Back Button

Software as a Service (SaaS) & Subscription-Based Revenue Models

The Software as a Service revenue model means that customers pay for using an application or tool over some time, instead of all at once. This is convenient because it means customers can always use the latest software technology.

Applicable businesses/products

The most common example of the Software-as-a-Service (SaaS) model is within the information and communication technologies industry with web-hosted applications. Other subscription-based businesses include delivery services for media properties, mobile phone carrier service, bank account management services, and even advanced medical equipment or devices on a per-seat/tiered pricing basis. With SaaS, you can get access to powerful tools without having to invest in expensive hardware or software solutions!

Customer relationships

By providing consistent value to their customers, SaaS companies are poised for success and can develop secure customer relationships.

Marketing issues related to the SaaS/subscription model

To propel subscriber growth, marketers must craft effective strategies that involve lead generation, building brand awareness and trust, and other activities designed to garner interest in the product or service.

Operational implications of the SaaS/subscription revenue model

Companies using the SaaS/subscription revenue model should direct their efforts towards offering customers a low-cost, high-value experience.

Financial and strategic implications

For most SaaS and subscription services that are successful, it takes a long time to build up their subscriber base. During this time, it is important to get money from investors to pay for expanding the service so it can reach more people as well as intensify efforts to attract more users.

Key metrics

To measure success, SaaS/subscription companies focus on key metrics such as client retention rates and the growth of new subscribers.

Modalities

Many people think that the SaaS/subscription model is only for individual sales, but it can also be used to make bulk purchases. If you want even more savings per user, then buy subscriptions in higher quantities.

Costs and benefits of the SaaS/subscription model

The SaaS/subscription revenue model works best when servicing customers who need ongoing and continuous support. Consequently, customer relationships may last for several years at a time. It can be difficult to encourage newer customers to agree to lengthy contracts, particularly if you are offering unique products or services.