Archive for the ‘SaaS’ Category

Engaging SaaS Customers with Targeted Content

Monday, September 5th, 2016

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When you consider content marketing for your SaaS, what immediately springs to mind?

For many SaaS, content marketing is seen as a lead generation strategy, a way to generate interest and effectively “prove” their expertise to potential customers. This is a great idea, but if you’re not looking at content with a view over your entire customer lifecycle, you’re possibly missing out.

When you think about it, at any given time you have customers who are at various stages of their journey with your SaaS and these customers have different needs and desires when it comes to content.

If your view of content is more of a “one-size-fits-all” approach, you risk becoming irrelevant to those who are at different stages. This is where targeted content comes in…

Need content ideas for your SaaS? Grab our ideas list.

Why Targeted Content?

Targeted content means that you deliver relevant content to the right people at the right time. For example, if account records show a customer just took a certain action with you or reached a particular milestone, you might send them content which pertains to taking the next step.

To get an idea of what content and when, you’ll usually need to create content which falls under each of the phases of a typical SaaS marketing funnel:

Awareness Stage

Awareness or “top of funnel” is the stage where prospects have some kind of problem or need they’re searching for a solution for. They’ve come across your solution either via search or because they’ve heard through the grapevine that you can take care of their problem.

The usual content strategy at this stage is to provide them with a broader view of information that is relevant to their problem, or possibly to help them discover a need they didn’t realize they had (this stage may also be referred to as “discovery”). This is not usually the stage to share deep, analytical information about your solution because the prospect isn’t ready for that yet.

Middle of Funnel

At this point, the prospect is familiar with the problem and probably aware of multiple possible solutions besides yours. They’re in the “consideration” phase, looking into deeper research to determine which solution is going to be the best fit for them.

Middle of funnel content should establish you as an authority within your industry and help guide the prospect through their research. You want to establish trust and provide information specific to your solution, such as what makes you unique.

Content here may also include knowledge base topics or how-to videos; your prospect wants to know how your product works and preferably be able to see it in action to determine whether it is easy to use and has an attractive interface.

Bottom of Funnel

This is the stage where prospects are ready to make their final decision to purchase—the “conversion” stage. They will be looking for evidence that solidifies their decision to go with your SaaS such as social proof, free trials or guided demonstrations.

You might use case studies and testimonials, webinars or “master classes”, all designed to demonstrate the value of your SaaS and how customers can get the best from it. If your SaaS uses a customer success or sales team, you need to be looking at how your content at this stage supports their efforts too.

Retention

This is the next part — the “flask” into which your marketing funnel flows. We like this example as demonstrated by Moz because it is one of the few funnel examples which emphasizes the importance of not forgetting about the next stage of content.

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For SaaS, keeping churn numbers low is a critical metric, so it’s important to make a plan which includes content for retention of current customers. The aim is to keep the customer engaged and continue to deliver something that is of value to them.

Content at this stage might include tips for getting the most of your software, how-tos, user case studies and email newsletters for subscribers.

Start by Tracking

If you want to get better at providing targeted content, you need to begin tracking usage data and segmenting customers based upon activity.

You need to understand your customer behaviors and preferences so that you can create content which is useful and relevant to them. For example, if you notice that current customers reach a certain milestone then tend to go quiet, you can focus on “next-level” content which will help them realize new heights of value.

Of course, this works when you have registered users to track. For prospects who are not yet registered, monitor the analytics for the content you are putting out and figure out what is working for getting people into your free trial. If you’re not sure what content to start with, ask people! You can only track if you’ve started with something…

Some Examples

It’s all very well talking about targeted content marketing in theory, but what does it look like when done well in practice? “Done well” is the caveat to success for any content marketing strategy; with the amount of content already being put out there, yours needs to stand up and count among the noise.

Here are some SaaS-based examples of content at different stages:

CrazyEgg

CrazyEgg uses strategies so simple, they’re genius. If you’re a newb arriving on their website for the first time, this is how you’re greeted:

crazyegg-heatmap

Easy, intriguing and immediately relevant content. Who doesn’t want to know precisely how users are interacting with their website and what they might be able to improve?

This kind of gateway content provides value to the individual immediately and helps to drive awareness of the problems they should be monitoring for. It helps to endear CrazyEgg to prospective customers because they’ve already received something useful which helps to highlight the expertise CrazyEgg can offer.

HubSpot

HubSpot is a regular purveyor of multiple types of content. When it comes to middle-of-funnel, they have got some simple solutions for prospects. Take their marketing automation solutions as an example; if you’ve reached the consideration stage there, you might be offered a quick tour to see what makes it tick. As an aside, they also offer live chat as you go through that process so prospects are able to ask any questions immediately.

hubspot-tour

Netsuite

Do you have some good customer stories to tell? Netsuite makes the most of these to produce some “conversion” content that is relatable to prospects and sells their product well.

netsuite-testimonial

Moz

Moz are another example who are content machines at all levels of the funnel. Their content is a huge asset to them because they continue to deliver valuable insights, including those aimed at people who are at a more advanced stage in their customer lifecycle.

If you’re looking for the next strategy to spice up your results, Moz probably has it either in their blog or included in their in-depth beginner’s guides.

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What types of content should your SaaS produce? Check out our list:

Final Thoughts

If you want to make content marketing really work for your SaaS, then taking a targeted approach is a good strategy. While you might get some good hits by blanketing content and aiming at all levels of the funnel, it is much more powerful when you are able to be relevant to the stage the individual customer is at.

Start by knowing the different stages of the marketing funnel and what types of content work for each. Track user activity and content analytics, ask customers what they’re looking for and create more content to suit the stage of the user.

Targeted content is an opportunity which many are now grabbing. Get your SaaS onto it and boost your chances of getting and retaining the right customers.

Why Integrated Marketing Is Important for SaaS

Monday, August 22nd, 2016

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Multi-channel marketing methods are really becoming the norm for any company wanting to promote themselves today.

For SaaS, it’s about encouraging people through the lifecycle; from trial to paid to a paid upgrade. If you’re not making use of multiple channels to reach your customers, there’s a high chance you are missing out somewhere.

This is where an integrated marketing approach with a modern perspective is important. What does that look like for SaaS? Let’s check it out:

Where can SaaS be marketing? Grab our checklist here!

What Is “Integrated Marketing?”

The term integrated marketing has been around at least since the 1980s. It originally referred to achieving marketing objectives by coordinating use of different promotional methods, with the idea being that they reinforce each other.

This is still true, but as Don Peppers proposes, this definition really needs expanding to better account for the twenty-first century environment. Technology is melding functions like customer service, marketing and sales together like never before, so Peppers argues the true unifying view is that of the customer.

Here is his updated definition of integrated marketing:

“Integrated marketing incorporates an individual customer’s own perspective into all customer-facing functions at a company, including marketing, sales, and service.”

What might integrated marketing look like?

A SaaS-related example might be a lead who responds to a specific campaign you are running, where you are aiming to generate more sign-ups. Rather than that lead being sent to a one-size-fits-all sales approach, they are presented with a specific selling strategy which has been tailored to preferences they have expressed or actions they have taken which have helped you to segment them and create a profile.

So, Just Do More Stuff?

Well no, not really. You’ve got to have decent strategy behind using the channels you do. John Jantsch wrote a piece for Duct Tape Marketing where he discusses the general lack of understanding around integrated marketing. It’s one of those terms that is elevated to “buzzword” status, which as a result, means there are some common misconceptions.

For example, the basic interpretation which many consider is “we need to do more kinds of stuff.” As Jantsch points out: “The problem with more stuff is that stuff without a central strategy can actually cause one stuff to combat and conflict with some other stuff.”

As one commentator on Jantsch’s article points out, while customers might get slightly different messages from different channels back in the day, social media is now here shining a light on any disparities in strategy. Consistency across tactics is the key to ensure your messaging is not confusing to customers.

Get Selective

So as a SaaS, there are some common issues which you may be able to relate to:

  • You want to keep acquisition costs down.
  • You want to attract more of the “right customer”, the one who your product is really suited to and who is likely to hang around.
  • You want to reduce churn.

First of all, many newer SaaS look at the array of possible marketing channels available with a sense of bewilderment. Is that print ad worth it? Should we be on X, Y and Z social media channels?

A truly effective integrated marketing approach begins with a strong central strategy, just as John Jantsch stated. Where does that central strategy start? Always, it should begin and end with your target customer.

To pull this off, you need to be very clear on who that target customer is and where to find them. How will you speak to them directly and make them feel that your product is definitely for them?

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Source: HubSpot

It seems like such an elementary concept, yet one reason many businesses (including SaaS) are no longer around is because they were afraid to narrow down their audience. They think they may be “missing opportunities” if they don’t cast a wide net.

The thing is, if you try to be all things to everyone you risk confusing people and limiting the number you actually bring onboard.

Targeting the channels where your ideal customer is likely to be found helps you to reduce acquisition costs by focusing your spend. You can stay on-message and clearly communicate with those who need your product the most. (Hey, you’re a cloud-based solution, we suggest those appropriate channels are found online too. Here’s an article we wrote on channels SaaS are using to get found).

We’ll show you which marketing channels to use for your SaaS in this free resource.

Your Messaging

A key part of integrated marketing is consistency. The mode of delivery may look different, but the key overall message has been consciously decided and deliberately applied across channels.

One strategy which can help you to deliver consistent messaging is to develop a unique brand story which is central to your communications. Your story helps you cement a unique position and build a real connection with customers.

If you look at a SaaS such as HubSpot as an example, you can find them across multiple channels, and promoting more than one product. However, their messaging remains consistent no matter where you see them. It’s clear who they are there for, what their values are and what they deliver for customers. Their vision of an “inbound world” is the consistent story wherever you find them online.

hubspot-story

Setting Expectations

Another reason integrated marketing strategy is important for SaaS is because you need to clearly set expectations with your customers. Lincoln Murphy points out that many SaaS fail miserably at managing customer expectations, yet this seems to be such a simple idea.

Whether those expectations involve limits to free trials or even simply explaining that they will be offered an upgrade for which they’ll need to pay if they’d like to take it, make sure those expectations are managed and that there is a consistent approach across all marketing channels.

Look at things from the point of view of that customer you want to sign up with you. As Lincoln Murphy says, if everything appears to be self-service to sign up but they then receive a sales call from your team out of the blue, they may not be too happy about that. If you’re going to do or require anything else, be upfront about that from the beginning.

Get Contextual

While your marketing messages should be consistent and align with your overall goals, that doesn’t mean all your messaging should be exactly the same.

Contextual marketing means delivering the right message to the right person in the right moment. You can use marketing software (such as Hubspot) which helps you to do that quite effectively, or you can go relatively low-tech by triggering emails based on certain activities.

Most SaaS will have more than one segment and often each segment has slightly different priorities and reasons why they need the software. The beauty of a multi-channel environment is that you can use those to provide the best messaging, timed to be relevant to the customer and on a channel of their preference. Driving engagement in this way is an important strategy for reducing churn.

Need an example? Google Adwords is one of the most obvious, delivering up advertisements to people depending on the keywords they have searched. With mobile technology, apps with enabled push notifications which can be activated depending on customer location are another example. Dunkin Donuts has used this to let users know when a nearby fresh donut batch is coming out of the oven.

What could your SaaS do? Messaging based on milestones reached or usage might be a good place to start…

Final Thoughts

Integrated marketing for SaaS is about presenting the customer with consistent messaging across the multiple channels which you may choose to use.

The customer is at the center for every marketing call you make and their perspective should be the lens through which your messaging is viewed.

Start by having a very good description of what your target customers look like and where to find them. Be choosy about the channels you use so that you are more likely to reach the right people and reduce that marketing spend.
Lastly, don’t leave retention to chance once you have onboarded the customer. Use your marketing channels to deliver contextual messages which keep your customers engaged.

8 Barriers to SaaS Customer Engagement

Monday, August 8th, 2016

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What stops customers from engaging with your SaaS?

If you have potential customers who come to your website and show interest in your product but don’t actually make the leap from prospect to full-fledged customer, it may be due to one of the following reasons:

Here’s a list of best practices for crafting a strong call to action. Subscribe to receive this extra resource.

They Don’t Have the Financial Resources

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One of the main reasons people do not purchase from you is because they simply don’t have the money to do so.

Is your product priced out of their budget?

While I’m not a big fan of competing with other businesses on price, I do think that you should understand who your target customer is and know exactly how much they’re willing to spend. That way you can create a price list that makes sense for your market.

This is the reason multiple tiers are such a popular payment model for Saas.

Without a doubt, you should offer different prices to the different groups of customers you have. If you haven’t already, look for ways to do just that.

But please remember that price automatically communicates value. The higher the price, the more value people will associate with it. While you should always make your price fit within your target customer’s budget, don’t strive to be the lowest offer.

They Don’t Have the Time

Is your SaaS complicated to learn or in some way time consuming?

While your customers may be excited to use your product initially, they can quickly become overwhelmed if there are a lot of moving parts. Plus there’s simply not enough time to learn. Your customers—just like you—are strapped for time. For this reason, many a free trial goes wasted.

The best way to combat this is by making an onboarding process that guides the user at a steady pace. It may make sense to automatically involve the user in an email series that is dispensed over the course of the trial and shows how to use your product.

They Don’t Trust You

I hate to break it to you but sometimes people stop engaging because they just don’t trust you.

The good news is that you can use basic visual elements to develop trust.

For example let’s take a look at your website design:

  • Is it easy to navigate?
  • Does it look good on mobile screens? (Most people are searching the Internet from their smartphones these days.)
  • Do you have social proof in the form of customer testimonials or logos of businesses that use your service?
  • Do you have easy access to frequently asked questions or a knowledge base?
  • Do you offer security certificates for credit card logos or even a 100% money back guarantee?

All of these things will help your customer trust you with their credit card.

Transparency also makes a difference. Some customers are interested to know where exactly the money goes when they pay you. The folks at Buffer have a completely transparent payment model. Buffer customers get to see exactly where their $10 per month goes. Check it out here: Buffer’s transparent pricing.

buffer pricing

Image Courtesy of Buffer

They Don’t Understand Your Product

Sometimes people simply do not understand how to use your product. They may think they know but once they get into the dashboard, they find themselves confused, bewildered, and maybe a little scared.

You don’t want that, they don’t want that, and luckily, there’s an easy solution out of that.

It’s called an email course.

I’m really surprised at the number of SaaS that do not offer an onboarding process via email.

I mentioned earlier that an onboarding email series can save time for your user. That’s the side benefit, but the main benefit is that it helps your user understand how to use your product to the fullest.

Don’t skip this step. It will help your customers feel empowered. It will also make them more likely to use your product when they know what the heck they’re actually doing.

They Don’t Know How You’re Different From Your Competition

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Maybe your customer gets your service, but what they don’t get is how you’re different or better than your chief competitor, Widgets R Us.

It’s your job to educate them.

Many smart SaaS create comparison pages right on their website. They may even create a separate mini site, such as www.comparingwidgets.com (I made that up just for this discussion) where they highlight the top brands, obviously skewing to their own brand as the best choice.

Of course you don’t want to do a hatchet job on your competition. It’s not about tearing down the competition, it’s explaining how you are unique and what you offer that your competitors may not.

They Don’t Know if Your Product Is Customizable

A lot of new customers want the option to customize your SaaS for their own business or purposes.

Adaptability is huge. Do you offer the ability to customize your service? If you do, make it a clear selling proposition on your landing page. Also make it a part of your onboarding process.

They Need to Test You Out

If you have a SaaS and you don’t offer a free trial you may be losing out. Come on, offer a free trial—all the cool kids are doing it.

Free trials help you introduce your service without risk. That lowers the barrier of entry for your customers.

Plus, it gives you something extra special: it gets people on your mailing list which you can then use to sell to them.

Demos are extremely important for any SaaS.

However, don’t let your trial linger too long. Depending on your service, 15 days offers enough time for your customers to sample your service.

They Don’t Know What to Do Next

If you have followed my advice, you’ve already inserted the trial user into an automated email course. When the trial is almost over, it’s time to show the users how to transition from trial to premium.

This is where a strong call to action makes the dream work. Be sure you that you guide them to their next step—don’t assume they’ll know what to do.

Speaking of which, don’t miss our downloadable resource on how to craft a compelling call to action that you can find below:

Here’s a list of best practices for crafting a strong call to action. Subscribe to receive this extra resource.

Clinching the SaaS Customer Upgrade

Monday, July 25th, 2016

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How many customers does your SaaS have lingering on a freemium product tier? How many trial customers simply never upgrade and go to a paid service?

For every SaaS, clinching the customer upgrade is of utmost importance. It’s about boosting the lifetime value of the customer for your company, as well as hopefully generating loyal users who are advocates for your brand.

We’ve touched on strategies for getting customers to upgrade before, but this time around we want to look at a few extra ideas, such as how getting inside your customer’s head can help you make the sale…

How can SaaS clinch customer upgrades? Grab our checklist here.

Psychology of the Sell

It doesn’t hurt to understand a bit about what goes on inside a customer’s head when it comes to clinching a sale.

ConversionXL published a great piece recently about psychology and lead nurturing. The law of reciprocity was one thing discussed. Quite simply this means that the more you give, the more you are likely to get in return because people like to return the favor. As they state, this is a powerful strategy and should be deeply ingrained into any lead nurturing program.

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Source: Content Propulsion

Practically speaking for SaaS, giving might look like all of those tips you provide in your lead nurturing campaigns to help customers achieve success. Look to deliver unique value, something through which a customer could really see results.

How does this relate to clinching upgrades? Reciprocity again. If the customer sees great results from the information or tips you gave them, they’re more likely to want to pay you back by upgrading.

Exposure

This is another psychological principle outlined in the ConversionXL piece: when we need to make a choice about some product or service, we will usually pick the one we’ve been consciously or subconsciously exposed to the most. Humans favor the familiar.

This proves the importance of those emails you’re regularly sending out, the social media posts and the paid advertising. You can’t afford to take your foot off the gas once a customer signs up because you need to be ensuring that you’re still featuring often in their minds.

Lifecycle Emails

“Lifecycle emails” simply means sending the right email to the right customer at the right time. In terms of clinching customer upgrades, this means being on top of where customers are at with their free trial and which milestones they have or haven’t achieved. (Note: this could also be known as a “behavioral email”, though Totango treats them differently in the image below).

It will be difficult to convince a customer that they should upgrade to the next tier if they’re seeming to struggle with the free trial. Activation is the goal of SaaS here and this means that the customer has taken critical steps or used crucial features to the point where they are realizing value from the product.

If you know when customers haven’t achieved those milestones, this is where lifecycle emails come into play. Not sure how to place the code on your website? Here’s a quick guide. Need to know how to set up a new product? Follow these steps.

Of course the other side of lifecycle emails is getting in when the customer has achieved milestones and seen results. What’s next? Did you know that when you upgrade, you can access (X features and how they help)?

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Source: Totango

Use Promotions or Not?

Whether or not to use promotions to encourage upgrades is often debated among SaaS experts. On the one hand, people worry about devaluing the product or having people sign up simply because it’s on promotion, on the other hand, a well-run promotion can help draw a large number of upgrades.

If you’re going to do it, we suggest being very targeted about how you go about it. It would be easy to blast a promotion all over social media then have all-comers sign up, but you probably won’t get the numbers sticking around which you aim to have in the first place.

A more effective way of using promotions can be to segment your current audience based on their activities and make an offer only where it is relevant. For example, you might offer freemium customers who use your product at least twice per week a free one month upgrade to test out additional features. This way, you’re only targeting people for whom your promotion will have relevance.

Reach Out in Person

Many SaaS are reluctant to pick up the phone. You’re busy with a dozen different things in your business and the online nature of SaaS can push more old-fashioned methods further out of mind.

When you think about the standard kind of SaaS onboarding process, it tends to be very low-touch, especially in lower-priced SaaS who are not necessarily targeting an enterprise market. Often the process goes something like: customer signs up to free trial or freemium tier after finding your SaaS through some kind of online marketing, customer receives a few emails telling them how to use the product or giving success tips, trial period ends, customer either signs on or leaves.

It absolutely makes sense to have a process like this because that’s how you get to scale a SaaS, but if you don’t talk to people, how do you know what they’re really thinking or feeling about your product? The advantage of picking up the phone, even for just a sample of your clients is that you get actual immediate feedback. The customer may be more inclined to provide extra feedback which they might not if they’re filling out a survey or typing up comments.

Talking to your customers over the phone is also a good way to build relationships and increase trust. You’re putting an actual concerned voice behind your SaaS and are there to listen to the customer. You get to address any concerns they have and can more easily speak to the advantages of upgrading by relating directly to the customer’s own situation.

Value is Number One

The twenty extra features you provide with an upgrade might seem like good value to you when you consider your development costs, but that does not mean they will equate to value for your customers.

Value is rooted in customer success and may look slightly different for any given customer. The savvy SaaS stays in tune with customer sentiment and understands exactly what their clients are looking for in terms of value. They’re not going to upgrade for the extra twenty features, it’s more likely that they will upgrade for that one feature which signifies value to them because it makes something significantly easier in their lives.

This is where taking the time to reach out in person can yield very useful information. Are there any common themes coming out across your customer base? In a Price Intelligently study for example, they found that the model of allowing extra users on an upgrade is rarely perceived to be where value is found for users. What do users care about instead? Generally measures that impact their bottom line or ability to accurately measure, such as new contacts, extra sales or reporting functions.

For most SaaS, if you build a model based on upgrading for extra users, there is a natural ceiling in terms of number of upgrades that you get. Say your SaaS product is a reporting or analytics tool, how many people in one company realistically need to use it? This is definitely something to consider when creating your pricing tiers.

How can SaaS clinch customer upgrades? Grab our checklist here.

Final Thoughts

There’s no way around it, clinching customer upgrades means a lot of work for SaaS in terms of following through with effective lead nurturing strategies.

The psychology of getting the sale really underpins everything that you do in the pursuit of customer upgrades. Making sure you have sufficient exposure and deliver value with timely lead nurturing efforts is key.

How does your SaaS ensure sign-ups are realizing value?

Product/Market Fit for SaaS

Monday, July 11th, 2016

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Most SaaS spend quite a lot of time agonizing over product/market fit. It’s not surprising really, we all know it’s important, yet everyone has their own opinion on what exactly it is and when it has or hasn’t been reached.

Are you a premature self-declarer of product/market fit? There are some commentators (and yes, they have some evidence of this) who claim that this is a rife condition among SaaS. We all know what happens when you’re prematureyou don’t reach the goals you’re really meaning to hit when it comes to growth.

Marc Andreessen is the guy largely credited with posing the term “product/market fit.” His definition: “Product/market fit means being in a good market with a product that can satisfy that market.”

The three main components which fall into the equation for any SaaS are their team, their product and their market. If you agree with Andreessen, market will always win. For example, a terrible team can still do well in a buoyant market, an excellent team with a top product which has no demand in the marketplace will fail, while good teams with an amazing product who have nailed a market demand will do extraordinarily well.

Everyone has an opinion, so let’s look at a few prominent ideas on product/market fit.

Ben Horowitz – Myths of Product Market Fit

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Ben Horowitz – Source: Salon.com

Ben Horowitz is of course a partner and co-founder of the Andreessen Horowitz venture capital firm, along with Marc Andreessen. Together they also founded the hugely successful Loudcloud and Opsware, both of which were sold for large sums of money. So, you know, Ben brings solid experience to any discussion about SaaS and product/market fit.

The “myths” we’re talking about here were actually from an excellent article he wrote back in 2010 to debunk some of the popular notions of product/market fit. Largely, what he’s saying is that a popular view of “find product/market fit then raise a stack of cash to build a big company” is often not that simple, even if it would be nice!

What simple tools can you use to test SaaS concepts? Grab our free guide here!

Here’s why:

Product/market fit is often not one big event

There is such a thing as getting only a partial fit and perhaps getting to a more complete fit in stages:

“By the time it got acquired, Opware had achieved product market fit for a category of software called data center automation.But it wasn’t at all obvious that was going to be our destination while we were getting there. We actually achieved product market fit in a number of smaller

Sub-markets…”

We’ve known dozens of other SaaS with similar stories, where they’ve had to “tweak” to find an overall fit as they went along.

Briefly, here are Horowitz’s other three product/market fit myths:

  • “It’s obvious when you have product market fit.” What measure do you use? How do you know? It’s not obvious for most.
  • “Once you achieve product/market fit, you can’t lose it.” Not true and Horowitz experienced this with changes in the cloud services market.
  • “Once you have product/market fit, you don’t have to sweat the competition.” Hey, some of the best markets to be in are the hottest for competition. You’re always going to have to be on your toes.

Product/market fit might happen in a nice tidy line for some SaaS, but for many it is not linear at all. Sometimes it happens in a more circular fashion as SaaS discover that true market fit as they go along.

At the same time, you’re always going to have to be monitoring the market and your competitors. Things can change in the world of technology in a heartbeat, so a good fit today doesn’t mean that won’t change next month!

What If You Don’t Get It Right the First Time?

Many SaaS don’t get product/market fit right straight out of the gate. Joel York suggests adopting “try, try again” as a motto in this instance, though of course you may need to rustle up another funding round.

You don’t want to be in this situation as outlined by Marc Andreessen:

“…you see a surprising number of really well-run startups that have all aspects of operations completely buttoned down, HR policies in place, great sales model, thoroughly thought-through marketing plan, great interview processes, outstanding catered food, 30″ monitors for all the programmers, top tier VCs on the board — heading straight off a cliff due to not ever finding product/market fit.”

There’s often a lot on the line for a SaaS, so if you haven’t quite got product/market fit right, systematically try things based on better customer alignment is a good way to get closer to your fit. As Joel York says:

“In other words, you need to create a continuous loop of SaaS customer feedback and SaaS product development that increases product-market fit on each iteration: listen, build, deliver…listen, build, deliver…try, try, try, again.”

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How Do You Know You Have It?

Brad Feld posed some interesting points in his article “The Illusion of Product/Market Fit For SaaS Companies” last year. In his experience, many SaaS are prematurely declaring that they have product/market fit without really having a clear science around the concept.

It’s definitely a buzzword term which gets tossed around Silicon Valley boardrooms a lot, though Feld argues that what many perceive to be product/market fit is merely the illusion of it.

He proposes a hypothesis of product/market fit based upon MRR (monthly recurring revenue), which builds upon the myths identified by Horowitz. See what you thinkwould you agree with these parameters?

$0 MRR: You have no product/market fit. Can’t argue with that!

$1 to $10k MRR: You have the illusion of product/market fit. Someone is paying you for your product but Feld proposes that this level is a long way from true product/market fit. This is where you should keep going with you customer feedback loop and systematically testing.

$10k – $100k MRR: This is the point where raising a series A isn’t so difficult. Feld does warn that if you’re not growing at 10% per month compounded, you haven’t quite got it right just yet.

$100k – $500k MRR: Sweet! However, don’t think you’ve nailed it just yet. According to Feld this is where you can be in danger of thinking you can’t lose product/market fit (myth #3), whereas you could just be one bad sales hire away from doing damage.

$500k – $1 million MRR: Eureka! You have product/market fit, though you are never out of the woods as far as maintaining it. Keep an eye on your growth rates, changes in the market and what your competitors are doing. If you are at this level, there will always be someone else gunning for you.

Feld describes the search for product/market fit as a never-ending quest. Every time you put work into developing a new feature, you are searching to remain relevant, to build that incremental product/market fit.

In other words, like any other business, SaaS cannot afford to rest comfortably, secure in the knowledge that their product/market fit is stable. Remember what happened to American railroad companies in the early 20th century?

It was the classic case of believing that they were in the “railroad business”, therefore automobiles were not a threat. The thing was, really they were in the “transportation business” and developments such as trucks for moving freight and cars that were not stuck to set tracks sent many of them bankrupt. Always be monitoring and innovating!

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Final Thoughts

Ok, there’s a lot to consider when it comes to product/market fit. Those who don’t recognize that perhaps they’ve declared product/market fit too early or only have the illusion of it, can be in danger of a severe wake-up call.

Product/market fit is almost never a linear process; SaaS need to have strong customer feedback loops and be able to systematically test features to reach that fit.

Even if you’ve reached the heights of $500k+ MRR, that’s not a sign to sit back. Keep monitoring the market and your competitors so you don’t go the way of the railroad companies!