Nothing Matters Unless Your SaaS Product is on Point
When building a SaaS company, some founders tend to focus on sales, marketing, or design. Obviously, all of those areas of a business are important. But, achieving success in any of those other areas won’t matter much if the product you’re building isn’t stellar.
Whether intentional or not, the primacy of product is too often replaced by other aspects of running a business. Such a posture puts the business at risk because no area of a SaaS business is more important than product development.
Why product is central to building a SaaS business
Why do I insist that product be the central focus of your SaaS company? The answer is simple: No other aspect of the business matters unless the product is outstanding.
In comparison to building an audience or getting people to pay, building the product seems like the easy part. That’s why it’s easy to overlook it and focus on other areas.
However, building a great product is far from easy. It takes work to build something that solves a big problem in a sticky way.
I’m not discounting the importance of the other areas, but even if you’re great at sales, marketing, or customer service, you’ll soon experience one of the scariest things anyone building a business will face if your product isn’t great: churn.
Churn happens when SaaS customers cancel their subscriptions. As SaaSMetrics says, “Churn is the enemy.”
But why does churn happen?
It’s tempting to point to all of the surface-level causes of churn—things we can’t control:
- “The customer doesn’t have the budget.”
- “The customer’s payment methods aren’t working, and we can’t get a hold of them.”
- “The customer has decided to take the service in-house.”
The truth, however, is sometimes a bit more painful to admit. Churn often happens because your product isn’t good enough.
A high churn rate more often says something about your product than your marketing. Most of the time, we try to fix churn by applying marketing band-aids, like:
- Create a better guarantee
- Improve the drip campaign
- Send more emails
- Send fewer emails
- Send a survey
- Tweet more frequently
- Make more client calls
- Rewrite the FAQs
Ok, let’s back up. Before you even think about any of the marketing tactics above, think about your product first. And how exactly do you create a product-first SaaS business?
Create the best possible product.
When creating a product-first SaaS business, your main investment will be in building the best possible product. Ironically, the way to create the best possible product is to not start with product at all. Stick with me—I promise this will make sense.
There’s a process for building a product-centric SaaS business. It’s logical. It’s sequential. And it works.
The process begins with: 1) the problem, then 2) moves on to the customer, and 3) concludes with an understanding of the competition.
1. Identify a problem worth solving.
Every good SaaS product addresses a significant pain point.
The pain point that led to me building my first SaaS company, Crazy Egg, was one that I experienced personally. I was helping to run a marketing consulting business at the time, and my partner and I felt stuck in terms of specific data that we needed.
Our frustration gave rise to the product that we later developed: a simple-to-use heat mapping tool with easy-to-understand metrics and pleasing visuals.
I’ve learned that if you find the right pain point to address, the product begins to take care of itself. In fact, there’s an intriguing inverse relationship between the intensity of a potential customer’s pain point and the perceived value of the product.
In other words: The greater the pain of the problem, the more delightful your product will be to a consumer if it helps alleviate that pain.
Once you’ve identified a pain point you’re interested in building a solution for, your next task it to study the group of people who most want that solution.
2. Research the customers who are looking for a solution.
As a problem researcher, your goal is to understand how people currently address the problem.
Here are some of the questions you may want to ask yourself:
- What are some common ways that people solve this problem now?
- What’s frustrating to people about the current solutions?
- What other problems arise when people try to solve this problem?
- What is it costing people in terms of time, energy, and money to solve this problem?
- How much are people willing to pay in terms of time, energy, and money for a better solution?
- Where do people go to discuss their efforts to solve this problem?
Make it your goal to be exhaustive in your research around the problem, the customer, and the competition. Once you’ve done that, you’ll know it’s time to develop your product.
3. Research the competition.
I’ve given talks about it. I’ve posted slides about it. I’ve podcasted about it. I’ve blogged about it. I’ve sent emails about it. And it’s this:
SaaS competition matters. A lot.
Some business leaders believe that you should ignore your competition and simply focus on being the best you can be.
I’ve heard competition get compared to flowers: ”A flower does not think about competing with the flower next to it. It just blooms.”
It’s an inspiring thought, but also a misguided one in the business world. Your competition should help you shape the product you will create.
Understanding your competition involves several key things:
- Knowing who your competitors are. What individuals, customers, companies, and products are in this space with you?
- Knowing what your competitors provide. What methods, means, and solutions have they devised?
- Knowing the limitations and frustrations surrounding your competitors’ solutions. What do their customers think, say, and do? How well does the current solution work for them?
I’ll volunteer another story about Crazy Egg to add some color to the point about understanding your competition. At its founding, Crazy Egg was trying to do something that many other products didn’t do: create visual heat mapping solutions for websites. But today? It seems like every marketing SaaS has added heat mapping to their list of features.
We couldn’t simply ignore the competition. Instead, we had to improve our product, add features, and interact with the competitive landscape. If we had ignored our competition, Crazy Egg would be in the startup graveyard.
I tend to agree with Victor Kiam, the late business leader and entrepreneur. He said, “In business, the competition will bite you if you keep running. If you stand still, they will swallow you.”
Don’t be afraid of competition. It’s often the very thing that helps you bring out the best in your product.
And that’s your next step.
4. Develop a product that surprises and delights.
Now, finally, you’re ready to develop your product.
My advice? Build something that is ten times better than what your competitors have built.
If you can’t make it ten times better, then build something that is completely different than what your competitors have made.
Whatever approach you take—whether it be mind blowing improvement or vast differentiation—make your product shockingly valuable. You want customers to be truly delighted when they use what you’ve built. If you can’t make a product that is ten times better or completely different, then you might be in the wrong market.
SaaS has its risks. It always will.
There will always be risks in a product-driven SaaS marketplace. Building an exceptional product is critical, but not a complete safeguard against all risks. Here are the three main ones to be aware of:
1. It is easy for competitors to enter your market.
While still challenging work, it’s never been easier to build a SaaS product because of the vast set of tools available to entrepreneurs.
Crazy Egg is an example of one such tool. It is consistently ranked a top heat mapping tool. That said, there are many other competitive options available. If Crazy Egg is going to continue being relevant, it’s important for us to constantly evolve and iterate on the product.
Make sure you’re focused on the problem you’re trying to solve (and how it’s evolving), stay aware of emerging customer needs, and keep a close eye on the competition.
2. It’s easy for customers to switch to your competitors.
How quickly can your customer switch to the competition?
I’m not making that up. To see how long it took to sign up to one of Crazy Egg’s competitors, I started the timer on my phone, located the competitor’s website, and signed up for an account.
It took me literally nineteen seconds to reach this point:
Some SaaS founders might think, “My customers won’t leave. The switching costs are too high.” Thinking that way is potentially a big mistake.
According to Investopedia, “switching costs are the costs that a consumer incurs as a result of changing brands, suppliers or products….A switching cost can manifest itself in the form of significant time and effort necessary to change suppliers, the risk of disrupting normal operations of a business during a transition period, high cancellation fees, and a failure to obtain similar replacement of products or services.”
There are often significant switching costs associated with Internet providers, cell phone service providers, cable services, or computer operating systems.
In the SaaS world, however, switching costs are sometimes nothing. Sure, there might be an enterprise-level SaaS where the product is deeply embedded in the operational and functional nature of the organization. But in other cases, the “switching cost” might be just nineteen seconds. Don’t assume your users won’t switch to a competitor’s product just because they don’t want the hassle of a switching cost.
3. It’s easy for the competition to add features that used to differentiate your product.
Your competition is smart. If you launch one or multiple features that become a hit, expect to see many copycats.
As soon as you’re done building the first set of successful features, the best thing you can do is ask yourself, “What can we build next to make this product 10x better than it already is?”
A great example of this is Trello, a collaboration tool that helps you organize your project into various boards—similar to a physical Kanban board.
Once Trello got popular, others started copying them—surprise, surprise!
And by “others,” I mean Aha!, Archmule, Asana, Brightpod, Casual.pm, Codecks, DaPulse, Favro, Fusioo, Github, Hive, JIRA, Kanbanchi, Kanban Tool, Nostromo, Orgzit, Pipefy, Planio, ProductPlan, ProdPad, ProofHub, Swip, SprintGround, Taskworld, Twoodo, VivifyScrum, Yalla, Yodiz, Zenhub, Zenkit. You get the idea.
If you come up with a good idea like Trello did, a whole bunch of other startups are going to copy you.
This seems a bit discouraging. Is it even possible to remain competitive in SaaS?
I wondered this myself when I was considering Crazy Egg’s situation. What was keeping our users from pulling a nineteen second switcheroo to the competition?
Thankfully, there are ways to stay competitive. And once again, it all goes back to product.
Remain competitive with a product-first approach.
Early on, I became frantic when I saw competitors copying our product. Over time, it became fun to assess where and how my businesses could remain competitive.
I knew that the competition would rush to enter the market. Before they did, I committed to driving my product forward in order to stay ahead of them. Here are a few of the strategies I used to do so:
1. Understand and adapt to your customer’s needs.
Research is my therapy. Whenever I feel uneasy about the direction of one of my businesses, I retreat to my office to do some research.
Typically, it looks like several hours of mindless clicking, searching, and reading. What’s actually happening, however, is this: I’m analyzing my customers. I’m anticipating their needs. I’m looking ahead for potential roadblocks. I’m examining my competition’s products.
For me, research always produces answers. I’m not saying that research is the panacea, but it is the only way forward when the competition is crowding you out, when your product is dated, or when you feel stuck.
When doing research, start with your customers.
Your customers have a lot to say. You can try what I did with Crazy Egg, and start calling some of your most loyal users. Listen to their experiences with your product. Understand what’s working—and what isn’t.
Anticipate their needs, and move in that direction. Go back to the beginning of the process, and replicate the careful research that you did at the beginning of your product development.
Chances are, you’ll see something new or different that you missed the first time around. You can use these observations to spawn a new feature, product, or other competitive advantage.
2. Develop additional products or features.
If a competitor replicates your product, create another one.
It’s easy to say, but a lot harder to do. However, if you follow the process above, you will be able to augment your business or create an entirely different one.
Another solution is to develop additional features for your existing product—features that the competition hasn’t yet developed or even considered.
We used this tactic with Crazy Egg. As the competitive landscape expanded, we developed a new feature: the Confetti Report. It looks like this:
As the competitive landscape grew, we innovated by creating the Confetti tool. Not surprisingly, others have replicated this feature since we released it. This serves to highlight the importance of constant innovation and product iteration.
3. Integrate your product.
Jack Welch once said, “Buy or bury the competition.”
When it comes to SaaS, I suggest that you bury the competition. If that doesn’t work, you can consider buying it if that’s an option. But if it isn’t, what are you left with?
Integration wasn’t a technique that Welch would have found useful at GE, but for SaaS businesses it works marvelously.
What does integration mean practically?
It means that you allow your product to become part of a competitor’s larger suite of SaaS tools. Perhaps it means that you integrate your SaaS functionality to augment an indirect SaaS competitor.
Integration takes many forms, but it points to the future of SaaS. The era of the single-purpose SaaS is coming to an end. I believe the rise of the all-in-one SaaS is the next frontier of SaaS development.
Pivoting in this direction sooner than later will give you an advantage over the competition.
When building a SaaS business, you grow best by taking a product-first approach.
The takeaway is simple: Focus on your product. Spend the majority of your time, money, and resources on building the best product possible.
Then, when you’re confident in the quality of the product you’re building, focus on the other areas of the business so more and more people have an opportunity to find and use the solution you created.