MOTIVATING RESELLERS IN AN ERA OF SAAS
For software companies looking to accelerate their growth, resellers offer a significant opportunity. Resellers and consultancies can help scale your sales efforts, reaching an exponentially larger pool of clients, while also taking on the management and support of some of those client relationships.
Traditionally resellers have structured their rates as a percentage of the one-time licensing fees charged by the software vendors. However, the SaaS model has revolutionized the software industry—and is requiring changes for resellers as well.
If you want to motivate resellers to play the subscription game, you'll need to align your strategies and explore new incentives that make selling subscriptions that much more appealing.
TRADITIONAL RESELLER MODELS VERSUS SAAS
Most resellers built their business models to fit enterprise software sales. That is—they charge the vendor a percentage of the lifetime licensing fee. That could be anywhere from 10% to 70%, depending on the services provided by the reseller.
Under a subscription model, however, the monthly, quarterly or annual fees are smaller, but recurring. The recurring revenue models do offer appealing opportunities for resellers. But switching to selling subscriptions from traditional licensing fees can be difficult at first, as resellers may perceive they're giving up large upfront commissions.
Communication and determining "who owns the customer" also poses a challenge for channel partners. Resellers are often tasked with onboarding clients onto software platforms and serving as the customer intermediary. Independent software vendors (ISVs) want to ensure that they're providing timely, accurate information to resellers so that the end-user experience is as good as it can be.
For resellers, vendors also need to be more easily accessible for questions and support, beyond a call to a general help desk or chatbot.
THE SAAS ADVANTAGE
As SaaS vendors know, the appeal of the SaaS model rests in the ability to garner that recurring revenue over the lifetime of the customer—and perhaps even increase it. The revenue stream is steady, predictable and makes the software company more resilient.
While resellers may be initially reticent to give up the big one-time fees, SaaS products offer the opportunity to generate more revenue than selling traditional enterprise software. How so?
First, while the subscription fee may be much less than the one-time fee, resellers have the potential to earn commissions when the customer renews. Chargebee reports that the average that the lifetime value of a SaaS customer is between three to seven years.
Resellers can also earn money on upgrading existing customers. Doing so increases the size of the commission overall—and costs less from a reseller's perspective compared to acquiring new customers.
Finally, resellers often help with software integration and provide value-added services. They can charge fees in addition to the subscription commissions for such services that improve the end-users’ product usage and experience.
KEEP YOUR INDIRECT SALES MOTIVATED
As an ISV, resellers can do a lot to help you achieve your revenue goals, increase your market share, and tap new channels of customers. The key is educating your resellers on how a SaaS model works in their favor—and then providing incentives that motivate them to sell your product. Here are three incentive strategies to consider:
Renewal commissions. This is a common arrangement within indirect SaaS sales and one that encourages resellers to help maintain the user relationship. In addition to an upfront commission, vendors may offer resellers a percentage of renewals for the first and second generation. An automated reconciliation system can help ensure that generational commissions don’t cause problems with your accounting.
Upfront commissions. Offering resellers an upfront commission on a SaaS sale can sweeten the deal, especially if they're in the process of transitioning to more subscription sales. Upfront commissions are typically paid once the first invoice has been received versus waiting for subscription payments from the customer.
Lifetime value incentives. ISVs can also get creative, creating incentive structures that reward resellers based on the anticipated lifetime value of the customer. Keep in mind that doing so requires strong analytics on the vendor side, and a good amount of trust between the ISV and reseller.
SIMPLIFY YOUR RESELLER MANAGEMENT
Motivating your reseller network is critical to your external sales success. The right reseller management software simplifies the process, allowing vendors to efficiently manage their reseller payments, improve communication, track performance, and optimize the partnerships.
In fact, leading software solutions will help you manage incentive modules you've put in place across multiple resellers, attribute revenue to the correct reseller when customers renew, and customize pricing based on your reseller partnerships. By automating payments and reseller management, vendors can ensure they're making the most of reseller modules—and building relationships that last.
Interested in optimizing your reseller network? Learn more about our MONETIZE Reseller Module.
The Nexway Team