Integrations: from cost center to revenue driver
This blog gives a brief overview of how smart software teams are taking nagging integration requests - traditionally a cost center - and turning them into revenue drivers. Get all the details on this strategic approach in our full e-book, The beginner's guide to monetizing integrations.
Working with SaaS product teams, we see a general reluctance to implement integration features. Your customers and prospects consistently request integrations, yet it’s difficult to prioritize such requests. Why? Two reasons. One, integrations require both heavy development effort up front and development commitments for ongoing maintenance. Over time, integrations can be a significant drain on development resources—especially compared to other types of features. And two, many product teams don’t perceive integration features to be particularly differentiating. The result: Many teams regard integrations as a cost center that pulls resources away from higher-value features. Product teams want to prioritize making best-in-class products to conquer the world, not delivering a one-off customer integration.
The dilemma of building integrations vs. taking your eye off the ball in product development often brings teams to Tray.io. They’re looking for a cost-effective way to deliver integrations that minimizes the resource drain of the cost center). And while it’s certainly true that an embedded integration solution such as Tray Embedded can lower the cost of developing integrations, there’s a bigger opportunity that product teams overlook. The reality is that integrations may not seem differentiating, but they provide significant customer value. Value that savvy organizations can capture to not just cut costs but turn integration features into a significant revenue driver.
Companies that adopt Tray Embedded to power their customer integrations realize development and maintenance cost savings simply because Tray Embedded makes development and maintenance much faster and easier. However, the biggest ROI driver (we’re talking returns of 2x or 3x, or higher) is often through revenue gains. Teams that operationalize delivering integration requests quickly realize revenue gains through higher retention, stronger sales win rates, and an effective monetization strategy.
There are two key components to a monetization strategy: The delivery model, and the packaging and pricing approach. Most product teams think of integrations as a one-to-many product feature that customers set up and configure themselves, but there is a much broader array of delivery models. For example, some of our customers’ integration needs are better served through a professional services model where integration capabilities are customized and deployed on a customer-by-customer basis. Other approaches include a partnership or community model where third-party developers build and share integrations.
Packaging and pricing approaches can vary depending on the delivery model, but generally, they take one of the following approaches:
Direct integration pricing - Pricing individual (or bundles of integrations) separately from other product components.
Product tiers - Adding integration features to specific product tiers or editions.
Support/success plans - Incorporating integration access and support into support offerings.
Marketplace/exchanges - Building customer and developer communities where you can share and sell integrations.
When you align delivery model, packaging, and pricing, integration features can become highly profitable investments for product teams. Thinking of integrations as revenue drives can also help you better evaluate and prioritize integration requests. To help you get started, we’ve developed The beginner's guide to monetizing integrations, a detailed e-book that walks through integration strategies, monetization best practices, and an ROI model that you can use to evaluate requests. Click here to get your copy.
The combination of delivery, packaging, and pricing can lead to a surprising number of opportunities for integration monetization. Whether you’re charging for each integration directly, bundling them within product or service offerings, or creating solutions that increase customer retention or expand your channel network, there’s no limit to the ways you can roll out integrations to your customers.
When developing your integration strategy, consider starting with a percentage of the total contract value. Integrations provide a surprising amount of value to end customers. To capture that value, make sure you’re pricing in a way that scales with your customer base. Another important consideration is one-time versus recurring revenue. Many integrations require ongoing maintenance and customer support. A recurring revenue model will ensure you cover the cost of subsequent support.
With a monetization strategy in place, product teams are much better equipped to address integration requirements as they come in. Not every request will have ROI potential, but many of them do. Understanding how you will deliver, package, and price integrations gives you the ability to better assess the potential of integration features and prioritize them with greater confidence.
SaaS companies that invest in operationalizing the delivery of customer integration requests see higher retention, win rates, and customer satisfaction. For some more inspiration to get started, see how product teams at Eventbrite, Typeform, Hackerone, and Cue have driven growth and profit by expanding their integration offerings.