Before my current company, I was selling hosted open source software at an 13-person “late” startup. Specifically, hosted CVS, SVN, and Git to DevOps folks. It is NOT fun selling hosted open source software. The product was inexpensive and the value in hosted open source software is typical SaaS vs on-premise statements. A typical conversation would go like this:
Someone in India, Russia, or some uber small company: “ $6.99/month? Can you give me a good deal?”
Me: “$6.99 is the lowest tier. You can get the annual plan for one free month”
Someone in India, Russia, or some uber small company: “ But can you give me a good deal on the month plan?”
In order to build the process, we had to ask a couple questions: What is the average selling price? What is the average customer acquisition cost?
For a low price product, sales transactions should be low touch and high volume. Price determines volume and calculates risk. The lower the average selling price, the more your sales reps will have to sell, the less concerned you should be about customer attrition. With a higher average selling price, your sales reps will close less deals and focus on building and retaining customers to prevent churn.
“For example, achieving $10M in total revenue with a $1K ASP requires 10,000 customers, whereas a $10K ASP only requires 1,000 customers. The volume requirement implied by ASP flows back through the sales process to put pressure on every upstream metric. Low ASPs require large target markets, more leads, more pipeline, higher conversion rates, shorter sales cycles, and so on to deliver a high volume of customers. High volume also requires more customer self-service, more automation and less labor, because labor is expensive, slow and has poor economies-of-scale.” (Read more here)
After crunching numbers, we focused on optimizing the customer experience for easy on-board, intuitive setup, and simple payment process. Lower ASP pushed for low touch sales, but made the process dependent on marketing, insightful analytics and automated workflow, quickstart wizards, and integrated billing systems. Let the online experience educate the customer, and “sales” will become customer advocates, level 1 support, and/or tour guides.