Building a SaaS business is not an easy feat. Given the saturated market, the competition can be tough. So to win and grow your SaaS company, here are some things that you should know.
The Software as a service (SaaS) Global Market Report 2020 cites that the SaaS industry is expected to grow at a CAGR of 13.1%. Its estimated market worth is also projected to grow to $220.21 billion by 2022. Therefore, it’s not surprising that streams of startups are competing for a share of the market from the already established companies.
According to a report from Statista.com, the SaaS business is approximately at 15,000 counts in the United States alone. All these companies cater to an estimated 179 million customers from all over the world.
So if you’re a SaaS business owner, having these many competitors in the market can be daunting. How much more if you’re still starting your company, right? Don’t worry. We’re here to help you get ahead of the competition.
We compiled medium-sized and SaaS startup growth tips from building a user base to looking into pricing strategies. Let’s start by defining what Saas is and how a SaaS business works.
SaaS Business: Its Definition and Market Value
The term SaaS is an acronym for “Software as a Service.” It pertains to businesses providing subscription-based software delivery services to clients through cloud-based technology or internet storage. At times, it is associated with cloud computing. And, it’s beneficial to both clients and business owners.
For one, it reduces the overhead cost of your company’s SaaS product since no physical store is necessary. Since automation is possible, it also reduces the need for many resources to deliver the product to customers constantly. This is one of the reasons why more IT companies are adopting SaaS into their working environment.
On the clients’ side, they can access the software using web browsers or any provided interface. This means that users can access the software anytime, anywhere.
As long as they are connected to the internet or software network, the software should work. Moreover, updates are commonly installed automatically, which regularly improve user experience.
B2B vs. B2C SaaS Business
There are two types of SaaS businesses in the market today. Determining who you’re catering to can make or break your efforts in terms of delivery, targeting, and marketing efforts.
Now, a B2B SaaS company provides services to organizations that need to improve their business technology. This includes CRM tools, production software, customer support software, and even business analytics software.
On the other hand, a B2C SaaS business model caters to individual customers. These users may need access to photo editing software, word processing software, scheduling tools, or an online notepad.
Yes, there are times that the line between the two target markets becomes a blur. But as a business owner, you must still create a clear distinction on your primary target market.
6 Secrets to Grow Your SaaS Business
In today’s technology-driven environment, the possibilities of growth for SaaS companies are endless. However, it can’t just happen overnight.
As a SaaS business owner, you also need the proper strategies to make it happen. So take note of these top six tips that you can use to scale your SaaS company.
1. Highlight the problem and solve it
Sometimes, your target market may not be aware of a problem. So why not sell the problem to them?
Once they are conscious of what needs to be resolved, introduce your services as the solution. This way, you can easily highlight its benefits alongside the features without doing a hard sell.
For one, the strategy worked for Apple, Inc., when Steve Jobs first introduced it to the market. He highlighted that the iPhone’s 3.5-inch touch-sensitive screen is a novelty and a pioneer in the industry. With it, the brand determined the current pain point that the customers have with a tangible keyboard. He, then, highlighted its product as a solution to it.
2. Figure out your target market’s specific needs
Whether you’re a startup or a medium-sized SaaS business, it’s vital to refocus on your client’s needs regularly. Time and market movement can change their priorities. Therefore, you should regularly update your strategies too.
Aside from reviewing the need for your service, look into necessary upgrades to elevate the user experience. You can do this by conducting market research and service tests. And, remember that customers are drawn to services that are easy to use and efficient.
Additional Considerations for B2B SaaS Businesses
It may be easier to do a customer profile when you’re a B2C SaaS business owner. Yes, creating a demographic profile and competitor analysis may still be challenging. But at least you’re looking into an individual’s needs.
How about a B2B SaaS company? What are the things you need to consider in addition to the common marketing data? To ensure that you’re not wasting resources, here are things you need to think about.
- Size of the company — Take note that SMEs have different needs than established companies. So consider targeting a specific niche based on the number of employees or the kind of information they need to handle.
- Type of industry — There’s a wide expanse of industries that need technology. But not all companies in all industries may need the kind of services that you offer. So focus your efforts on a niche that needs your service value.
- Existing tech stack — It’s important to consider the current tech stack of your client. This way, integrating your software into their system becomes easier.
3. Record your CAC and churn rates
To ensure that you’re scaling your SaaS company the right way, manage your resources in relation to your operational expenses. Most importantly, compare it with the number of customers that are paying for your services. This is where keeping track of your churn rate and CAC comes in handy.
The term “CAC” means Cost for Acquiring Customers. It helps you determine your expenses as you acquire and build your user base.
To calculate it, divide the overall cost of customer acquisition by the number of conversions within the given period. This data will help you forecast your success rate and help you manage your expenses properly.
On the other hand, the churn rate defines the percentage of service cancellations within a specific period. So if you have a low churn rate, it signifies that your customers are happy with your service. But if the churn rate is high, then perhaps it’s time to make adjustments on a certain aspect of what you’re offering.
4. Plan a strategy to build your user base
Acquiring new leads and converting them to customers may sound like an easy task. But in reality, it’s more than just putting your brand name out there.
Before getting your first users to sign up, you must prove that your services are worth the subscription fee they are paying for. So since it’s a continuous campaign, you need to think of a sustainable way of acquiring customers.
For instance, you can offer your service with a money-back guarantee for a certain period. It may sound disadvantageous, but this technique is known to attract more customers. Because users feel that it’s a safe purchase, especially when your service is new to the market.
5. Invest in a smart digital marketing campaign
An effective digital marketing strategy can help your SaaS business grow in no time. Optimized content can go a long way. It generates buzz for brand awareness and a positive reputation. Not only that, but creative digital marketing materials can also attract potential investors.
So think about the newest trends in digital marketing today. You can start with SEO and PPC campaigns, email marketing, and social media marketing. Additionally, there are other out-of-the-box ideas that you can also utilize, such as multimedia ads on interactive social platforms.
6. Optimize your pricing strategy
A savvy business owner understands that pricing is not constant. It evolves accordingly with market and competitor movement. So to push your SaaS business into growth, you must also constantly check the effectiveness of your pricing.
Try split testing various pricing levels. Look at how your existing customers react to it. You can also review how it attracts new users. And you will know that you have reached optimal pricing when three things happen.
First, when only an insignificant percentage of users complain about it being too high. Second, when a significant number of customers are readily patronizing your services despite its pricing. And third, when a significant number of users complain about the pricing but is still willing to pay for it.
Grow your SaaS business by employing smart business decisions
Now that you’re equipped with these tips, you’re ready to take the next step. It’s time to apply these strategies to real-world scenarios. And yes, it may seem like the work is cut out for you. But you have to remember that with all these efforts, your business can achieve growth.
And if you’re ready to scale your business in terms of technology, Full Scale has the right services for you. We can customize our solutions according to your requirements. This way, you can easily build and manage a team of highly skilled developers for your software development needs.
Take the first step towards our partnership today. Talk to us about your needs now!