It is hard to ignore the success of cloud SaaS vendors like Salesforce, Microsoft, and ServiceNow when they continue to report astronomical year-over-year revenue growth. After taking a closer look, you’ll notice that they all take a similar approach to the market and follow the same playbook designed to attract and retain your business. Here, we’ll list a few key techniques that make up their blueprint for success.
Offer Upfront Discounts and Flexibility
To get your attention, cloud vendors often offer enticing upfront discounts that can be so significant that the solution is essentially free (or at least that is the pitch often made). They’ll also offer appealing trial subscriptions where a small portion of your user base can test out the solution for a short amount of time, such as 3 months, rather than a full 3-year term. They typically push this trial offer during the last year of your term leading up to your renewal date, to gain additional product adoption but also increased penetration into your company to help elevate their leverage come renewal time.
While this may sound like a good deal, it is really just an opportunity for the cloud vendor to initiate a relationship with you or extend one already in place, so they can grab market share, lock you in, and then start or ramp up their aggressive upselling efforts. First, they’ll try to convince you to expand your user base, so more users are interested and “hooked” on the service. Then they will upsell and push their more robust edition, so you upgrade from the lower cost version to a more robust (and expensive) edition.
For Salesforce customers, this would be like starting with a Lightning Professional subscription, then moving up to Lightning Enterprise, then to Lightning Unlimited. For Microsoft customers, you might start out with Office 365 E1 and then move up to E3, then E5. All cloud vendors have different plans, packages and/or editions, but this kind of upselling allows them all to do essentially the same thing – get you on a more robust and expensive plan that negates any renewal price protections you may have had in place since the upgraded subscription is considered a new product and your protection come renewal time only applies to the products under the order form being renewed.
Become a Strategic Partner
All cloud vendors typically try to grow their annual revenue and attach rates by pushing you to adopt additional solutions and products. If you start using the Salesforce Sales Cloud product, they will soon ask whether you are interested in Service Cloud and/or Marketing Cloud if they didn’t get you to adopt at the outset. Their goal is to get more of your business using and relying on their products in order to elevate your relationship and eventually transition from a product vendor to a strategic partner.
They know that by becoming a strategic partner, you will become more dependent on them and it will also allow them to use your data, information, and relationship to innovate and create new offerings and tactics to sell more to other organizations. They may even offer appealing benefits or investment funds should you provide them the ability to market your relationship in the form of testimonials and case studies.
Strategically Price Support Services
The key tactic to be aware of is how they price support which is becoming more frequent based on a percentage of the product subscription fees. This is notable because as the quantity of users and products increase, product net fees will increase, too. That means their support revenue will continue to increase along with it.
Leverage Their Partner Ecosystem
It is also common for cloud vendors to leverage their own partnerships with other IT firms and systems integrators (e.g. Accenture, IBM, Deloitte, etc.). Since these firms likely have strong, pre-established long-standing partnerships with the same customers the cloud vendor is targeting or looking to upsell, these partnerships represent an opportunity to influence the adoption of the cloud vendor’s products through the encouragement of the potential customer’s trusted partners.
Cloud vendors such as Google and Salesforce are also starting to partner with each other as you can see with the integration between Salesforce’s CRM data, Google Analytics 360 and Google Big Query. Salesforce customers can also use G Suite for free for one year if they are not already using it. Examples like this show that cloud vendors are working to strengthen their partnerships with each other to ultimately strengthen their relationship with you.
All Customers Must Understand These Tactics
These cloud vendors will continue to employ these techniques to grow their revenue and grab valuable market share. While it is best to understand the cloud vendor playbook prior to adopting and starting a relationship, it is critical to be aware of these tactics even if you already have a relationship in place since you can use this knowledge, if done properly, to counterbalance their efforts and create the proper relationship moving forward.