SaaS Recurring Revenue for Manufacturers with Salesforce

There are many models of recurring revenue that manufacturers can tap, including:

• Product lease / Repair & replace / Warranty renewals / Etc.
• Predictive maintenance.
• Consumables (ink cartridges for printers for example).
• SaaS.

Having such revenue streams is beneficial in many ways for the top and bottom lines. First and foremost, it makes revenues much more predictable, especially in turbulent times. The predictability is even higher if the model is completely independent from the availability of parts, such as the SaaS model.

Secondly it reinforces the relationship with customers by providing stickiness and engagement through the various touchpoints of service, or the daily use of software. The engagement is even higher in the SaaS model if regular software updates deliver value-added features to users.

 

Industry Examples and Targets

Are you wondering where to start your internal discussions? If so, a few benchmarks or comparables can be handy.

Here are a few examples of targets that well-known B2B and B2C manufacturers are setting for themselves, as well as where the market average stands…

• Rockwell Automation aims at 10% of total sales in recurring revenues by 2025.
• Vizio (consumer electronics manufacturer) gets 90% of its revenues from product sales, but the margins on software are 73%.
• Volvo is aiming for 50% of their cars to be driven on subscription by 2025.

However:

• Only 14% of manufacturers say they have created go-to-market IoT strategies.

In the case of SaaS, because it is ubiquitous for everybody in their daily life, B2B companies can also take inspiration from their favorite B2C companies, especially when it comes to the smoothness of the experience, and the regular feature updates and upgrades. You can think of:

• Upgrades to the Tesla software, including its self-driving software. At the time of writing this article, the cost to enable the full self-driving Beta on a Tesla was $15,000 USD, while the price of the Model 3 base model was $45,000 USD. Meaning that in this case, a value-added software-enabled feature can represent 33% of the sale price of the product. Just for fun, if you are selling high-tech products or solutions, apply the same formula to your business model and see what numbers you end up with.
• Upgrades to the software/app of smart home products like Nest.
• Upgrades to the software/app of wearables like FitBit or the Apple Watch.

Step 1: Stop Giving Away your Software

Most manufacturers that are in a position to sell software already have software and apps that are used along with their products.

This may apply to you if you sell:

• High-tech products.
• High-tech solutions.
• IoT / connected devices.

The first step is very simple: stop giving away your software.

Step 2: Your SaaS Offer

As the SaaS offer will vary greatly from company to company, and from industry to industry, we will skip this step and address it in other articles. You can also contact our experts to help you define your offer or product roadmap.

Step 3: Your SaaS Rollout

When manufacturers start their journey towards SaaS recurring revenue, they are rightly focused on the software/app itself. What is often forgotten, but can be as critical, is all the business infrastructure and processes needed to support the go-to-market and offer rollout.

Here are, for several key business functions, the MVP that needs to be put in place to support your new SaaS business model.

Salesforce enables your rollout

As you go through this list, keep in mind that if you are using the Salesforce CRM, you are already equipped with a cross-functional enterprise platform able to support your rollout through additional configurations and customizations. You don’t need to get new tools, or overhaul your entire business infrastructure. You already have the master-platform needed to enable and accelerate your SaaS recurring revenue model.

Selling SaaS

If you are used to selling products, determining the right pricing model and payment terms might by itself be quite the head scratcher. Here are some of the options offered to you:

Licenses:

• Company-wide licenses?
• License fee per group of users (10, 20, 50, etc.)?
• 1 license per user?
• Different pricing per user based on the type of license?
• 1 license per connected product or solution?

Payment terms:

• Net 30 like you are used for your products?
• Using purchase orders like you are used for your products?
• Monthly, quarterly or annual subscription? Multi-year subscription/contract?
• Does your offer fit a transactional model with purchase of licenses online via credit card?
• Something different?

Pricing model:

• Small recurring fee as a complement to the products?
• Significant recurring fee to enable a reduction in the price of the products?
• Literally giving away the products and transitioning to 100% subscription around the software or app that are necessary to use the products?
• Premium pricing based on significant value provided by features of the software or app?
• Something different?

Managing renewals:

• Absolutely mission critical: the automation of renewals. Avoid at all costs your sales reps spending all their time renewing license contracts when all of that should be automated.

In addition to the aforementioned, the rollout also implies training your existing sales teams to properly sell and support the value proposition of the offer.

Salesforce / CRM Tip: streamline the options selected for your teams by building new Sales Paths that include automations, guided selling, quoting tools and templates that accompany sales rep in the adoption and execution of the new strategy.

Supporting SaaS

Customer service for your SaaS offer implies ensuring your agents can support this new type of offer, as well as its interdependencies with your products.

Here we will focus on the technical support aspect of customer service, rather than the ordering or invoicing, that we’re covering in the Sales and Accounting sections of this article. Make sure you have thought about:

• Do agents need visibility on the types of licenses the customer has?
• Do agents need visibility on the status / uptime / downtime of the software / app?
• Do agents need visibility on the usage data of the customer?
• What are the entitlements and levels of support specific to the SaaS?
• What are the entitlements related to the specific mix of products and
• SaaS licenses that the customer has?
• Does the SaaS entitle the customer with product privileges, like advanced replacements, etc?

As you have noticed from some of these questions, supporting your SaaS may imply integrating the CRM that is used by your agents to your SaaS backend, just like your CRM might also be already integrated to your ERP. More details on this integration topic below in the Usage Data section.

In addition to the aforementioned, the rollout also implies training your existing customer service or technical support teams to properly accompany your customers.

Salesforce / CRM Tip: maximize customer satisfaction and reduce the risk of errors by setting up a new SaaS-specific Case flow and knowledge base for your agents. The knowledge based should be enriched in real-time by your agents with the latest available information. From a selective extract of your knowledge base, create an easily accessible customer-facing FAQ that your customers and partners can use to resolve their issues before contacting support. Note that 69% of consumers prefer trying to resolve issues themselves first, yet only 33% of companies offer that option.

Marketing SaaS

New offers require marketing for their go-to-market. New business models require even more, especially if this novelty is not intuitive for your company culture or processes.

In the case of a SaaS, your existing customer base is the first target audience that you should market to, for several reasons:

• Your existing customer base may already be using the software / app that you are converting to a SaaS. This is the ideal scenario to transition their contracts or purchase orders to take on the SaaS model, while having the option to make it seamless for them via discounts on your products. You can tweak their pricing to balance the total cost of ownership in a compelling way.
• A subset of existing customers can be the Beta testers or early adopters of your new business model. This is a great way to test your rollout in a more manageable sandbox.
• The information contained in your CRM can easily be used to segment them for targeted campaigns, as well as to craft highly personalized messages that foster engagement, interest, and upsell.
• Marketing content and nurturing journeys can be used to onboard new customers on the SaaS model, as well as guide them towards the right resources (FAQ, support, transactional site or customer portal, etc.).

Throughout this process, ensure that product owners, sales and marketing are fully aligned, and that marketing initiatives are adjusted based on market feedback, including input from the sales team.

Beyond your existing customer base, you can market your new model to completely new prospects. In that case, evaluate if common SaaS tactics can be applied to your offer:

• Software / app free trials?
• Demos that show the value of your software / app. These can be pre-recorded (shareable videos), or live demos with sales reps that are scheduled by appointment?
• Freemium plans that entice users without giving them all of the features that they need to fully operate your products or solutions?

In the aforementioned, the relationship between your products and your SaaS will determine what is appropriate or feasible.

Salesforce / CRM Tip: segmentation is the name of the game. Leverage as much as possible the transparency / integration between your CRM data and your marketing automation tools to identify, segment and engage with your initial SaaS target audience. Use marketing channels, in coordination with sales, to promote the offer in a personalized way to convert or upsell the right type of customer. Adjust campaigns and content based on actual data (engagement and conversions reporting).

Accounting for SaaS

Many companies that are considering a move to incorporate SaaS underestimate the difference between their current accounting and managing licenses and subscriptions.

For example, what if a customer buys 100 licenses staggered over time for 100 different users, along with monthly billing. Would you send 1200 invoices per year to that customer? The answer must be no.

Similarly to the automation of renewals to avoid overwhelming your sales team, you want to organize and automate consolidated billing with prorated license subscriptions that align around 1 or 12 invoices per year per account.

Your accounting system must also be able to handle revenue recognition for those types of contracts or purchases.

Salesforce / CRM Tip: integrating your accounting system with your Salesforce CRM should be prioritized to sync opportunities / subscriptions from your CRM with your accounting. If you enable customers to pay online via credit card, then your payment gateway should be integrated to both your CRM and accounting systems for automatic revenue recognition, as well as to facilitate automated provisioning of licenses.

Auto Provisioning of Licenses

Many customers, including in the B2B space, now expect a B2C experience. As you start selling software, you want to strive as much as possible to deliver that level of experience.

That customers gain access to their software the minute they pay for it is now part of these expectations.

One way to achieve this is to connect these 4 key systems: CRM, payment gateway, accounting system, SaaS backend / SaaS license management system.

Salesforce / CRM Tip: with these 4 systems integrated, the moment the payment is through and the corresponding opportunity is won, your CRM tells both your accounting system (revenue recognition) and your SaaS backend / license manager (provision license to user) to do their part in real-time.

Self-Service for SaaS

Many B2C software and apps enable users to buy and manage licenses from within the application itself. This habit has created expectations that B2B companies have to answer to.

If your software / app offers license purchase and management by itself, you may be ahead of your competition. However, if that is not the case, your CRM can help.

Continuing the thread of having your CRM integrated with your SaaS backend / SaaS license management system, you can offer the same functionality through a dedicated customer portal, where customers can acquire more licenses and manage their users and user rights. The CRM can relay all the necessary information back to your SaaS for provisioning, user and rights modifications.

Salesforce / CRM Tip: use Experience Cloud to create your portal, which can also nest B2B Commerce or B2B2C Commerce, to enable users to log in, purchase and manage licenses. This is the easiest way to offer these features to your customers without adding all of that workload onto the backlog of your SaaS development team. This also allows them to focus on value-added SaaS features, and features that synergies with your products and solutions, rather than spending time trying to develop an e-store inside your SaaS.

 

Usage Data to Personalize the Lifecycle

Last but not least, an additional value-added benefit of having your CRM and your SaaS backend integrated together, is that you can share SaaS usage data with the various teams and departments that are tasked to interact with or serve your customers.

By having this information on hand, your people can be proactive in engaging your customers to generate more value for them and for your company.

Salesforce / CRM Tip: these interactions can also be initiated via automations that detect certain key thresholds. For example:

• Marketing: accounts that are very engaged (use the SaaS a lot, or certain features) are automatically added to campaigns promoting advanced features at a premium.
• Marketing: accounts that are not engaged enough are automatically added to campaigns tailored to highlight the most commonly used features for that type of customer, potentially rekindling the interest to use the SaaS.
• Sales: throughout the lifecycle of customers and accounts, sales reps know exactly how the customers are using the SaaS and can better cater to the needs of customers and propose the best solutions for them.
  Sales: accounts that are very engaged (use the SaaS a lot, or certain features) trigger a notification or task to the account owner to ensure a follow-up about advanced features at a premium.
• Customer service: agents handling support tickets or direct calls can see right away how the SaaS is being used by the customer, enabling them to resolve cases faster and provide a personalized experience where the customer feels understood right away.