SaaS stands for Software as a Service.
This is where the licensing and delivery model for software is done with a subscription that is centrally hosted online. The software can be called on demand because it is usually accessed by a client through a browser. All client data is stored in the cloud making it accessible from anywhere in the organization.
Types of Sofware for Services
There are plenty of different kinds of SaaS services. In 2019, you can find a solution to almost any online problem with a software as a service app. Here are some of the most popular types of SaaS’s.
Customer Relationship Management (CRM) Software
This is used to manage customer information, track sales and automate the process of marketing. This covers all phases of customer interaction and is a strategy to understand and retain customers while providing quality customer service and increasing profits by gaining more customers.
Enterprise Resource Planning Software
Management gains improved insight into productivity and workflow while the sharing of information throughout the organization is made more efficient. All parts of the operation are integrated into the management of businesses making them more streamlined.
Tracks finances and organizes them for organizations cutting down on the overhead for payroll because there is less need for individuals to track them. This feature can reduce the amount spent for accountants while putting all the information in one place to managing the budget easier.
Track all aspects of a project to ensure that it is completed on time and meets all requirements that stakeholders set for it. Planning projects, the organization of projects and assignment of tasks can all be done from the software.
Software for Email Marketing
Relationships are built while email delivery is optimized through automation. Specific criteria can be used to develop email marketing campaigns which customize them to the customer base you are trying to reach.
Software for billing and invoicing
Invoicing and billing is automated to give customers more payment options while lowering the cost for data entry. Expensive errors are eliminated and customers have the choice of paying with credit cards, online payment methods or mailing in the payments.
Organization communication is simplified, information silos prevented and it becomes easier for employees to follow the complex interactions. Productivity is increased and communication made more efficient with the proper software for collaboration.
E-commerce and Web Hosting
Everything needed for doing Internet business. CMS systems, web hosting, shopping carts, and message boards in addition to other things. This eliminates the need to create an online store using a third party programmer and the need for coding the site is eliminated.
Track hours worked by employees, increase scheduling efficiency, make better hiring decisions, payroll automation and manage the aspects of human resources.
EDI, Compliance, Public Sector
There are standardized rules for some industries that have to be strictly followed. Communications within the organization can be simplified with cloud applications ensuring that the rules are followed.
Everything you need to operate virtually any business. There are applications for management for every industry to optimize productivity and increase profitability.
Allows the use of cloud software to process transactions increasing the methods that payment can be accepted. A program for loyalty rewards can even run virtually eliminating the need to have someone manually track the programs.
SaaS Pricing Models
There are approximately six hours spent on the pricing strategy for the average Software as a Service startup. This is six hours total to define, test performance and optimize the price.
There are three components crucial to make the pricing strategy profitable:
- Value and revenue should be balanced by the pricing model. This means that the value of the features should be taken into consideration when setting the prices for the packages.
- Achieve the goals for growth with the pricing strategies used for determining the cost of each package offered to customers.
- Fine tuning the price with psychological tactics for pricing
The simplest method to sell the service of software is flat rate pricing. One price is used to sell single products or features individually from each other. This gives the option of monthly billing and is similar to the licensing model for software before the existence of the cloud infrastructure. There is also the option to pay for set amounts of services in advance.
Having a single price for one product makes it easier to focus energy on marketing and selling easier with an offer that is clearly defined. Potential customers will understand a flat rate easier than a complicated pricing model.
There can be missed profit opportunity because getting the full value of the software features from every customer is difficult. You only have one chance to get a customer. There is little room to change people’s minds, they will either want it or they won’t.
Pricing Based On Usage
This strategy is the same as pay as you go where you pay the cost directly associated with the usage of the product. This includes charging based on the transactions, requests and amount of data used.
Usage and price are correlated which means you only have to pay for what you use with fewer barriers to the usage. Small startups can afford to use products that are based on actual usage. This pricing structure makes up for the costs of supporting those who use more of the package features.
The price is not connected directly to the product value, it is more difficult to predict profit because the amount billed will be different every month. Customer costs are more difficult to predict.
The standard for pricing software services is tiered pricing. This method offers several packages that combine different features at various prices.
There are multiple customers this will appeal to with less profit loss. It is easier to upsell from these packages since users starting with one package can easily determine when they require the additional features offered in the package at the next price point.
Tier pricing can confuse some people if there are too many options which can cause you to lose customers. There can be a temptation to create too many packages trying to please everyone and the user risk is higher because you cannot get compensation if users exceed the amount of usage allowed in the package.
Pricing Per User
This is simple and allows users to pay one price for a single user and additional costs are added for each user that is added to the account.
The pricing scale is simple and the revenue is predictable. Revenue increases with each user that is added.
There are limits to adoption that means people might be less likely to add additional users. Users have an easier time leaving the service and the actual value isn’t reflected for services.
*Note: This can be modified to charging for only active users.
When only active users are charged for the features are only charged for when a user accesses them. The fewer users that are actually using the features the lower the cost.
Pricing Per Feature
The pricing is based on the features in the plans, with each package having different features. The advantage is the potential for upgrading increases and the compensation matches the uses. The disadvantages of this are that it is hard to get the pricing and features balanced correctly. Some people will be put off by the fact they do not have all the functionality.
Examples of Software as a Service
- Google Apps
- Wipro w-Saas
- SalesForce CRM
So now that you know exactly what a SaaS is, the advantages and disadvantages and even the pricing models, you can use that knowledge in the future. If you are a SaaS company, check out our digital marketing products for software as a service businesses.