SaaS products are all the rage at the moment.
The pandemic has shown us that truly scalable digital products can be built by remote workforces, which makes jumping on the SaaS wagon even more enticing.
But without the right mindset and framework, building a SaaS product can quickly go wrong.
As an aspiring entrepreneur, you are probably wondering two things.
- Is it really worth your time to pursue SaaS?
- What goes into making a robust SaaS product?
We address those concerns and also show you the crucial aspects that make SaaS so different and profitable from traditional products.
Why build a SaaS product?
With the staggering amount of existing possibilities and future potentials of SaaS, it is quite a no-brainer to not build SaaS if you are an entrepreneur.
Still, being new to all of this, you might have your doubts.
Or maybe you are a serial entrepreneur and have not really understood the fuss behind the SaaS’s hype.
Shorter benefit timeframes, cheaper go-to-market options, and enormous scalability are just a few of the many advantages of building SaaS.
Shorter benefit timeframes
Considering that you build your MVP via a design sprint, one can safely assume that you would release the first version of your product within the next six months.
While this is not exclusive to SaaS, but it is surely a defining attribute because SaaS products can
- be developed using a plethora of digital tools and agile methodologies;
- be iterated and upgraded on-the-go.
These factors ensure that you can hit the market as soon as you have validated your idea whilst not needing to wait for complete refinement or perfection.
SaaS products also enjoy another shorter timeframe — on the user’s end.
SaaS products work right out of the box and require only a minimal amount of setting up. This means that your users spend less time dealing with installation and more time using your product.
Unparalleled go-to-market strategies
SaaS products enjoy an edge over traditional ones when it comes to their go-to-market timeframes.
This is because SaaS products generally emerge from an urgent market gap, reducing the overall cost to create an audience or conduct marketing.
Plus, with their freemium tiers, SaaS products get a grasp of a bigger chunk of the population that become advocates if the offering is truly valuable.
What does that mean? Free word-of-mouth and exponential growth.
SaaS solutions are generally cloud-based, bringing in its obvious benefit of making your product accessible to everyone.
But, as your customer base grows, so will your SaaS product.
With hardly any changes under the hood, a well-made SaaS solution scales up to accommodate the needs of every user that signs up for your product.
And the larger the community, the more number of integrations there are — meaning, your solution becomes a powerhouse over time.
Things to consider before building SaaS
Shifting your mindset from traditional to SaaS
SaaS is a business model as much as it is a technological choice. But considering that all there is to SaaS is the ‘subscription model’ would be a folly.
If you are an aspiring entrepreneur or someone coming from a traditional background, you would need a new pair of lenses to look this through.
Physical products are also sold on a subscription basis, which are not a good bet in this digital era.
The hallmarks of a SaaS product are being user-friendly and future-ready.
Customers hardly have to scratch their heads to get the product to work. Unlike physical products, there is no installation or maintenance overhead associated.
Everything happens on the cloud and instantaneously, be it a bug fix or a new feature release.
Traditional products have installers and a learning curve for the end-user, both of which they would need to spend time on figuring out.
And this is where the mindset shift needs to occur for you — your product should be intuitive, top to bottom.
With a UX that just helps the user to glide through tasks, it is obvious that you would not fail.
What is not obvious is the fact that the sheer satisfaction from using your product will make them lifelong customers, which is something that does not happen often with traditional products.
Shorter Sales Lifecycle
“Getting them up to speed” is a phrase dear to the hearts of those who sell and develop traditional products.
With SaaS, this is hardly ever the case.
Instead of cold-calling, emailing, negotiating a contract, and so on, the terms and pricing of the product is made very explicit within a few moments of the first touchpoint with a customer.
Users these days rely on knowing everything immediately: another mindset shift on your side, as you would have to ensure that you make your product’s USPs and everything as clear as possible.
More interaction with the customer
Gone are the days when a simple month of brainstorming could help you and your team come up with a product-upgrade idea that ‘could’ attract users.
Combine the many choices in the market with a high skepticism of the digital consumer, and you cannot get away with a product that is built on assumptions.
Instead, you would have to conduct rigorous market research, user interviews, and testing to even get the ball rolling.
But your interaction with users does not end after the launch.
To stave off competition and to continue growing your business, you would have to make customer feedback an integral part of your development, something that has been missing in traditional business models.
8 Frameworks for your SaaS product
The Build-Measure-Learn Loop
A key concept from Eric Ries’s The Lean Startup, it helps aspiring entrepreneurs learn the value of iteration.
To put it simply, the build-measure-learn loop tells you two important things:
- Failure does not mean the end of your product or your dreams.
- When you make it a point to solve a user-need with all of your determination, nothing can stop you from succeeding.
This loop also shows how vital customer feedback is to building products that truly matter. Take ‘learn’ out of the equation, and you would literally have an unfinished system.
The Uniqueness Vs. Value SaaS Framework
Based on the same sentiment about competition from Thiel’s classic, Zero to One, this framework allows entrepreneurs to understand the true value of being unique.
Bringing great features with your product into the marketplace does not mean anything if there are a hundred more like yours.
Having a true differentiator — that is the power. Consumers cannot refuse it, and you would be the first to the game. Win, win.
Features vs. Benefits
You and your team build features. Your customers make use of them, sure, but most times, they are never thinking of them in the same way as you.
Instead, they have an intuitive idea of what they achieve from your product.
So, would it make sense to have your whole brand messaging revolve around ‘features’?
A better way would be to tell users what they stand to gain when they use your product.
Always talk about the benefits.
Take Apple for example. While not always benefits-driven, they tend to clearly state what awesome stuff you can do with iPhones.
You immediately get a sense of everything that you can do with the iPhone 12 Pro.
Now, take Samsung and their Note20 —
They barely mention benefits and instead crowd the whole message with multiple features that the user probably does not even process (~ multiple frames into one clear snap).
The 4 Steps of the Customer Development Process
This brings us back to the mindset shift that we were talking about.
More interaction with customers would be the norm for you when you build SaaS, sure — but this framework shows you how multi-dimensional it would be.
You would have to constantly ask, interview, and assess customers for a variety of product and innovative requirements, again and again.
The 9x Effect
This is essentially the second framework realized from the investors & users perspectives.
It takes a long time to convince the consumer about the benefits of your product. This roadblock has three aspects — initial skepticism, hesitation to change (or to drop the status quo), and inability to see the ‘need’.
The same happens from the investor’s side as well.
From an entrepreneur’s PoV, such a problem generally seems 9x bigger than it is supposed to be.
All it would take is some genuine communication from your end: after all, you are already convinced that your product works and that there is a need for it.
Accomplish this, and you would reap 9 times the results.
Feature Requests for Free and Paying Users
Once you integrate customer feedback into your product development, you might soon find yourself bombarded by a lot of feature requests.
Which should you implement and which should you not?
The answer: entertain the ones that pay for your product.
Freemium users are probably weighing their options, like between you and your competitor, and asking for features is their way of seeing who delivers the most value.
This can soon become a vanity game that ends up bloating your product.
Also, there is no guarantee that they would become a paying customer later.
A better thing to do is to only focus on what the paying customers ask for. They already understand how valuable your product is and satisfying them would help you in the long run.
The feature prioritization technique for this one would be a modified Eisenhower Matrix.
Once you fit the feature requests on the graph, you would immediately see what is the most valuable for you — building the ones in the first quadrant. It has features that are simple to develop that are being requested by your top-paying customers.
Obviously something that should not be ignored.
The Retention Curve SaaS Framework
Customer Retention Rate is quite important for products and enterprises, especially for SaaS ones.
A continuous influx of new customers might seem promising, but without a solid set of loyal customers backing you, you cannot really grow.
If you are not retaining customers, that means that you are constantly spending to acquire new ones and not making profits.
As this graph shows, your retention curve should flatten and stay there for your product to be healthy.
The Whole Product Definition
This framework makes it easier for entrepreneurs to understand the concept of true product–market fit.
There are three kinds of solutions that you can develop.
- The generic kind that solves the problem and nothing more.
- The expected solution that eases the workflow as well.
- The whole product that makes the whole process intuitive.
It is the third kind that you should aim for. Making an intuitive product is where the money is, because such a product also addresses other overlapping needs as well.
Common mistakes and misconceptions to avoid with your SaaS product
Pricing it wrong
This is the commonest mistake that aspiring entrepreneurs tend to make with their SaaS offerings.
Truth is, it is often hard to get right.
The commonest strategy out there is competition-based pricing. But the truth is, looking at a few competitors and using them as a reference for your pricing strategy never cuts it out.
You hardly know their profit margins and in this process, you might end up underselling your product.
A better strategy instead of this is value-based pricing. This is when you tailor your pricing and feature sets according to your user personas.
How much would your ideal customer pay, and how much would someone who just needs the core part of your product?
These are questions that you should keep in mind.
Another pitfall to avoid would be to introduce way too many pricing plans. Not only would that confuse your customers, it would also make it hard for you to track profits.
Here are a few pricing strategies and examples:
- Bundle Pricing: Instead of selling a product on its own, it is bundled along with other complementary products, thus increasing its overall value proposition. Amazon Prime and the newly-launched Apple One are the best examples.
- Psychological Pricing: As old as commerce itself, this opts for ending the price at ‘9’. When something is priced at $39.99, the user subconsciously presumes that they are spending only somewhere around $30. Another strategy is to position a much-more expensive version along with your actual offering.
- Freemium Pricing: Instead of capping a new user’s ability to try out the product in just a month, you let them use a ‘free’ version forever with feature limitations.
Not providing enough support
Sure, SaaS products are known for their ease of use. But does that completely eliminate the need to have a customer support team.
Not really. Customer support is crucial, especially during the starting days, because there is not enough experiential knowledge out there for your product.
Plus, enterprises that are known for their timely and satisfactory customer support generally are perceived to be valuable.
Don’t miss out on that.
Not setting a solid product vision
So far we have talked about the things that you could miss on the users’ end, but what about your own employees?
Setting a product vision that your employees understand, resonate with, and work along is very important.
Sure, it eases up your workflow and makes your organization more collaborative.
But having a rock-solid product vision also fosters innovation and agility.
Think about it in this way: a product without vision is like a shore without a lighthouse.
Markets have always moved fast. In this digital age, even more so.
One trend consumes the other and sets the bar for newer innovations.
When this is the case, it is hardly the time to try and stick to your initial plan of whatever you wanted to build and grow.
If you see the market’s tides shifting to a different kind of offering, or if you see a solution that addresses your users’ needs better, you should pivot to those.
Because if you don’t, someone else will.
Looking at all the new entrants in the market, you might feel that it is easy/necessary to build a SaaS product.
While this is generally the case when compared to traditional models, SaaS presents itself with a set of different challenges.
Challenges that need you to shift your mindset and adopt frameworks for the digital market and economy.
As an aspiring entrepreneur, all of these might seem too much to grasp or implement.
Luckily for you, digital product agencies specialize in working with the latest market trends and making a product idea real.
Give ‘em a try!