Jul 22, 2020 by Tim Schumacher
The perfect product (almost) sells itself
Recently, together with my friend and former co-founder of Sedo, Ulrich, I got more involved into SaaS. With our aptly called 'SaaS.group', we have been now for months actively looking at SaaS (Software-as-a-service) products. Having examined dozens of projects, we are more and more coming to the conclusion, that 'low-touch SaaS models' are the ones we want to be in.
Low-touch SaaS is designed for the majority of customers to purchase it without sustained one-on-one interaction with a human being. The primary sales channels are the software’s website (meaning tons of SEA+SEO, where I can recommend CanIRank from our friend and longtime Sedo ally Matt), email marketing, and usually a free trial for the software, with the trial being aggressively optimized to be very, very low-friction to start, onboard, and successfully make sustained use of the SaaS.
Low-touch products - contrary to high-touch products (which are much harder to manage, which is why we don't like them as much) - sometimes involve sales teams, but they are frequently structured as so-called “Customer Success” teams, which are less focused on convincing people to buy the software and more on ensuring that users of the free trial successfully onboard and convert to paying users by the end of their trials.
Customer support in low-touch products is generally handled primarily in scalable fashions, by optimizing the product to avoid incidents which would require human intervention, by creating educational resources which scale across the customer base, and by using humans as a last-resort. That said, many low-touch companies have stellar customer support teams. The economics of SaaS depend on the long-term (!) satisfaction of customers, so even a product which expects only one ticket (=a countable discrete interaction with a customer) every 20 customer-months might invest comparatively heavily in their CS team.
Low-touch SaaS is generally sold on a month-to-month subscription with price points at around $5-15 for B2C applications, and in the $20 to $500 range for B2B. This corresponds to an average customer lifetime value (CLTV) of approximately $100 to $5k. The term CLTV isn’t commonly even used by low-touch SaaS businesses, which typically describe themselves by their monthly price points, but it is important to do comparisons to high-touch SaaS applications. If you asked a low-touch SaaS entrepreneur for their most important metric, they would say MRR—monthly recurring revenue, which indeed is also an important metric, if couple with the churn rate.
And yeah, at SaaS.group we've got a public role model, too: Atlassian (which makes JIRA, Trello, Confluence, and several other products) is possibly the publicly-traded company with the most success with the model ;-)