Every industry comes with its own jargon and if you want to keep up, you better learn which terms stand for what and why they matter. It’s no different in the world of SaaS. While some SaaS terminology comes from more general business vocabulary, other terms are specific to this relatively new tech sub-field.
This post contains a list of commonly used terms when dealing with SaaS. Knowing these terms is crucial to ensure smooth communication with partners, stakeholders, journalists, and peers.
Combine them with the most important SaaS metrics to measure and improve your performance, and you’ll have a whole new language under your belt.
SaaS Terminology to Bookmark
ACP – Average Customer Pricing
Average customer pricing is the average price any client pays over the course of a certain period.
Bookings
A booking represents the commitment of a customer to spend a certain amount of money with you within a given timespan. If a new user signs up for one year, the amount he’ll pay over that year is the value of the booking, even if he pays monthly.
As such, bookings refer to potential and assumed future revenue. Your booking for a given month is the value of all the contracts you’ve closed within that month, where a “contract” can be as simple as a user signing up and giving you their credit card details.
Break Even
Your SaaS breaks even or reaches the break even point when its revenue covers all of its expenses.
Cloud Computing
Cloud computing refers to making use of software that’s on a computer in another location. SaaS is a type of cloud computing.
Cohorts
A cohort refers to a group of users that signed up around the same time and/or were part of the same onboarding process.
Cold Email
A cold email is an email you send to a prospect you haven’t been in touch with before and that, to your knowledge, hasn’t interacted with your SaaS before.
Cold Call
You make a cold call when you call a prospect you haven’t been in touch with before and that, tas far as you know, hasn’t interacted with your SaaS before.
CRC – Customer Retention Cost
Customer retention cost is the average cost required to keep an existing customer on board as a customer. Meaning, it’s the cost it takes to not have them cancel their subscription.
CTA – Call To Action
Call-to-actions are any type of message that urges a user to take action. They can come in the form of a button with text on it, a hyperlink with an inviting anchor text, or a bit of copy that asks to fill out a form. CTAs typically ask users to subscribe, sign up, buy, get in touch, download something, or follow on social media.
Customer Journey
The customer journey is like a log of all the interactions a user has with your brand, from the first time they come across your SaaS to signing up as a customer, submitting customer support tickets, and upgrading their plan.
Not every customer will follow the same customer journey but by tracking how leads and users interact with you, and where you offer them points of engagement (social media, your website, your newsletter, …), you can map out the different routes they can take.
Customer Onboarding
Customer onboarding is the act of providing a new user with all of the information they need to start using your SaaS. This could be sending them their account details, offering them tutorials, linking to your knowledge base, or giving them a walk-through of their dashboard.
Demand Generation
Demand generation refers to all marketing actions that have as their primary goal to generate awareness for and interest in your product. For more on this, definitely check out our guide on demand generation for SaaS.
Freemium
The freemium version of a SaaS is a free plan or subscription that offers a trimmed-down version of the paid plans of that SaaS. This can mean the use of fewer features, or more limited use of all features.
Free Trial
A free trial is a period during which a lead can test your SaaS for free, in the hopes that they’ll like it so much they’ll become a paying customer after.
ICP – Ideal Customer Profile
Also referred to as an avatar, an ideal customer profile is the hypothetical profile of the type of person or company that would be a great customer. Depending on your offer, you can have multiple avatars of which one or two may get priority over the others.
For example, if you’re running a translation SaaS based on AI, one of your ideal customer profiles may describe a small eCommerce business that operates globally but doesn’t have the resources to hire a full-time translator. It could also be a translation agency that always works on the same types of texts and is looking for a way to save time and optimize its workflow.
Migration Cost
Migration cost refers to what it costs a company to switch from using in-house, back office software, to a SaaS solution. Oftentimes, this comes down to the time it takes to migrate all of the data and get everyone adjusted to the new workflow. This will barely be an issue for smaller teams and businesses but might be somewhat intensive for large projects.
MSP – Minimum Sellable Product
A minimum sellable product is a product that is just finished enough to be sold to customers. It’s functional but may still have a list of features to be added and user-experience points to improve on.
Lead Generation
Where demand generation focuses on raising awareness and interest, lead generation focuses on generating new leads. This can happen through social media marketing, paid ads, or targeted SEO like we offer here at Flow.
If you want to discuss how SEO can help generate leads for your SaaS, get in touch.
Recognized vs Deferred Revenue
Recognized revenue is revenue you’ve received in your bank account and for which you’ve already delivered the service. It’s the state of the monthly subscription fee someone paid at the start of the month, after they’ve used your product over the course of that month.
Deferred revenue is revenue you’ve received but haven’t delivered anything for yet. It’s that same monthly subscription fee you receive at the start of the month, when the month still needs to start and the user still needs to start using what they paid for.
SaaS
This one is obvious, but this list of SaaS terminology wouldn’t be complete without it. SaaS stands for Software as a Service. As a business model, it refers to developing and hosting software on your own or a supplier’s service to then “rent out” the usage of that software against a – usually – monthly or annual fee.
This is in contrast to developing software that you then sell against a one-off fee and that the customer needs to install on their own servers or computers.
Sales Funnel
The sales funnel refers to the different stages a user goes through before they become a customer and, potentially, an ambassador for your SaaS. How many stages a sales funnel has, depends on the marketing theory you follow, but broadly speaking, a user goes from being aware about your product to being interested in it, deciding whether they want to buy it, and then buying it.
Use The Right Terms to Run Your SaaS More Efficiently
When two parties talk about the same thing using different words, miscommunication can easily happen. Not only does this lead to frustration, it can also mean the wrong kind of work gets done and goals aren’t reached.
Use this list of SaaS terminology internally to get everyone on the same page about what’s what, and to communicate effectively with external parties.
Combine them with the most important SaaS metrics to measure and improve your performance, and you’ll have a whole new language under your belt.
