The past several months have been a wild ride for just about every business, but Chief Financial Officer Mark Lambert of FastSpring, an eCommerce partner for software and software-as-a-service (SaaS) firms, has generally upbeat news to share.
“We’ve been pleasantly surprised overall that on average, FastSpring’s eCommerce customer base has not experienced a significant negative impact,” Lambert recently told PYMNTS. “In fact, our overall growth is up during the pandemic.”
He said FastSpring is monitoring the situation very closely, since one of the major lessons everyone has learned in recent months is that trends can shift very rapidly. But Lambert said the shift to SaaS vs. one-time software downloads was already well underway before COVID-19 — and if anything, the pandemic has only sped it up.
SaaS tends to be easier to implement and manage, he said, not to mention more scalable and customizable to end users’ needs, compared to one-size-fits-all solutions that tend to fit less well over time.
“For the customer, SaaS means lots of flexibility, lower cost, quicker access and continued updates designed to change over time as products and customers' needs evolve,” Lambert said.
And for vendors, SaaS can generally help build a longer-term customer relationship that is, on the whole, more lucrative, sustainable and predictable in terms of revenue in-flow, he said.
In fact, Lambert believes that SaaS offers a win/win for both sides, which is why it was expanding even before the pandemic hit. But he said that like most digital services, SaaS has gotten a major adrenaline burst from COVID-19 in terms of interest level and speed of conversion.
Untangling Sales Tax Collection And Other eCommerce Conundrums
Of course, that puts pressure on providers like FastSpring to up their game and ensure that vendor/customer relationships become long-term enough for SaaS to tap its highest potential.
Consider the collection of sales taxes. It doesn’t seem like a complicated issue, as most consumers are familiar with it as a process when they shop in stores.
But collecting sales taxes creates no shortage of headaches for merchants who sell things online. Lambert said that since a landmark 2018 U.S. Supreme Court ruling in a case involving Wayfair, eCommerce sellers must take responsibility for collecting and remitting state sales taxes to various jurisdictions.
“And it’s often just not state tax,” he said. “It’s also local municipalities like cities and even certain zip codes that have their own tax rates.” He added that things get even more complicated when U.S. merchants sell goods overseas and run into things like the European Union’s value-added tax (VAT).
The challenge for online merchants is to offer seamless integration for such tax collection during the checkout experience for any customer who might appear on a firm’s site. Lambert said there’s no single solution for that, as each merchant’s needs will have a lot to do with where they sell, what they sell and whom they sell it to.
Lambert said some firms have built their own solutions in-house. Still, he believes SaaS service providers like FastSpring can provide a better option for quickly rolling out something that can calculate, collect and remit taxes seamlessly at checkout.
“This is the exact place where SaaS can really shine,” he said. “Outsourcing this type of work to a partner allows the business to focus on the strategic areas of their business, like product quality and customer satisfaction.” He said that’s often more useful than focusing internally on compliance.
Battling Back Churn
Lambert also said that battling churn in both its voluntary and involuntary forms often represents the top priority for all SaaS providers, as it’s “the leaky hole in the bottom of any business’ bucket.”
He explained that involuntary churn is basically a back-end error that pushes customers out of systems when they don’t actually want to leave — usually the result of a processing error, or an expired or overextended card.
SaaS firms can head off that kind of loss before problems even arise by doing such things as keeping tabs on card expirations and sending consumers reminders before payments get disrupted, Lambert noted. Companies also need to offer more extensive grace periods for customers, so clients can fix such problems before their services get shut down.
But voluntary churn is a more complicated issue that requires a much closer look — and the use of predictive technology to spot at-risk consumers. Things to look at include how often customers use a product and how much they’re tapping into the full range of features offered.
Companies want to gauge the degree to which customers feel they’re not getting sufficient value for what they’re paying, noted Lambert. Preventing such churn, he said, involves “putting together all your customer touchpoints to proactively engage the customer before you see any negative signs of them leaving.”