expansion revenue.
• Surveys that measure metrics like CSAT, CES, or the net promoter score can give you insights into which changes would boost your monthly recurring revenue MRR and improve customer retention.
• Paid trials can filter out unqualified leads, helping your sales teams focus on the prospects who’ll actually convert.
• Focusing on qualified leads and therefore increasing the conversion rate facilitates more accurate revenue forecasts for SaaS companies.

What is the SaaS sales process?

The SaaS sales process encompasses the various stages of selling web-based software solutions either to new customers or existing users. Cloud-hosted and subscription-based solutions are the most common SaaS sales models because they bring in recurring revenue.

How are SaaS sales different from traditional sales?

Both physical and SaaS products are sold to solve a specific problem. That being said, selling software is different because the product is intangible. SaaS sales reps need to understand every aspect of the digital product as well as the various problems it can solve for a prospect.

When you factor in the complex integration process needed to add a SaaS product into an existing tool stack, it should come as no surprise that the sales cycle will be longer. The attention from SaaS sales reps will also need to be more personalized since every company’s stack and needs are different.

What are the 3 SaaS sales models?

If you’re starting a SaaS business or trying to get more recurring revenue for your existing SaaS company, it’s essential that you’re familiar with the three main models:

1. The self-service model: No sales reps and a sales process that relies mostly on lead generation.
2. Transactional model: The transactional sales process requires a few sales reps for potential customers who are hesitant to pay the price of your product.
3. The enterprise model: Succeeding with an enterprise sales model will require a sales team, outbound marketing, and enough capital runway to endure the long sales cycles.

Let’s take a closer at each model’s unique sales process.

The self-service model

Much like the name suggests, you won’t be proactively selling SaaS to users in the self-service model. Instead of having a team of SaaS sales reps, you’ll rely on marketing efforts to drive traffic to your sales pipeline.

This is ideal for SaaS products with a lower price point and a simpler onboarding process. Such products don’t have high enough margins to cover the salaries of SaaS salespeople and are thus better suited to a passive sales funnel that’s powered by lead generation.

The sales cycles for self-serve products often consist of generating awareness about your solution, publishing content for potential customers to see, and reducing friction in the signup process to maximize the conversion rate.

While you may not have a full sales team, building out a customer success team is essential so you can upsell existing customers to higher-margin plans and generate expansion revenue. This will also help with customer retention since customer success representatives are essential to reducing churn.

Transactional model

As the price of your product increases, so does the customer acquisition cost. This is because people are less willing to part with a significant amount of their hard-earned cash unless they have a positive interaction with a sales rep from your company.

After all, the perceived risk of getting a subscription from your SaaS company is higher when the first month will cost them $200 instead of $20. Transactional SaaS sales models are more complex since they combine sales reps and content marketing to nurture leads throughout the sales cycle.

Rather than pushing leads to an automated funnel, the role of the marketing department shifts towards sending qualified prospects towards your SaaS sales team. Many SaaS companies with a customer self-service model tend to transition towards transactional sales given time.

This often occurs when new features are implemented and more expensive plans are created to accommodate potential customers with complex needs. Selling SaaS products with a transactional sales model is still a lot easier than going for enterprise customers though.

The enterprise model

Finally, we have the enterprise model. This SaaS sales model is often reserved for high-ticket, specialized software — and sales techniques often focus on outbound marketing rather than inbound marketing.

The main reason for the long sales cycle is the bureaucratic inertia that most enterprise companies deal with. Your SaaS sales rep may convince the first person they talk to at the company, but the typical sales process for enterprise clients would still involve months of working towards a signed deal.

There’s the matter of migrating them over to your platform, drafting SLA agreements, and waiting for the company’s existing accounts with other providers to expire (as most enterprise software is paid on an annual basis.)

However, once you close that client, the long sales cycle actually works in your favor since the bureaucratic inertia can reduce the odds that they’ll churn. Of course, you’ll be dealing with a higher customer acquisition cost which could make it harder to maintain a healthy LTV:CAC ratio.

The sales rep’s commission percentage also tends to be higher since enterprise clients take longer to close and bring in more annual recurring revenue for the SaaS company. This is mainly while you won’t see a younger SaaS company targeting enterprise sales cycles too often.

Most SaaS businesses start out with self-service or transactional SaaS sales models but start targeting upmarket users when their product or customer needs get more complex. This lengthens the sales cycle significantly but also increases the average customer lifetime value or LTV.

“There are two reasons companies start targeting enterprise — either you outgrow your customers or your customers outgrow you.” -Yazan Sehwail, CEO of Userpilot

The SaaS sales model matrix: what is the SaaS graveyard?

Any successful SaaS business falls under either the self-service, transactional, or enterprise sales model. However, some products that are a combination of cheap and complex often find themselves in the SaaS graveyard of the sales model matrix.

Pre-launch SaaS businesses who are concerned that their product may end up here should adjust their GTM strategy — either by increasing the price or simplifying the core offering of their software solution (therefore broadening their ideal customer profile.)

How long is the SaaS sales cycle?

HubSpot found that the average length for a SaaS sales cycle is 84 days. Sales cycles with an annual contract value ACV below $5,000 are often shorter, lasting around 40 days. A few things can impact the length of your company’s sales cycle such as:

• Its price
• Its complexity
• Its target audience
• Free trial length

You shouldn’t rush it though. Reducing your free trial to seven days may speed the process up but it could also jeopardize your conversion rates. The goal should always be to maximize acquisition, retention, and expansion while minimizing any wasted time.

What are the stages of the SaaS sales cycle?

Across all SaaS sales cycles, there are seven distinct stages that you need to address:

1. Finding leads.
2. Connecting.
3. Qualifying leads.
4. Presenting the product.
5. Overcoming objections.
6. Closing the deal.
7. Nurturing the new customers.

SaaS sales cycles that mess up even just one or two of these stages could lead to your churn rate skyrocketing and your free trial conversion rate falling below the 66% average. Let’s take a closer look at each stage and how you can optimize for success.

Identifying your customer

Prospecting is the first step in the sales process since you can’t start generating leads if you don’t know what your target market looks like yet. You can also use our buyer persona template if you’re not sure where to start.

A few user persona examples in the SaaS space include product managers, product marketers, customer success managers, UX designers, and independent contractors who help companies with any of the aforementioned areas.

Identifying which persona you’re trying to target will help you create a lead generation funnel that brings in traffic consistent with your ICP or ideal customer profile. You can also use this data, later on, to start user segmentation early with a welcome screen — improving your contextual onboarding flow.

Canva is a great example of how to use a welcome screen effectively.

Generating leads

Once you have your buyer persona down, you can explore various lead generations channels like:

• Social media platforms
• Blogs
• Newsletters
• Case studies
• Paid search
• Link building
• Thought leadership guest posting
• eBooks
• Webinars
• Video marketing (YouTube and TikTok)

HubSpot found that most leads come from the company website and referral traffic — both of which are heavily dependent on content marketing. Using high-quality articles to build your brand, increase exposure, and get people talking about your product is a prime path towards increasing SaaS sales.

Qualifying leads

Qualifying leads is a crucial step in SaaS sales since it helps you determine whether or not a lead meets the requirements to purchase your product. This will save you from wasting time and money on a lead that won’t be able to make a purchase at the end of the day.

There are three main classifications for this stage of SaaS sales:

1. MQL. Marketing qualified leads are prospects who have interacted with your marketing content and displayed purchase intent. Signs could include opening emails, visiting your website, and sharing their email in exchange for an eBook or newsletters.
2. PQL. Product qualified leads are prospects who have experienced the product either through a free trial or freemium model. In addition to signing up, completing various onboarding tasks is necessary to qualify for the PQL definition.
3. SQL. Sales qualified leads are users that are ready for a sales pitch after showing sufficient interest in the product and experiencing multiple marketing messages.

Once leads get a lead score and qualification, they’ll be marked as sales-ready so a SaaS salesperson from your team can reach out to them. This reduces the workload of your reps to ensure they only spend time on qualified prospects and put the SaaS sales salary you pay them to good use.

Presenting the product

Once you’ve got the qualified leads flowing in, the next step in the SaaS sales process is to present your product as the solution to the main pain points of your prospect. This stage looks different for every company since SaaS sales cycles can vary wildly depending on the type of product on offer.

Free trials are the most common approach but you could also have your sales manager run product demos (especially for enterprise customers who might need a guided introduction.) Demo content is particularly important for complex and/or expensive products.

However, if your product is affordable and easy to use then you might want to use a free trial vs a demo. In addition to free trials and product demos, you could also use case studies, presentations, or even paid trials (more on that last one later.)

Handling objections

Overcoming objections is a core trait of any good SaaS salesperson. What most people don’t get is that you don’t need to be talking non-stop to handle the objections of your prospects. On the contrary, being an active listener can be far more effective.

Instead of interjecting the moment you hear an objection, listen to all their goals, motivations, and concerns. By taking the time to understand where their objections might be coming from, you’ll be better equipped to respond.

Repeating what they’ve said, asking follow-up questions, and using social proof to put apprehension to rest are all effective tactics that you can use to seal the deal. In fact, #1 New York Times best-selling author Daniel Pink found that waiters/waitresses who repeat the order earn 70% more in tips.

Here are a few common objections and how to respond to them:

• “It’s too expensive” — instead of debating the price with a prospect, move the conversation back to the value the product provides and how each feature can solve one of their problems.
• “We need to use the money for other areas” — the best way to get around this objection is by sharing the ROI some of your customers have had and reminding them that they can divert the extra revenue towards other departments.
• “I’m not ready to commit to a contract” — to get past this fear, you could offer a free trial, 30-day money-back guarantee, or suggest a monthly billing schedule instead of annual payments.
• “I already have a subscription with one of your competitors” — ask them why they chose that vendor and what is or isn’t working then explain how your product is different/better.
• “I’m already locked into a contract” — depending on your profit margins, you could offer a discount to cover their switching costs.
• “I’m happy with my current provider” — this is always a tough pill to swallow but you should still ask them for the main things they like about your competitor so you have a roadmap on which areas you need to improve.
• “I heard X about your product” — if the statement isn’t true then just say “that’s not true” and pause. This will satisfy the majority of buyers and they’ll move on to other questions. If the negative statement is true, make a brief clarification and promptly redirect the conversation elsewhere.
• “I’m not authorized to approve this purchase” — politely ask them who the right person to talk to is and if they’d be willing to redirect you to them.

Closing the deal

Getting people to sign up is hardly the last step in the SaaS sales journey. You’ll still need to get them onboarded, retained, and set up the eventual upsell. Still, few things feel better than closing a new customer for the company and knowing that their subscription will bring revenue in for years to come.

If your prospects are still on the fence at the end of their free trial or product demo then you could try a few things to make them commit to a subscription. Offering a 10-20% discount “only for those who sign up today” could be extremely effective since it taps into their FOMO.

You could also offer to give them one or two months for free if they decide to bill annually since this longer lock-in period will keep them from churning prematurely before their AHA moment. Alternatively, you can try asking the prospect probing questions to help them make up their mind.

Even simple questions like “did the product solve your problem?” or “is there any reason why you wouldn’t continue with the purchase today?” can give on-the-fence prospects that last nudge into certainty.

It’s worth noting that you won’t always have to go for the hard close every time. For certain prospects, it may be more effective to offer to extend their trial by a few more days or tell them about an upcoming feature and how it might benefit their business.

Nurturing the customers

Whether you used a hard or soft close to reel the customer in, that’s not the end of your interaction with them. You’ll need to get the user through onboarding and help them in their user journey to optimize for customer success.

A 2021 study from Bloomreach reported that 56% of customers are willing to pay more if they get a better customer experience. As such, investing in a self-service support system could bring a good ROI in the form of SaaS sales compensation since it will help them solve problems on their own.

This shorter resolution time may not seem like a big deal but it could actually make the difference between a user with a stagnating LTV versus one who generates expansion revenue for the company.

In the same vein, you should ensure that your onboarding flows have enough in-app guidance to ensure that fresh signups don’t hit too many obstacles before reaching user activation. There’ll always be late-game objectives to pursue like customer expansion and improving the sales process.

How to improve the SaaS sales cycle?

Now that we’re up to speed on the varying SaaS sales processes and their respective sales cycles, it’s time to start optimizing your sales process for success. We’re going to go over four strategies that can help your sales reps get the results you’re looking for:

• Continuous engagement during free trials
• Upselling customers to drive account expansion
• Satisfaction surveys
• Paid trials

Keep in touch with customers during the trial period

No matter how long your free trial length is, your sales team should stay in contact with prospects regularly as they try the product out. Checking in with them throughout the course of the trial could also help the prospect overcome early obstacles or discover new features that they haven’t tested yet.

Having customer self-service resources like a knowledge base or in-app guidance can also increase free trial conversion rates since prospects will be able to find the help they need without waiting in queue for a live agent.

Upsell to existing customers to drive account expansion

Upselling and cross-selling to existing users is one of the best ways to increase your annual recurring revenue ARR without increasing your customer acquisition cost CAC. Expansion MRR comes from three main sources:

• Upselling. Getting people to upgrade to a more expensive plan or version of your product.
• Cross-selling. Promoting other standalone products that could complement their tool stack.
• Add-ons. Selling additional features that will improve their user experience when using your core SaaS product.

If you have a freemium plan but want to upsell users to a paid plan, you could incentivize upgrading by offering additional features or imposing limitations. Slack, for better or worse, takes the latter approach by capping the message history.

Upselling is a great way to generate expansion revenue — and can even help you achieve negative churn — but it’s important that you capitalize on the other two approaches as well.

If you’ve ever wondered how Zoom could make a $1.8 billion gross profit in 2021 despite having a freemium plan, its wide array of add-ons surely had something to do with that. The Large Meetings add-on alone costs $600/year which is equivalent to three Business-tier licenses.

Atlassian, with over $1.7 billion gross profit in 2021, has spent years on development and acquisitions to build out a product family that truly has something for everyone. This makes cross-selling a lot easier for the company, bringing in fresh revenue while reducing their customer acquisition cost CAC.

Regardless of which method you use, it’s essential that you factor in where the customer is in their user journey. The best time to prompt account expansion is when it helps the user get their desired outcome and accomplish their JTBD (job-t0-be-done.)

You can even use product usage and customer data to identify the ideal moments for upsell prompts as this will make your users feel like you’re actively trying to help them rather than just trying to improve your SaaS sales metrics.

Use satisfaction surveys to collect feedback

If you want to increase your SaaS sales and get more monthly recurring revenue then you have to constantly improve your product. The best way to do that is by understanding what users want through feedback surveys.

Customer satisfaction surveys could measure various key metrics like CES, CSAT, and NPS scores. CSAT microsurveys are the simplest approach since they just ask your customer to rate their general satisfaction. HubSpot uses a scale of one to seven for their CSAT surveys.

Getting NPS feedback could help you dig deeper into specific aspects of your product and how they impact SaaS sales. You can also segment respondents based on the net promoter score data to see which features appeal to the most satisfied users and what your detractors are struggling with.

Speaking of features, a feature survey can help you identify features that are popular with happy customers so you can promote them more or features that people are annoyed with so you can implement a fix.

If you wanna go a step further then you could look at the features often used by your highest paying customers then offer your entire user base a free trial of that feature. This behavioral segmentation could persuade some of them to upgrade plans, boosting your monthly recurring revenue MRR.

Try paid trials

If your sales teams are getting bogged down with free trial users that slow down SaaS sales processes without converting then you may want to consider switching to paid trials. Paid trials, on average, have higher conversion rates than a free trial because only a qualified lead would be willing to pay for them.

Of course, the main drawback of forcing prospects to commit a monetary amount to your product from the get-go is that you’ll get fewer signups in total — making paid trials a delicate balance between the quality and quantity of your leads.

The good news is that the trial revenue and higher conversion rate can offset some of the acquisition costs as well as make for a more predictable sales cycle. Surfer is a great example of this as they charge $1 for a 7-day trial.

The amount is small enough that it won’t cost sales qualified leads but still enough of a commitment to ensure that your SaaS sales specialist isn’t exhausted by users just looking for a freebie.

Conclusion

The SaaS industry is large enough that you can generate recurring revenue whether you have a sales team or not. It all comes down to your product and how well it fits the company’s sales process + target market.

However, you should carefully select a pricing model that suits your product most, do research, find qualified leads, and try to turn them into loyal customers by continuously nurturing them.

Ready to improve the key metrics and optimize your SaaS sales model for your target customers? Get your free Userpilot demo today!