Competitive analysis of current market offerings absolutely helps your SaaS company. However it isn’t the only thing, and perhaps a quite overrated approach to achieving SaaS growth. Not only is tracking the competition daunting, it doesn’t ensure the product chiseled and shaped will be used by YOUR user base.
In 2023, the competitive strategy is not as much about analyzing the market opportunities but focusing on the satisfaction of customers. You need to collect customer feedback, prioritize roadmaps, and ship features and products that offer a brilliant user experience. The SaaSy waters, as they’re sometimes (never) called, can get murky. That is why you want to approach SaaS growth by focusing on what sticks with customers and what can multiply.
In this article, you’ll evaluate different SaaS growth models. From there, we’ll identify the metrics to prioritize. Finally, you’ll learn how to transform the voice of customers into ammo for winning over your users.
Ready? Let’s g(r)o(w)!
What are the levers of SaaS Growth Strategies?
First, let’s define what is meant by growing your SaaS business. SaaS growth is the change in product usage and payment transactions from a SaaS solution as a rate over time. Most SaaS products are purchased through a subscription plan.
A subscription revenue model means the company is allowing the users to constantly assess the value provided by the product. Therefore, creating a strong competitive advantage over its competitors is always a priority for SaaS companies.
Since the product itself plays a much more critical role in revenue compared to customer service, sales, and branding. SaaS teams are logically better-suited to focus on enhancing what they already offer through a scalable product-led growth strategy.
To effectively understand the growth rates for your SaaS company, the Pirate Flywheel Metrics (also known as the AAARRR framework, yes we at Usersnap employ it with an extra “A”. We will talk about this later.) are a means for determining SaaS growth holistically amid those murky waters. The metrics are not only helpful for measuring whether your venture is moving in the right direction but also for identifying strategic areas that need attention.
Types of SaaS Growth
Now let’s look at the three product-led growth go-to-market types for SaaS companies. Each has a different approach to SaaS growth and will significantly impact your company’s product vision and revenue strategy.
Differentiated SaaS Growth
The differentiated growth approach is creating a product with unique features which can make it stand out from the crowd. Creating a differentiated product increases the chances of a competitive advantage, which may lead to higher returns. Your business is different from any other, so your competitive SaaS growth strategy should be unique as well.
Differentiated products get sold at a high price and low volume. Nonetheless, they generate healthy profits.
Disruptive SaaS Growth
The disruptive growth approach focuses on gaining market leadership with a lower-cost product, which will help capture new customers. Disruptive products are low priced and high volume.
The products are easy to use and provide immediate results for customers. The main goal of a disruptive SaaS growth strategy is to give your company fast market leadership and the competitive edge. By doing so, you can, capture enough market share within a short period to ensure your survival.
Dominant SaaS Growth
The dominant growth approach aims to dominate the market with a high-quality product. Customers can be acquired quickly and at a low price.
5 steps to scale SaaS Growth, regardless of your competitive strategy
SaaS companies cannot rely only on offering new features that beats the competition. There are approximately 5,000 new SaaS companies popping up each year (source from Ascendix and Exploding Topics). It is not a wise use of time and resources to be running SWOT analysis in this SaaSy jungle.
To create a sustainable SaaS growth engine, you should prioritize your target audience to get to know them inside out. Through understanding their Jobs-To-Be-Done, how they behave and interact with your product, and maintaining their success in using your product to get their jobs done, you will be able to build a unique competitive advantage.
Here are the five essential steps for any SaaS company seeking market leadership.
1. Make sense of your data
One huge advantage of digital products is the ease of user activities tracking. Measuring the behaviors inside your product gives you the ability to analyze what customers like or lack. These insights are indicators of potential growth opportunities.
However, it is also easy to get lost in SaaS metrics when you try to measure everything. The principle of a data-driven SaaS growth strategy is that the data needs to be actionable. This often requires speaking with customer-facing teams to comprehend the context. And further conducting qualitative user research to obtain the reason for their behaviors.
A useful tool for asking users short questions or inviting them to interviews within your web application is Usersnap’s microsurvey. You can send event-based pop-up surveys to engage with the exact users you wish to investigate.
2. Listen to your customers
Customer experience is a vital component of SaaS growth. A company’s ability to optimize the customer experience is crucial to each customer’s continued happiness and satisfaction and, by extension, their buying patterns.
A memorable and unique product experience is your best competitive advantage. And you can only find out how to create such an experience by getting close with your customers. Maybe you’re thinking of creating more ways to interact and collect feedback from users, either reactively or proactively.
SaaS product users are often tech-savvy and very solution-oriented people. They know exactly what they want and are willing to share that information with you. Hence, a simple feedback widget that enables the users to send in suggestions and enquiries can do wonders. This approach of waiting to receive feedback is reactive.
Here are a few examples of Usersnap’s feedback buttons:
The proactive approach is to reach out to users during their time in your product or create an off-site journey. This can be done by displaying an in-app survey or sending emails. You will get more feedback this way and you can frame questions that are more actionable for your team to consume.
We will go more into how to innovate by listening to customers in the Jobs-To-Be-Done framework chapter below.
3. Create your vision and positioning
While prioritizing customer feedback is the most promising method to drive high product usage and growth, you are bound to get many different requests. Some are even going to conflict with each other. For SaaS companies to grow their operations consistently, defining a product vision for the mid to long term is crucial. This vision will help you challenge the various offerings your customers demand as well as prevent you from running in circles by looking at the market trends.
Hand in hand with setting up a clear vision, is knowing where your company stands right now, which is your positioning. Distinguish who cares about your product the most, how it helps make their lives easier, what value keeps them coming back. Establish a strong messaging to communicate with existing and potential customers. When your customers resonate with you, the conversion rate, both on your website and in your product, will skyrocket.
SaaS companies should also aim to continuously update their positioning canvas as they scale. The dream is that one day your positioning will perfectly match your vision!
4. Be quick to adapt and iterate
SaaS growth depends on how well and how quickly a company can use the data it gathers to make adjustments that benefit the customers. Following the above three steps, how to proceed to act and make improvements is how you can foster market leadership.
For example, at Usersnap we prioritize customer requests and research insights to build new features, and we try to ship a new solution asap. The exhilarating part is after the release of the MVP, when beta users or real-life customers start trying it out and feedback starts coming in. The feedback is valuable information to give our teams guidance on what and how to enhance the features and complete the use case. We often use the Customer Effort Survey (CES) to proactively measure the customer experience.
SaaS companies must leverage customer insights in their favor and focus on iterating products and services in a timely manner to strengthen customer loyalty and maximize overall SaaS growth.
5. Double down on making your customers successful
Retention is king in SaaS growth. The longer you can keep your users, the more money they bring to your growth, and the less goes to your competitors. The higher your customer lifetime value (CLV) is, the greater the return on investment (ROI) is for your user acquisition campaigns.
Dharmesh Shah, CTO of HubSpot, encourages startup SaaS businesses to pay attention to what their customers are doing and cater to what can make them successful. Creating a customer base that loves, and trusts, your product and company enough to leverage their word of mouth is the golden nugget to SaaS growth.
Understanding The Jobs-To-Be-Done (JTBD) of Your Users
By now you should have figured out: industry trends, go-to-market strategies, and competitive analysis are all just noise compared to the voice of your customers. Understanding your users’ needs is of the utmost essential for product adoption and long-term success in the SaaS market.
At Usersnap, we formulate Jobs-To-Be-Done to empower our teams to build meaningful products, as well as acquire new users more effectively. To pin down the JTBD we spent some time running customer feedback surveys and discovery interviews. When you unravel the “why” behind the “what” of your customers’ needs, you can align your product solution and design to their deepest motivations.
The three dimensions of the Jobs-To-Be-Done framework are as follows.
This is often the most important and obvious aspect of what your users can achieve with your product. The “job” description should embody the ultimate purpose for the user and not just the activities necessary to get the “job” done.
For example, the functional aspects of product managers’ jobs-to-be-done with Usersnap are:
- Plan the roadmap
- Survey customer needs and satisfaction
- Ensure the quality of the product
By having the functional jobs-to-be-done you can already get a clear picture of what your customers are looking for in a solution. And you can build THE product that will truly help them meet their daily tasks, improve their performance, and meet their needs regarding delivering the right results.
The emotional aspect is about what your customers experience and feel while doing the job.
As Seth Godin, founder of Yoyodyne and Squidoo, says, companies are not selling to increase joy, but to reduce fear by giving users control and stability. The user’s JTBD may include feeling empowered and confident, having self-esteem, having the freedom to make different choices, and feeling healthier or happier.
Looking at Usersnap’s example, here’s how we added the emotional aspects to the jobs-to-be-done:
- Plan the roadmap with confidence
- Survey customer needs and satisfaction in a non-disturbing way
- Ensure the quality of the product and keep bug reporters happy
The social component of the JTBD is how the users want their peers, friends, and others to perceive them while doing the job. They seek solutions that help them meet their needs to interact with others or be a part of something larger than themselves.
And here is what we added as the social aspects of Usersnap’s jobs-to-be-done:
- Manage feedback in one place to plan the roadmap with confidence
- Survey customer needs and satisfaction in a non-disturbing way
- Ensure the quality of the product and keep bug reporters happy
- Lead stakeholders and other teams to deliver success
The Role of JTBDs in Improving Product Adoption and SaaS Growth
The Jobs-to-be-Done (JTBD) approach is one of the core lean startup principles. It allows you to build a product that customers want, essential for product adoption in the SaaS space.
JTBDs will help you build products that are more likely to solve problems and meet your customer’s needs. JTBDs provide detailed insights into how users view their everyday activities so you can identify what product features will be most relevant to them.
Using JTBDs improves your chances of making the most of a SaaS application and boosts adoption rates. You need to determine if you can provide a solution to help people get what they want and need in their tasks.
In additions, you must meet and learn about the expectations of prospective customers to determine if your potential customers will see value in your product. Finally, you should also consider the time your new talent has spent researching new solutions.
Inviting customers for interviews or a customer effort micro survey will help determine if a JTBD exists on behalf of your customers.
The AAARRR flywheel to accelerate and measure SaaS Growth
We’ve covered a lot of SaaS growth strategies, which are foundational work, kind of like buying a good pair of shoes and learning how to tie the laces. Now it’s time to run. Well… growth hackers are way more ambitious so they actually like to talk about flying, or flywheels to be exact.
The most common product-led growth flywheel utilized by SaaS companies in recent years is the Pirate Funnel Framework. Invented by Dave McClure, the pirate AAARRR metrics help companies understand current performance, identify areas that need improving, and accelerate their scale-up journey.
Here is a 6-point SaaS growth strategy guide for your enterprise.
Most importantly, getting digital foot traffic so that anyone looking for your solution (or topics related to it) can window shop, and find you. Every SaaS company should place a heavy focus on the awareness strategy.
- Where are your potential customers going to find out about your product and offering?
- How do you know which channels work best for your audience?
- What is the strategy to double down on the channels that do work?
- How do you measure the success of your efforts to improve awareness?
For example, if a good chunk of your audience looks for tools such as yours via Google search, then spending too much time on social media might not be worth the effort. Identifying where your potential customers are and which channels you should devote your efforts to is key to the awareness stage.
Customer Acquisition Cost (CAC) is the first metric to consider. It helps you learn how much a customer is worth and why people buy your product.
The time and money it takes to acquire a new customer depends on the competition, your value, and whether it’s the right time to enter the market. With this information, you can adjust for better future sales performance.
You also need to know if you’re growing fast enough to increase market share and whether your customer acquisition cost is competitive enough for you to achieve growth.
The activation rate of a company is the ratio of the number of new customers to the total annual customer acquisition.
The rate is the number of new customers who have activated a product divided by the total number of customers acquired during that period. You can then compare your activation rate with others in your industry and determine where you stand against competitors in terms of growth.
Customer retention is the percentage of customers still using your product over a given period. The rate lets you know how many customers regularly use your products or services. The SaaS churn rate is the percentage of customers who stopped using your product or service compared to the total number of customers in a given period.
You must monitor this churn rate because it shows that if you don’t address issues promptly and effectively, you may lose long-term clients. It also gives you an idea of whether your company offers a competitive price or if you need to improve your marketing efforts to attract new customers.
However, if you can achieve negative churn, a term coined by SaaS superstar David Skok, the number of customers you gain will exceed the number that you lose, allowing you to continue growing your business and making even more people aware of the work that you do.
Revenue is the number of dollars a company receives. It reflects the company’s efficiency in selling products or services and whether the business is growing effectively.
The monthly recurring revenue size helps you measure your company’s overall financial performance and determine your growth potential.
SaaS companies’ expansion revenue per customer metric tells how much revenue a new or existing customer brings to the table. You can also use the data to determine how much you should invest in your customers and their needs.
The approach aims to establish your market leadership and increase your revenue through economies of scale. The main cost is the investment you need to make to develop products that compete with the competition and provide exceptional customer service.
Net Promoter Score (NPS) is a metric that measures customer loyalty by asking customers to rate their overall satisfaction on a 0-10 scale, where 0 means they hate the product and ten means they love it.
Additionally, if you’re able to ask your customers how they found out about your solution, and word-of-mouth (WoM) keeps popping up, well then maybe you’re onto something without NPS.
The metric helps identify the number of loyal customers likely to refer and recommend your brand to others. It also indicates how many of your existing customers will continue using them in the future. Knowing if you can rely on your referral network to expand your business is beneficial.
Bonus: 3 Ways to Gain to Immaculate SaaS Growth
If you have the patience to read to this point… You sure are keen to boost the growth for your business! You deserve a special treat! Let’s look at three ways to gain a competitive edge for your SaaS enterprise.
Porter’s Five Forces
Porter’s five forces is a framework that uses new entrants, purchasers, suppliers, alternatives, and growth intensity to determine the product’s threat level.
All firms must maximize profit by increasing their output while minimizing the cost of producing that output.
The framework is based on set starting points, and each force has a range within which it operates for each given firm. The content for each detail changes depending on how the company works under different conditions.
The growth-share matrix allows investors to examine the relationship between market share and the growth rate of a company.
The growth-share matrix compares companies in a market with each other or an established company against a new firm entering a market. This tool can determine the possible threat to an established business or competitor from a new business entering their field.
By examining the figures, you can decide if new competition from outside the industry could create economic issues for you.
A perceptual map is a chart that shows the relationships between products or brands and how consumers perceive these relationships.
Perceptual maps allow SaaS companies to compare their brands with competitors on different factors such as quality, price, and efficacy. This tool can help companies to examine the gaps in their market share in consumers’ minds.
Are you ready to craft your SaaS growth strategy?
The SaaS industry has grown over the past decade and is continuing to increase at an exponential rate. The competition components are beyond technology. Your capability to provide functional features and ease of use, and meet emotional and social aspirations, will decide if you will earn market leadership one day.
At Usersnap, we focus on customer-led growth and prioritize understanding customer Jobs-To-Be-Done as our growth strategy. And we see results in MRR and ARPA. We also hear from customers about their joy and excitement in using our product. ❤️ (Yep, listening to customer feedback can be rewarding in multiple aspects.)
To help you get started today, we recommend you to measure the baseline of your product-market fit and empower users to share screen captures of their problems with you. Usersnap is a customer feedback software that streamlines research surveys and visual bug reports. You can find templates in our website library and create them in 1-click in the product.
With a competitive growth strategy, customer feedback, and product data, you’ll be able to upgrade your business to excel in the SaaS battlefield. We look forward to seeing your “hockey stick” growth curve.
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