What does it mean to create a good SaaS product?
The rosy picture is the following: you have an always-growing subscriber base, you're able to monetize your subscribers, and, once tried, customers continue using your product over time recommending it to colleagues and friends.
Building a successful SaaS product is like playing a Rubic’s cube — to make it good you need everything to magically click together. Sounds obvious, but the only chance for a newbie to win a Rubic’s three-inch beast is to google the winning algorithm.
In the case of SaaS, you don’t even have an algorithm to google it. Otherwise, we’d have 100% of successful startups.
However, we can investigate what prevents SaaS products from becoming good and gently mark those danger zones with black & yellow warning tape. To avoid getting caught.
Now let’s see what can go wrong and how to cope.
Achieve your product-market fit
Despite being a top-line buzzword, the product-market fit is imperative for SaaS success, since for any business to survive, there must be people who will buy what it sells. The lack of market need is the #1 reason for failure, noted in 42% of cases.
The concept is vivid, but what are the indicators of the product-market fit? Sean Ellis, who ran the early growth of Dropbox and Eventbrite, came up with a simple survey.
Ask your users how they’d feel if they could no longer use your product with the three answers given — ‘very disappointed’, ‘somewhat disappointed’, and ‘not disappointed’. The group that answers ‘very disappointed’ unlocks your product-market fit.
After going through this survey with almost a hundred startups, Ellis found that the magic number was 40%. Most companies that struggle to grow have less than 40% of ‘very disappointed’ users, whereas companies with strong traction almost always exceed that threshold. And that’s in no way an easy task to keep 40%, as the case of Slack shows.
2015 was the year when Slack’s growth skyrocketed and the company called itself the fastest-growing business app ever. That year, Hiten Shah posed the question to 731 Slack users to find out that 51% of them would be very disappointed to lose Slack.
In 2019, a similar question asked by ProfitWell showed the product-market fit decreased to 26% only.
The remarkable reading here is the story of Superhuman. The company built its ‘very disappointed’ segment up from 22% to 58% and explained their road beyond 40% in the iconic product-market fit article.
Fight customer confusion
If your new shiny fitted-to-the-market solution is buried under the big, clunky, wasteful mess, the good chance is that nobody will notice how fitted it is.
Customers see your product and ask themselves. What problem does it solve? Why do I need it? How do I use it? What do I do next?
SaaS products are systems with multiple design layers and tricky user flows. They are difficult to explain, difficult to design and understand. So the answers to the questions above are not always clear enough.
“X-tech is a flexible and efficient price optimization & management software used for advanced price setting in various industries to ensure your pricing strategy forces you to provide reasons for the users to make a purchase and allows you to automate pricing analytics, optimization, and execution.“
Pfff, goodbye. Didn’t get what you do. I’d better stay with my good old app.
One more shot, how we do it at Eleken.
“Eleken is a pragmatic design agency for SaaS”.
A bit of cheating here — it’s easier to articulate the design agency than a never-before-seen X-tech, but you got the idea.
Think different (no kidding)
When in doubt, B2B businesses keep their best serious face. To play safe, they use muted blues and greys everywhere. To decide on their next moves, they look to the left, and then to the right on their competitors to clone their new features and pricing policies.
It seems to be a proven, less risky way to go, but it’s completely ignorable.
What is so different about successful SaaS that makes them stand out? They get beyond the boundaries of boring B2B software and create products that are not just convenient but fun to use. People love using them.
Look at Notion with its nerd aesthetics and Slack with its confetti cannon color scheme.
If you’re seeking a way to break down the inertia and make people try something new, you can’t allow yourself to be an ignorable brand.
If you’re making money convincing people to prolong their subscriptions every month, you need to be an addictive brand.
If you’re Microsoft — it's alright, skip to the next step.
Consider Apple, the brand that became synonymous with the word ‘addictive’. While BlackBerry and Samsung hard-sold their devices through advertising of numbers and claims, Apple positioned themselves beyond the devices they produce.
They created memorable experiences that keep people coming back. They created mystery and buzz. They created rock concerts to celebrate and announce new products to the community of fans.
Define what can be considered a rock concert in your product niche and do it to become a rock star.
Take pricing (more) serious
Pricing strategy, or its absence, is what makes the difference between a fail and growth for 18% of startups. It's no surprise, given that the average SaaS startup spends only six hours to decide on a SaaS pricing strategy. Six hours, overall, to set, test, and sharpen everything.
So much blood and tears and sleepless nights to bring the product close to perfection and at the final stage of purchase, you have no idea whether you’re turning the potential clients away with huge price tags or, more likely, leaving your money on the table.
When companies think about growth, they think about customer acquisition and retention. But in fact, improving monetization had the largest impact on your bottom line, followed by acquisition and retention.
In the world of tech, pricing rarely depends on production cost, rather on the consumers’ needs and willingness to pay.
Take the 1980s IBM’s LaserPrinter, retailing at $2,395, that printed ten pages per minute. In 1990 IBM launched a cheaper model — LaserPrinter E at a cost of $1,495 that printed at half the speed of its more expensive version.
But the new printer was not made using cheaper details, it was just the original printer with extra microchips added to slow it down. IBM spent time and money making their original product worse.
Similarly, software companies package their products in a range of plans aligning their product with what different customers want and need.
Think one step ahead
Over time, things are moving according to your product life cycle. As things move, you need to adapt.
When you're launching, it's about going all-in and working hard. When you're growing, it's about hiring the right leadership and climbing your growth curve as high as possible. Being on the top, you should be ready for stuff that comes beyond growth.
Here’s what is just around the corner:
- Audience saturation, when most of the audience that needs your product already uses your (or your competitors’) services and growth starts to slow down.
- Channel saturation, when your proven growth mechanism doesn't work so well anymore and growth starts to slow down.
- Market saturation, when more and more competitors rush in to capitalize on your market with lower prices and improved products. As a result, again, growth slows down.
Saturation happens sooner or later with any successful product, giving you a narrow window for innovation that can jump-start the new round of growth. So you need to figure out when it’s coming, accumulate resources for further expansion and decide in which direction you’re going to expand.
Okay, *slaps knees*
There are many other dangers lurking along your way to a good SaaS product, but they can't stop persistent entrepreneurs from building good SaaS products.
Look at the picture below, that's the evolution of one SaaS segment – marketing technology – for the last 9 years. The number of offers on that landscape has grown from around 150 in 2011 to 8,000 in 2020.
There are dozens of little segments inside, and each one has its flagship products that were once born as ideas in someone's heads. If they did it, you can too!
We put these stats here, in the end, and hope they will inspire your best efforts to build your own SaaS and carefully pay attention to its product-market fit, its clear performance, personality, pricing, and life cycle stages.
If you're making a MarTech startup and just found out that you have 8,000 competitors – sorry for that. Take deep breaths, read our article on how to overcome competition, and come to Eleken for a human-centered design that will beat them all.