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Across the SaaS industry, win rates are facing significant declines. This is particularly true in SMB and mid-market: Many companies are struggling to make the economics work when selling to smaller customers. Increasing efficiency, conversion rates, and profitability in the sales funnel is the hottest topic on the mind of every CEO, CFO, and sales leader.
A big reason for these win rate decreases is that buyers aren’t able to fully grasp the value of different software solutions during buying. Either they don’t get enough time with the rep to go into the details, or the time to that "aha" moment is too hard to get to during a free trial.
Figuring out how to efficiently communicate the value of your product to a prospect is difficult — but it’s increasingly important.
In this article, I’m going to share some stories about problems in sales funnel economics from the leaders I’ve been speaking to recently, including the questions they’re asking themselves, the options they’re considering, and my take on what could be done.
4 case studies from companies struggling to make their economics work
Below, I'll share four stories from real leaders at SaaS companies who have hit walls with their current growth models and are struggling to make the economics of their sales funnels work.
Case study #1: An early-growth stage company
The first company is an early-stage but growing business that is expanding internationally with great success. They don't yet have a strong trial experience, and they want their reps to focus on larger customers. However, they still have lots of interested SMB customers.
Right now, they have a fully self-serve motion for smaller companies, and they have a fully sales-enabled motion for larger companies. However, if the smaller companies need a call, they will work with them through the sales process, meaning that these customers are instantly lower profitability for them.
To make catering to those smaller customers more efficient and profitable, they have two options: either make the self-serve experience so great that customers don't need any help before they buy, or make the sales-assisted motion more efficient.
Case study #2: A high-growth, PLG-first company that is scaling upmarket
Over the last few years, there have been some amazing PLG-first companies that have absolutely skyrocketed in popularity and growth. Many have massive numbers of customers and are still growing rapidly each year.
These companies have done amazingly well with acquiring those initial customers that typically skewed smaller. Those customers have grown and are using the product more — all excellent things.
However, as the second company I talked to grew into mid-market, their customers started needing more hand-holding. Their needs were more complex, and they required answers to more questions to see the full value and depth of the solution available to them.
But being a PLG-first company, their price point doesn’t accommodate a deep sales-assisted motion. So what was an efficient motion for them on the PLG front has suddenly become expensive in their mid-market, which is going to be a future growth engine for them. They need help to figure out their economics in the funnel.
Case study #3: A scaled growth company that's planning to go public
Unsurprisingly, the CFO at company number three is focused on metrics. Scaled companies looking to go public care deeply about every single economic metric.
In this instance, the CFO has worked with the sales team to demonstrate that the economics in their core enterprise business are excellent: relatively low CAC, low churn, and great NRR.
However, a decent-sized chunk of their overall revenue is from SMB and smaller mid-market customers. Unfortunately, these are accounts that are hard to service in the acquisition funnel — even with a PLG motion — as the product can be extensive and needs some explaining.
Right now, the CFO is considering whether they can continue working with any SMB or mid-market customers or if they need to just let that revenue go for the sake of their metrics as they move to an IPO.
Case study #4: A scaled public-sized company
For company number four, SMB and mid-market have historically been major growth areas, particularly as, over time, those smaller customers frequently grow into their largest enterprise accounts. However, their product is complex for smaller companies to get started with, and reps are spending significant time attached to $5k ARR deals.
Over time, they have reduced the size of the deals that are touched by reps, with small companies (under 50 FTEs) all being managed self-serve. However, due to the complexity of the product and that buyers are frequently new to solutions like theirs when they’re under 50 employees, these customers will still frequently reach out for assistance.
When these buyers don’t get the help they need, they end up frustrated and frequently abandon the buying process. So the major focus for this company is how can they make their rep-assisted motion, even for the smallest companies, be as fast as possible while still serving the customers' needs and showing the power of their platform.
The current options for solving funnel economics problems
Looking at the four case studies above, a few key themes start to emerge:
- Even the best PLG companies eventually move upmarket and realize they can't escape having a sales process.
- A large portion of SMB and mid-market buyers will always want contact with a human, even if you have best-in-class product onboarding.
- Buyers get frustrated if they can’t talk to someone in depth during the buying process because they’re seen as too small.
So what are the levers sales leaders can pull to solve these issues?
You could stop selling to SMB and mid-market. But does that make sense for your business? Are you confident you'll be able to acquire enough enterprise customers to make up for the loss of revenue? Abandoning a thriving revenue stream and a significant portion of your TAM likely isn't a viable option.
You could pay your sales reps less, but that decision will likely lead to a complete turnover of your sales team and difficulty finding new reps to step in and take over.
You could limit the number of meetings or time spent with prospects — tell people you can't have something like more than two calls with them — but you'll write your own downfall with that approach as people get angry and your win rates spiral downward.
Finally, you could improve your product onboarding to increase the speed to that "aha" moment, decreasing the need for sales reps to get involved. But that's probably something your product and engineering teams are already spending time on, and it's unlikely you'll see significant improvements quickly.
These are all poor options, so what are companies to do?
The only way to truly solve these types of funnel economics problems in a way that doesn't come with huge disadvantages is to figure out how to solve multiple issues at once.
For example, can you increase speed to the "aha" moment and reduce the number of sales calls simultaneously? If you could reduce deal cycle time and rep-engaged time — while also enabling the customer to see value faster — that feels like a huge win.
How to actually solve these funnel economics problems
In consumer land, when you want to buy a pair of shoes, you can go to the vendor's website, choose five options, have them shipped to you overnight, try them on, make a decision, and send the rest back. When you want to buy a car, the salesperson doesn't just tell you about the car: They put you in it and let you test drive it.
So what are the similarities here?
- The buyer has more control and is given the resources to learn what they like/don’t like on their own.
- The seller doesn’t need to hold the hand of the buyer at all times.
- The buyer is easily able to get access and test drive their options immediately.
In B2B SaaS, we need to harness these concepts and instill them throughout our sales processes, but there are multiple barriers to that today:
- Buyers frequently need some education on what is possible.
- Most products are hard to get started with immediately (i.e., you don’t get tons of value in the first 30 minutes of using it).
- Sellers don’t have enablement tools outside of a great SaaS demo and PDF leave-behinds.
- The sales process is reliant on real-time interactions as buyers don't have ways to interact with your solution on their own time, and sales reps don’t get feedback on what is happening on the customer's side.
Before now, these were challenges that required a huge project and tons of resources. But as the industry moves more toward a customer-led buying model, we’re seeing tooling appear to enable these outcomes.
There are now product tour tools that help the marketing team, and there are sales enablement tools that make the resources a sales rep provides more consistent. But until recently, there hasn’t been anything that is focused on enabling the seller to be significantly more efficient in their sales process while also giving the customer what they want.
This is where TestBox comes in.
Improving your funnel economics with TestBox
TestBox helps B2B software companies create live product instances that are preconfigured with realistic data, functional integrations, and guided walkthroughs. These instances — what we refer to as playgrounds at TestBox — can be used to:
- Give your buyers more control: TestBox can be used either before or after a sales call to let buyers try your product before they buy it. More importantly, it has features like quick links to key use cases and guided walkthroughs that give buyers the resources they need to teach themselves how to use and properly evaluate your product.
- Focus interactions on high-value moments: Sales reps can view detailed analytics on how buyers interact with TestBox playgrounds, making it easy to qualify buyers before a call, weed out time-wasting tire-kickers from the sales process, and identify exactly which buyers are worth spending time following up with.
- Speed up your sales cycle: Giving buyers more control means they can make decisions faster with less hand-holding from your team. Some of our customers are seeing shorter sales cycles than ever and removing the need for one to two calls that were formerly part of their sales processes.
- Close more deals with fewer resources: In addition to being able to provide customers with trials and POCs, TestBox can also be used to create clean demo instances for live demos. This frees your solutions engineers up to focus on closing deals instead of managing demo environments; it's like having one SE for every AE.
With TestBox, you can increase the speed to the "aha" moment and reduce the number of sales calls simultaneously. You can reduce deal cycle time and rep-engaged time while also enabling customers to see value faster. You can improve your funnel economics without having to make major, risky changes — and you can do it all with minimal engineering support.
Poor funnel economics don't have to be inevitable
As a software vendor, it's important to understand that your customers may want to either self-serve or go through a sales-assisted motion.
If all of your customers want to self-serve, then you can go all-in on a product-led growth motion. However, as you move upmarket, that might not be possible to maintain. Even in the SMB space, many customers need a sales rep to help them; if you make it too difficult for them to buy, they'll get frustrated and walk away.
Thus, it's essential to adapt the way you serve customers in a sales-assisted motion; otherwise, it will always be too expensive to serve them.
By moving to a customer-led motion and giving them tools like TestBox, you can sell more efficiently with higher win rates, shorter deal cycles, and higher landed total sales. This benefits not only the vendor by reducing their CAC and increasing efficiency, but it also leads to happier and more loyal customers who get faster time to value from your product.
