March 20, 2017
What is the difference between selling SaaS technology in Europe versus North America? Unlike USA, Europe is not one addressable market but 28+ different Countries, so your SaaS sales success boils down to choosing the right geographic rollout and looking and acting like a local in each territory. See below for 4 Best Practices for how to succeed, or shoot me a reply and I can walk you through it.
According to Goldman Sachs research, Software-as-a-Service (SaaS) sales revenue totaled $106 billion globally in 2016. Cisco’s Global Cloud Index forecast estimates SaaS will encompass 59% of total cloud IT workloads by 2018. Within those global figures, North America accounted for more than half of the market (54%); however Europe represents a less saturated market that is potentially a better opportunity depending on the country. SaaS adoption rates vary widely with Finland, for example, seeing SaaS penetration at 51% while Poland is just 6% (figures according to Eurostat).
The original premise for SaaS software was that it is easy to buy: with just a credit card and a few clicks, you can be running sophisticated enterprise applications without any IT involvement or accounting approval cycles. In the previous era of on-premise software, 70% of software sales went through channel distributors (versus only 23% of SaaS sales going through a channel now). But despite its ease of purchase, SaaS software in enterprises rarely ‘sells itself;’ today’s enterprise SaaS vendors rely heavily on direct sales
So what could be so hard about selling SaaS in Europe? Let’s look at those four best practices.
SaaS Best Practice #1: Start With a Global Mind Set
In SaaS sales, it helps to have a global mindset from the very beginning, as it will guide your early decisions in product development, channel strategy, and other core infrastructure. Adopting this global perspective is admittedly more difficult when your company is strong in your home market and your home territory is large. For example, you can afford to be strong in just Germany, or just France or Sweden or U.K., where probably 80% of your first $10 million-or-so of sales is coming from your home territory.
But companies from countries like Israel or Finland have no choice but to sell globally, and the product development choices they make early on pay dividends. To put that into a North American perspective, a U.S. company would never choose to sell into just one State – yet the economy of California or Texas alone is larger than most countries.
Put simply, you will eventually out-grow your home country so start thinking globally right away.
SaaS Best Practice #2: Choose the Right Entry Country
Many U.S. companies choose to enter Europe by setting up an office in the UK, where the language barrier is less acute. While that choice may be logistically easier, UK may not be the best market for your particular product.
Narrowing down the right market-entry country is a strategic decision. Start by doing desk research into which countries your direct and indirect competitors sell, and interview local companies that might be good targets. Then analyze your trade-offs:
- Addressable Market Size: does the country have the potential to be 10x your current market? Or just 1x… or 0.1x?
- Competition: will you be selling against 100 competitors, or just a few?
- Regulations: are you competing in a regulated sector like FinTech? Are some countries an easier fit for your product, even if the addressable market is smaller?
- Difficulty of Replicating Value: what tweaks will be needed to your product to deliver the promised value to your target prospects? Will it take a few weeks to localize some code, or months of new development work? Will you need to radically alter your sales processes and pricing? What will it really cost you to replicate your current value proposition?
Here at SFE, we offer an Accelerated Market Analysis service where we use local domain experts to help you arrive at an optimal country-by-country roll out strategy.
SaaS Best Practice #3: Act Like a Local
U.S. companies often are spoiled to the fact that almost everyone around the world can speak English. But that doesn’t mean you can get away with simply exporting your product and sales processes as-is. European enterprise buyers are skeptical of U.S. companies that aren’t willing to localize their product and related materials to their country, because it doesn’t feel like a long-term relationship. Think of it from a buyer’s perspective: how committed are you to on-going support and product development if you won’t invest a little up front?
Here are four ways to signal that you are a local:
Local Sales Staff: Local sales staff (hired or engaged as a service) have an existing network of in-country buyer contacts — especially important for enterprise sales — but they are also native language speakers who know the subtle cultural cues and nuances that help guide sales to a close. So much of enterprise sales is about trust and perceived commitment to the region.
Localize Your Pricing: When converting prices to the local currency, go beyond just the current exchange rate. Consult with local sales experts about what are natural pricing break points (either perceived barriers or thresholds for expensing vs. capitalizing budgets). And also consider what components are expected to be included versus priced as extra – these expectations differ by country. Also remember to be clear whether your prices include or exclude VAT (Value Added Tax) for European countries, which can be sizable.
Localize Support Materials: Localizing your supporting materials is a matter of degrees. At the simplest level, you should localize your website and domain; next is localizing marketing and sales materials (especially your case studies!), then customer support materials. Remember also, if you offer support services, that you might have to find the people who speak the local languages or contract out to a 3rd party support service. Lastly, you probably do NOT want to localize your legal contracts.
Get a Local Domain:Sure, a .co a .io domain name is pretty universally accepted. But you can show your commitment to a region by getting a .fr, .de, .es top-level domain (TLD). Also set up a local telephone number (Skype-in works well) and a local email drop.
Localizing the product itself depends greatly upon its complexity. Some channel partners might require localization (e.g. SAP might require that you localize for Germany), and in those cases you will want to negotiate for minimum guaranteed sales.
SaaS Best Practice #4: Use SaaS Model for Your Actual Sales:
Just as companies are moving to SaaS services to avoid huge cap-ex investments and risky software deployments, so are companies moving to a Sales-as-a-Service model to reduce the costs and risks of expanding sales. Instead of recruiting international sales teams, entering long-term office lease contracts, and investing hundreds of thousands or even millions of dollars to open a new region before it is even proven, many enterprises are outsourcing (or at least kick-starting) their international sales teams with in-country experts who work as fractional / on-demand resources.
SFE is a pioneer of the sales-as-a-service model, starting in 2001. Already more than 200 enterprises – brands like Adobe, Tivo, Applause and RingCentral — have trusted SFE to expand their sales into Europe and other international regions using our
Accelerated Sales Platform. Our Platform includes Accelerated Market Analysis, Accelerated Lead-Gen, and Accelerated Sales modules, which can be delivered as an integrated service or as stand-alone modules.
Our platform is deployed through our international team of 75+ Sales Professionals who represent your brand in-country/language, blend into your company culture, and use their local market knowledge and sales contacts to make revenues and ROI manifest quickly.
If your SaaS company is eying global sales, let’s talk. –Rick
CEO & Founder