Business model to sell an innovative and complex enterprise SaaS application
Our Startup company developed a web application for Data Analysis in Marketing. It's a B2B product that is innovative and complex. Although the app is very simple to use, the elaboration of the questions and databases, and the interpretation of the results require some extensive training. After some unsuccessful cases of two-day trainings, we realized it's necessary to have a consulting project inside the company for 3 to 6 months in order to get the company ready to use the project.
So, what we actually sell is the access to the web app plus a consulting project. The actual business model is charging a flat upfront amount for the consulting and a monthly amount for the webapp.
Big companies don't have a problem with this. However, medium-size companies see this as a big cost offer. Not because it's expensive, but because they don't see the "bridge" between the the vision I'm selling through my products and the benefits of it.
What would be a way to reduce this risk?
A profit-share contract could be a solution. However it's too complex and hard to come to an agreement. It's too hard to set KPI's to measure the performance of the product, and it's a very difficult contract to be set.
I believe what we need is a more apelative offer that would reduce the risk of the investment and connect the vision we're selling to the benefits of the product. How should we set our offer in order to reduce this risk and convince the customer that it worth the shot?
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Are you saying that your unsuccessful cases meant companies had a difficult time using your product? And that all new companies using it will need to get 3 to 6 months of training possibly pay extra for this before they can start using your application? And that medium-sized companies don't see the vision of what your selling? Shouldn't ALL companies clearly understand the value of your product large or small without needing 3 to 6 months of consulting? If I look at a web app I want a free trial and be able to decide for my self if it's right for my company not be sold in 3 to 6 months. – Anagio 13 years ago
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Yes, unsuccessful cases meant companies had a difficult time using my product. All new companies will need 3 to 6 months of training (actually this training isn't all about the app, but much of it it's related to marketing and data analysis concepts) to use the **full potential** of the web app. They start using the web app in the first week, but reach the full potential by their own at the end of the training. Related to the vision of what Im selling, all companies that decide to go on with the training has already seen it. They dont need 6 months to see the vision but to reach full potential – João Daniel 13 years ago
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The point is: big companies (ArcelorMittal, Coca-Cola, etc) see the vision, and easily see the bridge between the vision and the benefits. Medium-size companies see the vision, but don't see their companies getting the benefits. It happens because everything that is a problem for a medium company as data-extraction and treatment, qualified personnel to use the app and to implement the interventions, is not a problem for big companies. That's why this 3-6 month training is important for medium companies. With this training we try to reduce those risks and lead the company to the benefits. – João Daniel 13 years ago
3 Answers
...but because they don't see the "bridge" between the the vision I'mDid you validate this BEFORE building the product? Well now that the product is in place here's what every client will do in their heads: Is Benefits/Cost >> 1? I.e. is it worth the cost? Unless it's substantially greater client may not feel the ROI is worth it.
selling through my products and the benefits of it.
YOUR job: can you financially quantify these benefits 'believably'? What will the organization gain by using your tool - time saved, operational efficiency etc.? Put a monetary estimate (ranges please) on them. You should be able to do a simple Cost-Benefits analysis using the above ratio to convince your clients.
If your pitch starts out by something like this "our tool can help you save $1 Million annually" - you'll have their attention. If you say it would cost $50k for consulting, no problem. If the overall cost of consulting + usage = 500K you are NOT GOING to get a client! (Only twice the ROI may not be all that important for them in the long run).
And as you say it's 'complex' - can some UX work/study be done to decrease it? Look into these aspects and you should have your answers :)
I think one thing you may need to realize in this case is that all software is not for all companies. If your company requires substantial training, setup, and education for it to be effective in a company just market and target companies that are bigger and have a lot of money. If they easily 'get it', then that's a win for you.
If your product isn't fit for small business don't try to make it fit - they are just too small for you and price your product accordingly.
OR - after you have success with your product with large companies consider a scaled back easier to use version for small businesses that isn't as flexible or configurable to their business.
It sounds like you need to do a few things...
1. Qualify your potential clients carefully. You want the ones that "get it" immediately, and should avoid the ones you have to explain the value.
- Sell a bundle of consulting hours to get it setup.
