Red Ocean Strategy for SaaS Looking to Grow in Competitive Markets
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In 2020 Gartner Research reported 16.3% growth of the software-as-a-service (SaaS) market and it has been only rising since. The growing competition in SaaS market turns blue oceans into red. This means cloud-based software companies need to find new ways how to effectively compete and grow in their niche.
Experts say that to beat the competition and grow SaaS businesses can either acquire new customers or increase revenue per existing user. Ideally both. Sounds tough?
Don’t worry! We at Eleken have designed many products and most of them belong to the red ocean. To help you conquer the red waters, we decided to put together the best red ocean strategy examples that can beat the competition in any crowded market.
But first, let’s quickly recap what the red ocean market is and how it differs from the blue ocean.
What is red ocean strategy?
The red ocean definition was introduced by W. Chan Kim and Renée Mauborgne in their book Blue Ocean Strategy. Terms blue and red ocean represent two types of markets. According to color associations, the bloody red sea stands for the market with fierce competition, while the blue water is a symbol of a market free of competitors and full of opportunities.
Even though the book says that it is extremely difficult to become successful in the red ocean, many startup founders find it extremely difficult to develop a blue ocean strategy and see many advantages of red ocean strategy:
- You don’t need to reinvent the wheel to enter the market
- The field is well researched
- And most importantly, the red market means that customers need such solution
It’s natural that you may have your doubts about entering the market with solutions just like yours. But there’s always some room for a new product in even the most crowded market if you apply a right red ocean marketing strategy. But first, you need to define your goals and track your product’s performance. So let’s start with SaaS performance indicators that will help you survive in the red ocean.
Want to grow in the red ocean? Track the right metrics!
There are many metrics that SaaS businesses need to keep an eye on: North Star, ARR, MRR, churn rate, conversion rate, and such. You can learn more about them in our article about main SaaS metrics.
When your goal is to boost your growth in a crowded market you should focus on ARPU and customer acquisition.
Increasing ARPU - average revenue per user - is an important indicator of your SaaS profitability. To calculate your current ARPU divide your total revenue by the number of existing subscribers.
Try to understand why some users leave your product and opt for your competitors. By analyzing their feedback you can fix the problem and reduce churn rate in order to increase average revenue per user.
Surprise and delight your existing customers by creating aha moments, personalizing your customers service, or adjusting your pricing model. If you aim for long-term success, make sure your existing customers are happy before investing in acquiring new users.
Acquiring new customers is more expensive and harder to implement in the highly competitive market. However, it’s totally worth the effort as customer acquisition is the important factor that directly influences growth of your SaaS business. Try different channels of acquisition considering the cost and the time, experiment and work with channels that make sense to your users, not to your marketing managers.
Here are three quick tips that will give you some ideas what you can improve right now to raise your metrics:
- Offer a free trial. Let people see what they are buying.
- Design the onboarding of new customers properly. Smooth onboarding drastically improves retention rates.
- Pay attention to your referral programs. Referrals are great source of leads.
Now when you know the basics, let’s consider the most effective red ocean business strategies you can use to withstand competition in the crowded market.
Effective red ocean strategies for SaaS businesses
Let’s consider some smart strategies for SaaS that work best in the red ocean.
Discover a viable market
Obsessing over particular consumer groups is, suprise-suprise, a great strategy for the red ocean. If you study your niche and your potential customers thoroughly, you can create your own blue island in the red ocean by simply identifying a specific user group and focusing on solving their pains, becoming the best (and often the only one) who provides the best solution.
Adopt product-led growth strategy
Often, great products become viral and attract new customers thanks to the value they provide and not because of marketing efforts. Focusing on your product and delivering the reak value is one of the most successful strategies for red ocean SaaS. Slack, Dropbox and Airtable won the competition in their market niches and proved that product-led growth is more than effective.
Partner up on integrations
Partnerships can boost your SaaS growth in the competitive market. Nowadays users want universal solutions, but building Swiss knife-like software is expensive and time-consuming. Consider teaming up with other businesses on integrations. You can partner on analytics, website-building, new technologies to existing solutions, or just selling additional products/plug-ins to your customers.
This strategy is very well implemented in Slack. They partnered with other companies like Trello and Hubspot and offer handy integrations to Slack users.
Know and communicate your value
Keeping an eye on your rivals is important in red ocean industries. But let’s remember the tip we mentioned above: instead of trying to beat your competitors, focus on delivering the most value to your users. This way you will win long-term. However, you need to know what differentiates you from your opponents and clearly communicate this to your customers in a value proposition.
Don’t offer a product, offer a solution
Back in 2004 Tobias Lütke and Scott Lake, the founders of Shopify, wanted to create an online store to sell equipment for snowboards. Online platforms for creating shops weren’t something new those days, but Tobias and Scott faced the problem that all the existing services provided poor user experience.
They decided to create their system that later turned Shopify into the biggest SaaS platform for e-commerce. Instead of selling sports equipment, Shopify founders identified the pain point not only they, but many users faced at that time, and came up with a solution that saved a day and let their company shine.
How design helps you win in red ocean
Design is not about pretty looks of your app. Better navigation, functionality, UI and user experience in general directly influence customers’ decision to chose one product over another. But how can you know whether your product needs a fresh look or has UX frictions that ruin the experience for your customers?
We recommend to run UX audit to identify the problems in your product. UX audit reveals problems in your user flow, and helps you identify if interfaces are outdated. If the audit reveals any problems, you should consider redesign.
Let’s analyze some cases of our clients that swim in red waters and see how design helped them stand out.
One of our clients Gridle (now Clientjoy) is a client management platform for small businesses. There are many CRM systems on the market, and, to be honest, most of them look too complicated for small business owners (Gridle’s target audience).
Being in the highly competitive environment, Gridle had to evolve and look for ways to bring even more value to their users.
We started our work with UX audit and research. We talked to users and realized they want a simple and efficient client lifecycle management automation. So we based our design on these findings.
The new design made by Eleken not only gave the product a fresh look, but also enhanced the user experience, making it simpler and more pleasant. The revamped version of the app became a huge success among Gridle users and brought the company new happy clients. With Eleken's help a brand new product was able to survive in red ocean better. You can read more about it in our case study.
Cheerity is a digital marketing campaign platform that also had to strive in a competitive market, which didn’t stop them at all. To stand out, they decided to implement a subscription-based service for their solution, so that customers could sign up directly on their website.
The new user-friendly interface made by Eleken was a huge upgrade from the old version – the client’s team, advisors, and even investors were impressed.
The new design clearly communicates the value of the product. Neat structure and distinct CTA button encourage visitors to book a demo in one click and that’s what they do! Cheerity’s campaigns have now reached more than 100 million people.
An intuitive user interface can help you gain a competitive edge. When working on Process Place, we analyzed competitors and realized a funny thing: productivity apps that were intended to bring ease into business processes were not so easy to use.
We wanted to align our design solution with the challenges users are facing. So, we went straight to users, asked questions, listened to the answers, and visualized them via customer journey map. We figured out that all the pain was caused by messy workflows.
The productivity app that aims to win the competition in the red ocean should have an interface so clear that no user has to guess what to do next, and we managed to make it obvious at a glance.
Read about how we designed a neat alternative to many productivity tools in our case study.
The red ocean is not fully red. Even in the highly competitive market, there is always a place for adding something new, something that will differentiate your product from similar offers. If you want to survive in the red ocean, you need to constantly work on improving your product!
Getting a competitive advantage is very important for red ocean strategy. It means you can offer more value than your competitors and the customers will most likely choose your product. We hope that the strategies we collected in this article gave you some ideas on how you can outgrow your rivals.
As a design agency focused on SaaS products, Eleken has years of experience in designing elegant subscription-based solutions. If you are in a competitive market and want to boost your growth, maybe it’s time to run a UX audit and find out how new design can help you become the biggest fish in the red ocean. We are ready to help, contact us!