Go-to-market motions and quote-to-cash for B2B SaaS - m3ter
Go-to-Market Motions & Charging Models
The set of processes and channels a company uses to sell its product within a market is referred to as its go-to-market motions and these motions impact the detail of how their quote-to-cash processes and systems are used. The following diagram captures the key go-to-market and expansion motions for a typical B2B SaaS company:
Primary Go-to-Market Motions
- Sales-Led: In a sales-led approach, direct Sales teams working with Marketing are responsible for driving customer acquisition focussing on high-touch relationships with potential targets.
- Channel-Led: This approach relies on relationships with 3rd parties such as resellers, affiliates or distributors to sell the product. It is often deployed alongside a Sales-led motion.
- Product-Led: A product-led approach focuses on the product itself as the main driver of customer acquisition, expansion and retention. Companies that adopt this approach usually have one or more primary gateways to access their product which might include their own website or one or more 3rd party marketplaces.
Expansion Motions
- Renewals: This motion involves the process of renewing a customer’s contract or subscription for an additional period.
- Upsells: Upselling involves convincing customers to purchase more of the product they currently have. This could involve moving from a basic to premium plan, or adding new features that enhance the product's functionality. In a predominantly usage-based model it might also involve getting the customer to commit to higher levels of spend or to make a larger prepayment.
- Top-ups: Top-ups typically refer to customers purchasing additional capacity or incremental resources beyond what their current plan or subscription provides. This could be more seats, additional data storage, or enhanced bandwidth, depending on the service. Top-ups are important for accommodating customer growth and increasing their investment in your product without moving to an entirely different pricing tier or contract.
The following matrix outlines how the quote-to-cash process is impacted by the go-to-market motions:
| Sales | Product / Engineering | Finance | |
|---|---|---|---|
| Sales-led | This approach is most reliant on a sophisticated order management approach and the most likely to drive the need for a CRM. | Fulfilment may remain a manual process | Accurate billing is reliant on strong order management and an ability to handle complex pricing |
| Channel-led | Primary accounts tracked in the CRM are likely to be the resellers and distributors. If fulfilment is manual, then likely also need to track the end customer. | Fulfilment requires greater automation | This usually drives the need for more complex account hierarchies because when billing, often accounts are grouped under a reseller and need to be rolled up to the reseller level. |
| Product-led | The order process is usually handled on the website or in a marketplace and therefore this places less need on requiring sophisticated order management in the front office system. | Fulfilment requires greater automation | Pricing plans are often more standardised (because customers self-select) which makes them less prone to error when invoicing. |
Most B2B SaaS companies start off with a primary go-to-market motion and over time supplement it with a secondary and/or tertiary motion. For scale-ups, it is common to have implemented a combination of these go-to-market motions.
Charging Models
Many different charging models are used in B2B SaaS. Some of the most common include:
- One-off purchases: These usually occur when there is a set up fee, for example. They are charged once, perhaps broken up into several payment milestones and recognition rules depending on the nature of the charge.
- Subscription or simple recurring: This has been the most common model in B2B SaaS for the last 20 years. It has the advantage of being easy to implement and being predictable but can also fail to capture value in the way other models can.
- Per seat - is the most common variant of the subscription model where the fee is tied to the number of seats (people allowed access to the software).
- Tiered - commonly, subscriptions are split into tiered plans (good, better, best) where access to features is tied to a particular plan.
- Subscription 2.0: often called hybrid, mixes subscription pricing with usage elements through allowances and overages whereby a particular subscription plan allows you to do X of something and when you reach X, you need to either move plans or buy more.
- Pay-as-you-go: or pure usage, is where a customer pays for exactly what they use. Higher usage is usually rewarded with lower per unit pricing through volume discounts. Payments can be taken in advance or in arrears. It is common to see these models leverage a customer currency or credit and require customers to buy credits in advance and draw them down flexibly.
- Controlled Pay-as-you-go: variants on the above where customers are required to commit to a volume of usage and/or prepay for it in order to get the pricing they have agreed in their contract.
- Value-based pricing: is another variant of usage based pricing where the unit price is tied to the value derived rather than the resource or act of using the software. This is becoming increasingly popular as people add AI components to their SaaS offerings.
Quote-to-cash architectures are relatively simple for companies that offer simple subscriptions because they do not need metering and rating. But simple subscription models are becoming rarer as several factors drive the adoption of usage-based pricing either in addition to, or instead of, simple subscription:
- Appeal to customers, because usage-based elements align the perceived value of a service with how much they pay.
- Appeal to vendors, because there is lower friction for initial adoption (the customer doesn’t need to predict how much they’ll need) and expansion thereafter (the customer doesn’t need to speak to Sales).
- Appeal to vendors because it aligns revenues with COGS. This is particularly the case where usage drives significant variable costs for vendors. This has always been the case for particular segments, such as cloud infrastructure, but now is becoming more widespread, particularly as AI features proliferate.
- A growing number of software applications do not interface with humans - e.g. any API-based service - so something different than per-user pricing must be found. If a usage metric can be identified, particularly if usage may grow faster than the underlying customer company, UBP is the best pricing structure.
Between 60-80% of B2B SaaS companies have now rolled out some element of usage-based pricing. This creates more demanding requirements for the quote-to-cash stack and drives the need for this new reference architecture.
Interaction Between Models and Motions
Certain pricing models align better with certain go-to-market motions. Here are some considerations:
- Customer Acquisition Cost (CAC): Pricing strategies must align with the cost of acquiring customers. For example, high CAC in sales-led approaches justifies higher-priced tiers or subscription fees.
- Customer Lifecycle: Different pricing models can affect the customer lifecycle differently. For instance, freemium models in product-led strategies can lead to higher churn rates but also higher potential for viral spread and adoption.
- Market Penetration: Usage-based models might be more effective in new markets where customers are hesitant to commit to large, upfront payments, facilitating easier market entry.