It is an open secret that SAAS-systems (subscriptions) are becoming more and more popular. Let's talk about the advantages and disadvantages of SAAS systems, as well as how to use them and what to look out for.
SAAS business model is when customers buy a particular software not as a product but as a service. Previously, we used to buy software, pay for a license and install it on a computer. By contrast, SAAS is used by subscription for as long as necessary, and it does not require a license purchase for the whole life.
That is, you can use and expand it according to your needs. The simplest and most widely used SAAS service is the email – for example, corporate gmail. Dropbox, Canva, Hubspot are other products that work on the SAAS model, recognized as the most popular in 2020.
Advantages of building a subscription service for your business:
relatively small start-up capital due to prepayment and minimal risks;
regular payments and predictability of income;
long "lifespan" of the client;
predictability of demand and possibility of accurate planning;
minimum advertising costs after initial promotion;
the ability to collect information about customer preferences for analytics and adjusting plans and strategies.
When you start working on a subscription basis, you should learn to look at reporting in a new way. The backbone of your business is Monthly Recurring Revenue (MRR). It is reflected in the monthly statements of the company's profit and loss. When a customer subscribes to a site for $99 annually, the company shows $8.25 on the monthly recurring revenue line each month ($99 divided by 12 months).
Most SAAS apps have a mobile version, which means they attract even more customers. Nowadays, everything that can fit in a smartphone is at the peak of popularity, which is, of course, really convenient for those who spend a lot of time on the road.
If you store your data in the "cloud", a provider automatically backs them up, which means that in 99.9% of cases you don't have to worry about the safety of information. All payment systems are isolated and, consequently, safe. Payment withdrawal is done automatically. There is a product with a set timer that requests the payment system to withdraw the money.
For example, Apple Music charges $4.99 per subscription every month. Subscription start date is, for example, January 5th, which means that on the 5th of each month a service fee will be charged. No more, no less.
However, it’s important to secure yourself from scammers. Some users want to make an account for free by manipulation, using sql-injection. For example, a special code is entered into the login line, and the premium account falls for free. To avoid this, one must not rush but devote due time to safety. Check all the lines, numbers, signs several times in order to secure your product.
Saving time and budget
The usage of cloud infrastructure does not imply license purchase and server maintenance. In addition, you can unsubscribe from the service at any time if you realize that you no longer need it. This way, you pay only for what you use.
The system is quickly implemented, since there is no need to install additional software on employees' workplaces, all actions are carried out online through a browser.
Also, there exist offline installed programs (for example, photoshop), which are also paid for by subscription but are installed on the computer. Some installed applications do not work without the Internet, as on the Internet they check up whether the subscription has been paid. If paid - the program works, if not paid - the software asks to pay.
The costs of deploying and operating an IT-solution are significantly reduced, since there is no need to create an IT-infrastructure. You spend no costs for technical support and updates, everything happens automatically. All costs are borne by the owner of the service.
Subscribing to a SaaS, you get a completely ready-to-use platform, in which you don’t need to configure, install or modify anything. To start working with a SAAS service, as a rule, it’s enough just to register on the main site.
Another convenience is that automatic money withdrawal also saves time. You need to enter the data only once, when signing up, and confirm it, which takes from 2 to 7 minutes of your time.
SAAS allows you to create a project and sell it by subscription.
“In 90% of cases, small companies use SAAS because it optimizes costs. You rent a ready-made service, you are charged a monthly fee, and if it is not needed, you can unsubscribe at any time. Paying small amounts every month is much more convenient." the developer of our company
Taking into account the significant cost savings (see the paragraph above), SAAS-services have become available to the widest possible range of users. Due to their popularity, most SAAS applications have a user-friendly intuitive interface. Each of us uses SAAS every day, sometimes without even knowing it: all popular mailboxes, Google applications, including Google Docs, online games, and even ATMs are all striking examples of Software as a Service that quite quickly and solidly became a part of our daily life.
SAAS is suitable for almost all companies, as it can be applied anywhere. However, in order to adjust your business to the SAAS model, you need to answer several important questions:
Who is my target audience?What can I offer to the client? How can I attract new clients? How can I keep them?
Determine your target audience, make an attractive offer. The client subscribes and uses the product. They tell about it to friends and acquaintances - accordingly, attract new clients. Sometimes, the client doesn’t use the product but simply forgets about the subscription without canceling it. The payment is withdrawn but it’s so insignificant that it’s easier to forget about it than to unsubscribe.
You can use promotions and bonuses to retain customers, test periods and family subscriptions to attract new ones. You get a profit, your client gets a useful product at a small price. Let’s take a grocery store as an example.
Constant software updates
The most recent version of a program or document is always in the cloud. Be sure that you will never have to reinstall the platform and pay for updates.
High user turnover
This is a plus and a minus at the same time.
Due to the large number of users and their feedback, it will be easier to understand what adjustments need to be made to maximize the convenience of using the service.
Feedback tools can really help you hear your customers’ voices better and take a data-driven approach to product development. Feedback from customers will allow you to upgrade your product and strengthen the relationship with your audience, ensuring that these people will use your solution for a long time. There are two main types of feedback-gathering tools: micro-surveys and long questionnaires. Which one to use is up to you.
A large number of users creates a large community which will be advertised by the users themselves, so their friends/acquaintances will be able to buy an inexpensive subscription and pay for it per month. This is so popular because it’s easier to pay 20$ every month than 700$ one time.
Nevertheless, in the SAAS business model, it’s important to consider not only the number of customers but how long they stay with you. In the case of the SAAS business model, the cost per sale is little but you pay for the client retention.
Customer interaction is a very important point that should not be neglected. The client should see that their opinion is respected and affects the product. Thanks to feedbacks, you will know what adjustments need to be made to the current version of the product, whether the product is convenient and generally working.
Your user will always have questions and problems - there are no perfect products. But ignoring these problems will lead to losing users. Therefore, you need to work with clients at all stages and actively eliminate any issues they may face.
That way, you can improve the user experience and help the user achieve success with your product. This means getting loyal customers who will stay with you for a long time.
Now let's talk about what the owner will need to pay attention to when planning their service.
High user turnover again
To return your investments, your service should attract a lot of users that pay a little every month. Here is a disadvantage - low transaction check. Yet it should be kept in mind that the more useful and qualitative the service is, the longer the user will stay with you
When we talk about the software located remotely in the cloud, we primarily mean the ability to access it with an Internet connection. While this is one of the main advantages of SAAS, it can be the biggest hurdle at the same time.
Still, there is no point in worrying about this, as today you can find access to the worldwide network from almost anywhere.
Bandwidth and traffic
On the other hand, the question of the speed of Internet access comes up. In the case of transfering a large amount of data, the speed of the Internet connection is fundamental.
Let’s assume that a service is stored on a server located, for instance, in America. The server can process 10 thousand requests simultaneously. However, due to the fact that there are a lot of clients from Ukraine, the server starts to freeze and cannot cope with the number of requests. Therefore, you have to make distributed servers.
Infrastructure solutions for server placement should be clearly planned.
In this article, we touched on a general understanding of what SAAS is, what its advantages and disadvantages are.
SAAS services help to significantly reduce the enterprise costs for implementation and operation of business automation software. Regarding customers who use those services, they save time and make life more convenient. Test the need for a particular software solution, see if software managers and specialists accept it, and make a final decision - whether to stay on SAAS.
For cloud online services, it is extremely important to correctly build the process of familiarizing users with the product. Its quality directly affects whether users will purchase a paid subscription and actively use the service. It’s important not only to invest in user acquisition, but also to work on their retention. This can be done by high-quality technical support, accounting, discount system for regular customers, etc.
Since SAAS monetization is based on recurring payments, the profit from one customer throughout the entire time, as well as the cost of attracting a new user and the number of user unsubscriptions become especially important.