How to Create a Successful SaaS Channel Strategy
Building a rewarding SaaS channel can spell the distinction between success and failure for your company. Oracle, Amazon Web Services, Salesforce, HubSpot, and many other leading SaaS brands owe much of their success to their channel sales programs.
Channel partners serve as free sales and marketing teams and brand representatives for each. These extra capabilities are components conducive to long-lived and sustained growth for your SaaS business. But how do we build a successful SaaS channel strategy? Let’s find out in this article.
Benefits of SaaS Channel Strategy
When SaaS companies apply channel sales effectively, they position themselves to:
- expand their footprint into new geographies and markets
- reduce marketing, hosting, and production costs
- increase their customer base by improving brand awareness
- reduce internal sales forces, and cut back on distribution network expenses
- provide a wide range of services for complex technology products
Types of SaaS Channel Strategies
Note though that while SaaS channels are an important part of a SaaS marketing strategy, not all of them yield the same outcome. Choosing the best SaaS sales channel will allow you to reap the many rewards of this kind of marketing. The three most popular types of SaaS channel strategy are as follows:
1. Brokerage Channel Strategy
A brokerage channel strategy is one in which a company partners with a broker to distribute its product. The broker typically has a large customer base that the company can tap into, and the broker handles all of the sales and marketing for the product. This can be an attractive option for SaaS companies because it allows them to focus on building their product while the broker does all of the work to sell it.
There are several things to consider when deciding if a brokerage channel strategy is right for your SaaS product.
First, you need to make sure that your product is a good fit for the broker’s customer base. Brokers typically have a ton of customers with the same needs as your product, so it’s important that your customers are a good fit. You’ll get a lot of churn and waste if they aren’t.
Second, you need to decide if the broker is right for you. You don’t want to pay for services you won’t use, but you also don’t want to waste your time and resources on channels that aren’t going to lead to a sale. Lastly, you need to decide if the broker is going to be worth your time. You don’t want to spend all of your time on the channel and fail to generate any revenue.
2. Value Added Reseller (VAR) Strategy
A value-added reseller (VAR) is a type of business that adds value to a product or service before reselling it to customers. This can be done in a number of ways, such as adding features or capabilities, packaging the product with complementary products, or providing added services such as installation, training, or support.
When it comes to SaaS, VARs can be an important part of a company’s go-to-market strategy. By working with VARs, a company can reach more potential customers and build stronger relationships with its partners. In addition, VARs can be a valuable resource for developing and implementing a successful sales and marketing strategy for SaaS products.
There are several things to consider when working with VARs to sell SaaS products. This includes identifying the right VARs to partner with, creating a joint go-to-market plan, and setting expectations for the partnership.
Another important consideration is ensuring that the VARs you partner with have the necessary technical expertise to sell and support your SaaS product. You’ll also need to provide them with adequate training and marketing resources.
Finally, it’s important to maintain regular communication with your VAR partners and keep track of their progress. Regular reviews will help ensure that both sides are meeting their objectives and maximizing the benefits of the partnership.
3. Consultant/Developer Strategy
Consultants or developers are valuable assets for SaaS companies. They can help you build a successful channel strategy and penetrate new markets. Moreover, they have the skills and knowledge to help you develop your product and grow your business.
There are several benefits of working with consultants or developers.
- First, they can help you build a strong relationship with your target market. They have the expertise to identify and understand your target market’s needs. Moreover, they can then create a product that meets those needs, which will help you attract customers and grow your business.
- Second, consultants or developers can help you expand into new markets. They have the knowledge and experience to identify new opportunities and develop a plan to penetrate those markets. This will help you expand your customer base and grow your business.
Tips for Creating a Successful SaaS Channel Strategy
Unless you are already a household name, building and maintaining a successful SaaS channel strategy is no easy task. Here are five tips to help you get started:
Define your target market
SaaS companies are always looking for new channels to market their products. But before you can create a successful channel strategy, you need to first define your target market.
Start by identifying your ideal customer. Who is most likely to buy your product? What are their needs and what are they willing to pay for? Once you know who your target market is, you can then start thinking about the best way to reach them.
Your target market will vary depending on your product and industry, so it’s important to do your research and tailor your strategy accordingly. There is no one-size-fits-all approach when it comes to marketing a SaaS product.
But by defining your target market and creating a tailored strategy, you’ll be well on your way to reaching more customers and growing your business.
Research your competition
When you’re starting a SaaS company, it’s important to have a clear understanding of your competition. By researching your competition, you can develop a successful channel strategy that will help you differentiate your product in the market.
There are several ways to research your competition. One approach is to use public sources like websites and social media platforms. You can also use private sources like customer feedback and surveys.
Public sources are a great way to get an overall understanding of your competition. They provide information on who your competitors are, what products they offer, and how they’re positioned in the market.
Social media platforms are especially useful for researching your competition. They allow you to see what people are saying about your competitors’ products, as well as what features they like and don’t like.
Define your market positioning
By understanding who your target customer is and what needs your product fulfils, you can create SaaS messaging that resonates with buyers and identify the right partners to help you reach them.
Once you know who you’re selling to, you need to develop a plan for how you’ll reach them. This includes figuring out which channels will be most effective for reaching your target market and designing an outreach strategy that aligns with your goals.
It’s also important to think about how you’ll measure success when it comes to your SaaS channel strategy. Knowing what SaaS metrics you’ll use to track progress will help ensure that you’re on track to meeting your targets.
Below are the key performance indicators to measure your SaaS channel success.
Lifetime Value (LTV) to Cost of Acquisition (COA)
Investors take note of this ratio to determine how well you have product-market fit and how effectively you manage your marketing expenditures.
Your customer LTV is the estimated dollar amount you would earn from a typical customer if they remained a customer for the entire duration of your relationship with them. To calculate it, you’ll need to know your average customer lifespan, churn rate, and average order value.
The COA is the total amount of money you’ve spent to acquire new customers. This includes advertising costs, salaries for salespeople, and any other expenses related to getting new customers.
Ideally, your LTV will be at least 3 times greater than your COA. If it’s not, you may be losing money on every new customer you acquire. You can use this information to make decisions about how much to spend on acquiring new customers and how long you should keep them around.
Demand waterfall is a SaaS metric that helps identify which areas of the business are seeing the most success and where further investment is necessary. The waterfall is created by plotting monthly or annual sales against each stage of the customer’s buying cycle. The stages are typically awareness, consideration, purchase, and renewal/adoption.
In order to measure the demand waterfall in a SaaS product, you’ll need to track three different data points:
- Cumulative signups
- Monthly recurring revenue (MRR)
- Churn rate
By graphing these values over time, you can get an idea of how well your product is performing and where it needs improvement.
Sales velocity measures how quickly your products or services are selling through your distribution channels. It can be calculated by dividing total recurring bookings by the average customer lifetime value. This metric can help you determine whether your current sales and marketing strategy is effective in acquiring new customers and retaining them over time.
Generally speaking, a high sales velocity means that your products and services are in high demand and that customers are happy with what you’re offering. This is good news for your business as it indicates that you’re on the right track and have a successful SaaS channel strategy in place.
Conversely, if sales velocity is low, it may indicate that you need to make some changes to your strategy or find new distribution channels.
Net Promoter Score
Net Promoter Score (NPS) is a customer loyalty metric used to gauge the success of a company’s SaaS channel strategy. It’s calculated by asking customers how likely they are to recommend the company’s product or service to others on a scale of 0-10. NPS is then divided by the percentage of detractors (0-6) to determine the company’s Net Promoter Score.
A high NPS means customers are satisfied with the product and more likely to recommend it to others, which is what every company wants. In order to increase NPS, companies should focus on engaging and delighting their customers. This can be done by providing a great product, excellent customer service, and/or valuable add-ons or features.
Choose the right distribution channels
To create a successful SaaS channel strategy, it’s important to choose the right distribution channels. SaaS companies’ most common distribution channels are direct sales, indirect sales, and online marketing. Each of these channels has its own advantages and disadvantages.
Direct sales are the most common distribution channel for SaaS companies. With direct sales, you sell your product directly to your customers. This is the most expensive way to sell your product, but it allows you to maintain control over the customer relationship and keep all of the profits.
Indirect sales are a less expensive way to sell your product than direct sales. With indirect sales, you sell your product through a partner or an intermediary. This allows you to reach more customers than you could reach with direct sales. However, you lose some control over the customer relationship and you don’t get all of the profits.
Implementation and optimization
Implementation and optimization are two critical factors that can help make a successful strategy.
First, good implementation means ensuring the sales and marketing teams are on the same page and working towards the same goals. The process needs to be well-organized and efficient in order to achieve growth targets.
Second, optimization means regularly reviewing results and making necessary changes in order to improve performance. This could involve tweaking the website design, revising the sales pitch, or adjusting your pricing strategy. A successful SaaS channel strategy combines good implementation with regular optimization, resulting in increased revenue and market share.
If you want your SaaS company to be successful, you need to invest in a good sales and marketing strategy, including a strong channel partner program. By building a rewarding and mutually beneficial channel program, you can create a win-win situation for both your company and your partners. So get started today and see the benefits a successful SaaS channel can bring your business. Don’t forget to check our SaaS marketing blog for more SaaS growth tips.