A Complete Guide to Software Entitlements

23 Mins Read
Smuruthi Kesavan
Published On : 17/08/2023


  • Explore the critical role of software entitlement in growing your SaaS business.
  • Learn how entitlements control feature access and the benefits of an effective management system.
  • Grasp the challenges of entitlement management, including plan complexity and regional differences.
  • Discover how Togai can streamline your entitlement processes and support your business goals.
  • Learn the role of software entitlements in enhancing customer loyalty and satisfaction and its direct impact on reducing customer churn rate.
  • Understand the benefits of entitlements for customer satisfaction, sales strategies, and usage tracking.
  • Gain knowledge on the prerequisites for a successful entitlement system and how to implement it.
  • Recognize the influence of entitlements on SaaS KPIs and how they drive business success.
  • Explore methods to use entitlements for keeping customers and reducing revenue loss.

In the dynamic world of Software as a Service (SaaS), mastering software entitlement is critical for business growth. But what exactly are software entitlements, and how can they be leveraged effectively for your SaaS business?

This article gets deep into the nuts and bolts of software entitlements, their role in enhancing customer satisfaction and experience, and their impact on churn rate. From establishing an effective entitlement management system to understanding its influence on key performance indicators, this article offers a comprehensive guide that can help you harness the power of software entitlements to fuel your SaaS business growth. So, let’s get started!

What is Software Entitlement in SaaS Business

Mastering the art of software entitlement is vital for SaaS businesses aiming for robust growth. Why so? Primarily, this business facet bridges the gap between software licensing and user access rights, a crucial aspect in ensuring customer satisfaction and driving revenue. This understanding starts by familiarizing oneself with key entitlement-related terms.

Let's start by defining what SaaS entitlement is all about.

Software Entitlements - Definition and Their Role in SaaS

An entitlement in Software as a Service (SaaS) is a customer’s access to a specific feature or product within a given plan. As the term implies, software entitlement is about what your customers are entitled to once they subscribe to your service. This could include access to certain features, levels of customer support, or other benefits specific to your product offering.

Let's understand this with an example - consider that you offer a range of SaaS products with various feature sets across different pricing plans. If implemented correctly, your entitlement system can intelligently control access based on the pricing tier that each user subscribes to.

Imagine you've released a new premium feature, and this is only available to users on your highest-tier plan. A robust entitlement management system will automatically ensure that only these top-tier users gain access to the new feature without requiring any manual intervention or engineering effort. This creates an additional incentive for customers on lower-tier plans to upgrade - effectively driving upselling and fueling revenue growth.

Many SaaS products offer various plans or tiers - usually around three levels - that include different sets of features catered to the varied needs of users.

The vector image shows the different pricing plans for SaaS products.

However, managing these multiple layers can be complicated. It’s like peeling layers off an onion - they look deceptively simple initially but get complex soon enough.

For instance, scenarios might arise where upgrading customers could feel forced into new plan levels incorporating certain functionalities they didn’t anticipate using before making their purchase decisions.

Furthermore, not all features may be accessible across regions due to market-specific restrictions on particular offerings within plan levels.

Here’s where platforms like Togai - the most accessible pricing and billing infrastructure- can streamline this process seamlessly without requiring significant engineering efforts while keeping up with any pricing model changes aligning with your strategic objectives—in essence—delivering precise control over how you define growth via intelligent management of your business entitlements!

This comprehension forms an essential first step toward mastering software entitlement management—an under-the-radar yet powerful tool for driving SaaS business growth.

Boosting SaaS Product Value with Entitlement Management

Let’s now focus on understanding how software entitlements can amplify the worth of your SaaS products.

Improves Customer Retention

Offering entitlements like useful add-ons that align with your customer's needs can significantly boost customer satisfaction and perceived product value. By embracing a relationship-centric approach and diligently managing these entitlements, you increase chances for higher customer retention while maintaining steady revenue streams.

Empowers Sales Teams

From a sales perspective, there's power in flexibility. Imagine having a sales representative who can negotiate deals by altering entitlements or adjusting the quantities of Features A and B for an enterprise agreement. The strategic use of max values as entitlement negotiation levers can be game-changing in enhancing deal value from a user’s perspective.

A vector image illustrates the billing system empowering the sales team.

Encourages Usage Tracking

The breakdown of plans by entitled functionalities or features enables end customers to discern their usage better. For instance, if an entitlement allows an end user access to five reports, tracking report usage becomes vital for customers who need to know if they are nearing their limit.

Boosts Customer Satisfaction

Different customers may have varying preferences for the same subscription plan. Properly managed entitlements cater to this diversity, effectively enhancing overall customer satisfaction.

Enhances Product Value

Treated as features of products offered under specific plans created against them, software entitlements enhance perceived product value among end users.

Minimizes Churn Rate

Businesses can effectively minimize customer churn rates by ensuring access to relevant product features or loyalty rewards/compensation shown to end customers through efficient management of their entitled benefits.

So, what does it take to implement an effective SaaS entitlement management system? That’s where we are getting into next!

Establishing and Implementing an Entitlement Management System

Centralizing your monetization strategy can have far-reaching effects on streamlining processes across several areas like product management, orders, operations, and finance. It provides a single source of truth for metrics like annual recurring revenue (ARR), changes in software usage, customer churn, and profitability.

Implementing an entitlement management system is no small feat; it requires careful consideration and planning. Let’s see how

Requirements and Prerequisites for a SaaS Entitlement System

Before you get on to implementing an entitlement management system, it's essential to arm yourself with an understanding of critical requirements for designing a SaaS entitlement system.
This isn't just about ticking off boxes on a checklist - it’s about building a coherent structure grounded in a deep understanding of your product.

Here are some critical features that define a perfect software entitlement framework:

A vector image revealing the requirements and prerequisites for a SaaS entitlement system.

Product Logic:

An entitlement should have some product logic associated with them. Often, missteps happen due to poor understanding or inadequate tooling.

Easy Entitlement Migration:

A product manager should be able to easily migrate an existing entitlement from higher-tier plans to all lower-tier ones without any complications.

Quick Changes by Engineers:

Engineers should have the flexibility to make swift changes required by the product team around entitlement workflows, enabling agile responses to ever-changing market needs and user feedback.

Sensible Fallbacks for Downtime:

In case of failures in the entitlement system (or any downstream systems), logical fallback options are crucial for maintaining service availability and minimizing disruption.

Entitlement Management Tools:

These solutions must enforce user rights effectively across different scenarios - from simple subscriptions for 200 users to more complex consumption models like concurrent, metered, or user-based usage.

Engineering Preferences:

Engineers prefer an architecture that offers a single truth source for entitlements and allows swift changes based on product team inputs regarding workflows around entitlements.

Implementation Options:

The choice between hardcoding logic into your product, storing it in a database, or placing them in real-time query-based billing systems is significant when considering implementation methods for these workflows.

Adding New Entitlements:

As a product manager, you need the capability to add new entitlements onto existing plans effortlessly – another requirement not just enhancing user experience but also ensuring adaptability within fast-evolving SaaS markets.

Reporting Capabilities:

Running reports on an entitlement/plan basis provides essential insights into how each aspect contributes towards overall business objectives.

Tagging Feature:

To aid organizational clarity and efficient management, each entitlement must support tagging with one or multiple labels based on its characteristics or functions.

Implement Flexible Overrides:

The service should be able to override any entitlement without affecting the billing relationship – such as granting access to a non-paying customer for a short duration.

Building an effective SaaS entitlement system requires not only these elements but also some step-by-step planning and detailing.

How to Implement Your Entitlement Management System

Optimizing your SaaS business for growth entails a comprehensive understanding of entitlement management. Here are some aspects to keep in mind:

Define Your Goals: Start by outlining what you hope to achieve with your entitlement management system. For instance, it should effectively track transitions from freemium or trial to paid usage.

Understand Product-Entitlement Fit: A robust understanding of your product enables the effective design of an entitlement system that can harness multiple benefits and accurately identify where they fit within your product ecosystem.

Understand The Mechanics: Grasp how features link with different plan levels. Remember that hard-coding checks can complicate things when changes occur.

Design A Separate System: To avoid modifying and redeploying the entire software every time you need to launch new features, create a separate entitlement system where modifications can be scheduled using the entitlement service.

Avoid Single Points of Failure: Hardcoding customer names or IDs in your system can create a single point of failure. It's better than checking the billing system directly but it is not considered best practice.

Ensure Comprehensive Coverage: Make sure your entitlement system covers all plans and geographies, offering total transparency about all features across your SaaS product line-up.

In addition to implementing an effective system successfully, here are some tips for maintaining it effectively:

Prepare fallback measures: Even though upgrading in an entitlement system isn't too complex on paper, having measures in place for downtime is crucial if ever the system fails.

Embrace automation: Consider automating time-consuming manual processes via management systems that streamline administration tasks.

Consider future expansion: If expanding into new countries or markets is part of your future plans, ensure that you have a robust standalone entitlement service that can handle this scope.

Align with quote-to-cash process: Remember that reducing complexity aids operational efficiency – incorporate CRM systems holding quote details and SKU info of purchased products/services into the Q2C process.

Remember, every entitlement represents a differentiating factor that adds value to your service offering and caters directly to the varying needs of your customers. Whether it's offering discounts on certain features or providing vouchers for special services, having an organized system allows businesses to enhance customer satisfaction while boosting product value.

Leveraging Togai—an advanced metering infrastructure, you'll not only be able to manage individual subscriptions but also accommodate adjustments according to each customer's specific needs—talk about flexibility!

So far, so good? Now comes the icing on the cake—Togai is more than just a subscription management platform; it allows businesses like yours to fully align entitlements with your customer's preferences and needs.

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In fact, once implemented efficiently, such a system has remarkable implications on critical business metrics, bringing us onto our next point of discussion.

The Influence of Software Entitlements on SaaS Key Performance Indicators

Software entitlements play a vital role in shaping several core metrics that gauge the success of your subscription business. Understanding how these entitlements can influence a company's Key Performance Indicators (KPIs) is crucial. Managing software entitlement effectively can sway these KPIs positively. Here are some KPIs that get impacted:

Customer Lifetime Value (CLV): This is the total profit an individual customer contributes during their lifespan with your service. Software entitlements are directly tied to customer satisfaction and can help decrease the churn rate. When customers feel valued, understood, and appreciated, they're less likely to leave your platform—thus enhancing their CLV.

Monthly Unique Visitors (MUV): Entitlements have a solid potential to increase engagement. Clearer entitlement structures can encourage new visitors to try your product, thereby increasing MUV.

Customer Conversion Rate (CCR): More accessible and clear-cut entitlement plans make converting users from trial or free subscription models to paid ones easier. Hence managing entitlements effectively can provide a significant boost to CCR.

Customer Acquisition Cost (CAC): Understanding their benefits via entitlement plans makes customers more likely to convert from prospect status, ultimately reducing costly marketing efforts—and decreasing the overall CAC.

Customer Retention Rate (CRR): SaaS businesses thrive on active users using their software services continuously. Well-managed entitlements motivate customers to remain engaged, thus increasing CRR.

Ok, enough of the metrics. So how do these really translate into business success?

Here’s how!

Increasing Customer Satisfaction: Successful subscription businesses harness the power of entitlements to enhance customer loyalty and satisfaction. By providing unique benefits and experiences, you can effectively prevent customers from leaving, thus boosting their CLV.

Heightening brand loyalty and awareness: The perks offered through entitlement management are for more than just retaining customers. They help foster stronger brand loyalty while elevating your brand’s visibility in the saturated SaaS market.

Ensuring a steady recurring revenue stream: Entitlement management sits at the heart of any recurring revenue model in a subscription business. It helps maintain continuity in revenue generation by ensuring customer satisfaction and loyalty.

Driving higher product adoption levels: SaaS businesses can incentivize higher product usage with strategic entitlements, leading to better customer engagement rates.

Boosting annual recurring revenue (ARR): A central monetization strategy armed with effective software entitlements clarifies essential metrics like ARR, which reflect your company's financial health.

Reducing customer churn rate: A well-planned entitlement system keeps subscribers loyal, directly impacting important KPIs like churn rate.

Enhancing overall business success: SaaS deployments accommodate current purchasing behaviors and improve customer experiences while generating continuous revenue for suppliers – all these ultimately contribute to overall business growth.

Further exploring this aspect, let’s next discover some strategic ways of using software entitlement tools like Togai to retain customers and prevent revenue leakage while driving business growth.

Using Software Entitlements for Customer Retention and Mitigation of Revenue Leaks

Mastering the usage of software entitlements for customer retention and mitigating revenue leaks can significantly impact your SaaS business growth. Let’s see how.

Enable End User Report Customization: A case scenario would be where an entitlement permits an end user to "5 reports", and the user wants to know the number of reports remaining. Such a reporting workflow should ideally be pre-configured yet flexible enough for the customer to edit the threshold. This level of customization enhances customer experience, nudging them towards longer engagements.

Upgrade Options & Overlay Entitlements: When customers are close to exhausting their entitlements, they could either upgrade to a plan with more units or buy more. Additionally, your pricing and billing infrastructure should be able to override any entitlement as needed - allowing a customer short-term system access, even without immediate payment, can preserve that billing relationship.

Offer Perks & Incentives: Enticing unhappy customers on the verge of canceling their subscriptions with offers like coupons and vouchers often influences them to stay, mitigating revenue leakage caused by voluntary churn.

Competitive Advantage: The fierce competition in meeting customer preferences poses substantial risks but also offers considerable rewards. Competitors might lure away your clients with better deals; in such competitive market scenarios, entitlements serve as a strategy for outdoing your rivals.

Remember that proper software entitlements management is paramount for retaining customers and maintaining consistent revenue streams - eventually leading to robust business growth and stability.

Final Thoughts

Mastering software entitlements can indeed be a game-changer in the SaaS business landscape. Software entitlements not only play a critical role in enhancing customer satisfaction and experience but also significantly influence key performance indicators, directly affecting revenue generation and business growth.

Quoting software guru Bill Gates: "Software innovation, like almost every other kind of innovation, requires the ability to collaborate and share ideas with other people." So why wait? Start collaborating with Togai today! Schedule a demo with us and explore our newly launched entitlements feature.

After all, enabling an effective software entitlement system could be your ticket toward significant business growth and increased revenues!

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Smuruthi Kesavan
Product and Content Marketing at Togai
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