This is the third entry in a three-part series on The Secrets of SaaS Training. The first two parts addressed designing SaaS training, and delivering SaaS training. This article explores best practices for monetizing SaaS training.
A Unique Opportunity
Many SaaS companies don’t even think in terms of monetizing customer training. They are product companies that typically have little to no interest in being in the services business, beyond what is minimally required to get customers up and running. Training then, even more than at traditional software companies, is an afterthought, often seen as a cost of doing business: customers buying products need to know how to use them, so training, in some form, must be delivered. This often equates to a high-end implementation consultant spending an extra day or two onsite “training” users or doing an informal train-the-trainer session (typically with a client administrator), and then leaving the customer to sink or swim on their own. This is sub-optimal not just for customers, but for the SaaS company as well.
SaaS companies don’t like tying up their product experts in this way when they could instead have them off implementing at other customer sites. However, most young, high-growth SaaS companies don’t have dedicated training personnel, so options are limited. Yet, in an industry where clients vote with their dollars on a monthly basis, this kind of scattershot approach to training can put product revenue at risk. No product company can afford for their software to be shelf-ware, and SaaS companies essentially have one-twelfth of the time to drive adoption as traditional software vendors.
So the first key to monetizing SaaS training is simply realizing that, done well, customer training is in actuality a unique opportunity to drive adoption, customer satisfaction and, ultimately, subscription renewals. This is a good start, but not enough. Moving training from being a cost of doing business to being an important cost of doing business offers a reason for a more thoughtful approach, but not the means. What’s really needed is a way to move beyond cost of business and into line of business – and the SaaS market and business model is perfect
for doing exactly that.
Defining the revenue model
When training is sold, it is most often sold as a cost per class, either on a participant basis or at a group rate. This is booked as services revenue, which typically isn’t recognized until the services are complete. That is, until after the total number of people who have been contracted to be trained, have been trained. Instead, SaaS training should be sold as a subscription, at an incremental cost per user added to the product licensing costs. In this way, it becomes a ratable, annuity based revenue stream. Let’s take a look at how this would work.
Structuring a subscription training offering
When selling training as a subscription offering, you first need to identify what is included in the subscription. If following best practices for SaaS training design and delivery
outlined in the first two parts of this series, this would be a blended offering that would likely include:
- Instructor-led training (ILT): Specify the number of ILT hours to be provided by user type (end user, admin, etc.) This could be delivered as either in person training or webinars. Alternately, specify the exact classes that would be included.
- Portal access: Describe what this includes. Access to a baseline portal should be included in all subscriptions. There may be upsell opportunities for additional content, aligned to the way product functionality is sold and delivered. (That is, if the product offers a snap-in module with extra capabilities that is sold separately, the portal should also be designed and priced to snap in relevant content when implemented.)
- “Office hours”: Define how many scheduled but agenda-less webinars will be provide on a per month or per quarter basis where people can drop in and ask any questions they want of an expert resource. This can be structured as dedicated to the client, or as “open enrollment” where multiple clients can participate, if interested.
- Update training: Specify both how often additional content will be delivered and how it will be delivered. You might just roll it into the portal by assuring content is kept fresh and
relevant, or you may offer monthly or quarterly webinars on functionality deltas. The latter can also be offered as either dedicated or “open enrollment.”
As you think through what all to include in a training subscription, realize that you can structure and price this as a tiered offering as well:
- Baseline: All content provided will be built using a generic configuration and implementation of the application.
- Mid-tier: Baseline, generic materials will be redone using the client configuration and implementation. (The training design and content remains the same, but the materials are recreated using the client’s build. If following SaaS design best practices, this would primarily impact the “how to” demos.)
- Premium: Includes everything offered at the mid tier, plus additional custom built materials, defined as needed.
Finally, graduated, volume discounts should apply, just as it would for product subscription rates. Anything different or extra (such as completely changing the design or approach to
training) should be sold as custom work for hire, scoped as you would any other training development and delivery offering.
Optimizing operations for cost savings
Once you know how to offer and sell training as a line of business, you need to think about how you want to staff for it. As discussed above, most SaaS companies want to excel in the product world, not in the services space. To do that, avoid building out a whole infrastructure in an area that is tangential to your core focus. Instead, find a training partner that earns your confidence, and structure a managed services relationship around shared risk and rewards. Leverage their expertise as a snap-on service that is virtually plug and play with your SaaS business model so that your investment in training becomes essentially the cost of sales. Then stay focused on continuing to provide the best SaaS application in your field, confident that you can take it to market with highly effective and constantly relevant training that will help drive user adoption and subscription renewals.