With SaaS significantly changing the rules of the game in terms of pricing models, partner types needed, customer buying teams and customer adoption/engagement, the business of taking SaaS solutions to market is still relatively immature. However, vendors leading the charge are capitalizing on the Channel as a route to market. But what they are discovering is that selling SaaS versus On-Prem is very different. And as such, the activities they need to incentivize to drive SaaS take-up, so too are very different.
There are a number of activities that vendors look at when they try to incentivize channel partners around SaaS deals. New logo attainment, service delivery, customer satisfaction ratios and competitor take-outs, to name just a few. Here’s the top 5 from our survey:
Our research showed this is the top activity to incentivize for. With 71% of vendors surveyed saying they incentivized partners for new logos or growth in existing logos. And to be honest, it’s not a surprise that it holds the top spot. Afterall, a key growth metric for SaaS businesses is to scale fast in terms of new customer acquisition. While at the same time increasing their footprint. In effect increasing their Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) within their customer base.
2. 47% Expertise (Training & Certification)
Coming in a healthy second place with 47% of votes, is vendors incentivizing partners to complete training courses and/or attaining certifications. This is an expected trend as by its very definition “Software-as-a-Service” solutions, especially in B2B enterprise offerings, can be highly complex. Therefore, a premium can be charged by services partners such as System Integrators and Consulting firms to be seen as the “experts” on the vendors offerings by their target end customer segments. Top tier certified vendors may also gain a bottom-line financial benefit, as well as the top line on the services premium, as they often get higher margins and/or rebates from the vendor for their investments in training/certifications.
When it comes to service partners, John strongly believes that the large partners who can help you grow in this space, such as Global System Integrators (GSIs), are not always interested in financial incentives and rewards. Here, their people, especially solutions engineers and delivery consultants, are more interested in receiving training and certification, and maybe badges or even gamification. So it’s important to think about what they value in order to connect with their people. This in turn brings ethics to the forefront. “You may have to think about the ethics and the policy behind what incentives that they will allow you to distribute into their teams as well. So very, very different models: people centric, personalized, and not always financial”.
3. 33% Renewals
This figure seems surprisingly low. The reality for SaaS business models, if you fail to retain customers, you lose all the associated revenue (MRR & ARR) attached to the account. Moreover your retention rates drop, which is a key metric in the investment world for SaaS vendors.
However, Nehul believes vendors have much more work to do to become “partner friendly” when it comes to renewals. But he sees this as a great activity to incentivize partners towards. “Renewal means it’s not just renewal margin incentive for the partner, it’s also assured revenue for the vendor. It’s somebody doing local account management and ensuring that that deal does not go elsewhere next year”. Unlike On-Prem, SaaS is not tightly integrated, and therefore is somewhat easier to throw out. So driving customer adoption is paramount to securing the renewal. While customers perceive SaaS to be just that, with no infrastructure cost, they forgot about the “setup” costs. As a vendor, a higher renewal win percentage increases overall margin and is thereby an excellent activity to incentivize. Incentivizing renewals enforces good discipline between the vendor/partner to maximize Customer Lifetime Value (CLTV) – another important metric to investors for SaaS vendors.
4. 27% Switching from On-Prem to SaaS Model
This is becoming an important activity to incentivize for vendors that are transitioning from On-prem to SaaS solutions or Subscription business models. When both solution types are still available, vendors are offering “a phenomenal amount of incentive if the partner goes and sells a SaaS deal, rather than the On-prem deal”. As more vendors look to transition from “locked-in” deals they have to service and support, they are encouraging partners to sell more SaaS by offering “higher margins and more discounts”.
5. 16% Competitor Take-Outs
Just 16% of respondents state that they incentivize for competitor take-outs. From his experience, Nehul sees many vendors now establishing internal Customer Success Teams. The role of whom is to rate partners on two key criteria:
And the partners succeeding in both these areas, are being better incentivized for competitive displacement, whereby they “displace X vendor for Y vendor“.
In concluding, Nehul threw in a little curve ball – leverage your internal SaaS Marketing activity outcomes as an incentive for your partners. An area SaaS Marketers excel at is in digital marketing campaigns, both regionally and globally. Because of the global opportunities SaaS offers, digital campaigns can bring multiple global inbound leads. Nehul’s advice “passing on some of these (inbound vendor) leads to those partners in other countries, they are able to grow their business, allowing the partner to grow their own top line and bottom line”. While this is not a typical incentive, it drives a lot more partner engagement and loyalty as they see you as a vendor giving them new sales opportunities. As the vendor you can firstly report on and measure the number of leads you give to each partner. And secondly, on how many they successfully close won.