So much has been said and read about the all-mighty SaaS in the last ten years. Frankly, it’s a noisy part of the internet.
It’s hard to cut through the noise to capture the most valuable information and actually implement it in your business. Plus, in such a fast-growing and ever-evolving tech sector, it’s hard to know what’s still relevant!
As Software-as-a-Service enters its second decade, we decided to focus on 3 elements — qualities, actions, practices, whatever you want to call them — that will determine SaaS excellence moving forward.
1. Product-led growth
As you might guess, this means growth led by the product, rather than by members of your team. So, this is opposed to sales-led growth, with outbound activities, or marketing-led growth, with inbound activities. With product-led growth (PLG), new leads and revenue are attracted to your business without those forms of human intervention.
Why do SaaS-preneurs love it? It’s scalable.
There are a few different ways to achieve it, depending on the type of product you sell.
Tiered pricing is about pulling users into deeper stages of commitment to the product. You should design subscription plans that increase in usefulness (and cost!) at the same intervals as the user's business growth.
Why is this important? Because expansion revenue is the best kind of revenue.
For pricing tiers that drive PLG, here are two tactics to consider:
Design your subscription plans in tiers that increase for higher volumes (transactions, API calls, etc.) or even for additional accounts.
As their business grows, they should need your product even more — ideally, they’re dependent on it! So, the natural thing for them to do? Upgrade, baby.
Instead of manually identifying these potential upgrades and pitching a higher plan (not scalable), your team can design the customer interface to make the choice to upgrade more obvious. Or automate an email marketing campaign to accounts that are approaching a certain threshold of their subscription usage.
Reserve some of your tricks for the highest paying customers. Think of functionalities that aren’t necessarily core to your product, but make the user experience much better or heighten the value in a unique way. It could be a special report, a data visualization format, customization, or a host of extra integrations.
Shareable or collaborative features
The product’s very nature pulls in new users because current users either invite them or expose them to the tool. The classic example of this is Slack.
Though this type of PLG is easiest with collaboration tools, think creatively about how users can spread the word by just doing their thing. If there are any charts, graphs, reports — basically anything that users can export, download, or send outside the dashboard — brand everything with your logo!
The freemium model, or free trials
Okay, this is pretty standard by now, but must be included! It’s worth a try for nearly every business.
If you don’t have a collaborative tool or pricing tiers don’t suit your product, then your version of PLG could be in the free trial. Offering a free trial widens the top of your funnel automatically. Potential customers sign up on their own, and it gives your product a chance to sell itself.
Through design choices and perhaps some automated onboarding email campaigns, your product converts the user into a paying customer, without much (or any) hands-on effort from your team.
The bottom line of PLG is that the sheer quality and effectiveness of your product = revenue growth. But you can engineer it even more. 😉
2. Understand and use your data
You’ve probably read David Skok’s famous treatise on SaaS metrics. Usually, when this topic comes up, the main focus is: which metrics?
Of course, MRR and churn will always be top. Keeping your Customer Lifetime Value (LTV) above the Customer Acquisition Cost (CAC) is basically common sense.
All of the SaaS financial metrics that measure company profitability are important.
But there are other things to measure, and other information to analyze.
How do your customers behave? Where are they coming from? And what, if any, are the links between these answers and the financial metrics above?
There’s a wealth of information hidden inside your business. Here are just a few points of inquiry you could explore:
- Customer activation rate: understand how many paying customers are actually using the tool
- User behavior: analyze which parts of the tool customers are using, how often and how long
- Country reports: understand which regions are better/worse performing for your business, and where there is potential to grow
To learn more about segmented reporting, check out these 3 essential sales reports to help you grow your business.
It’s not just what you look at, but also how you look at your data. For example, looking at a single metric over time will reveal patterns and undercurrents that allow your team to work more strategically and proactively.
Knowing your churn rate from January 2023 is fine. But if you know your churn rates from 2020, 2021, and 2022, you might realize that January is always a drop-off month for your business. To avoid that blow to retention (and revenue) at the beginning of the year, you might start promoting sticky deals in… September!
3. Rally your team behind data-driven goals
We couldn’t talk about growth without talking about the people that help make it possible: your team!
Tracking your metrics and bringing in other analytics can only go so far if you keep it to yourself, execs, and other upper management. If you want to get the full value of your data, you need to share the metrics — and make them meaningful — for the whole team.
Because when you have “buy in” among the team, you don’t carry such a burden. You and other managers can save that energy you spent explaining, educating, contextualizing, convincing, pushing.
So figure out how the most important metrics relate to each function of the company: sales, customer success, support, marketing, etc. Show individual contributors how their work moves the needle, and people will care about making sure these metrics hit set goals.
Sure, you might need to invest a little time (and even money) in setting up tools or some other digital infrastructure that shares metrics and data points with the team. Be prepared to invest in incentives.*
Some ideas for making the culture more goal focused:
- Share the metrics team or company-wide through data visualization tools
- Gamified performance within teams
- Incentive structures within teams
- Send regular updates and provide a “town hall” like space (physical or virtual!) for everyone to reflect and/or brainstorm
*With the right messaging and culture, monetary incentives might not be all that necessary. Direct reports will be intrinsically motivated to carry their weight and see the team and company succeed as a whole. That said, think creatively and be generous where you can.
And good luck!
Other SaaS Resources
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the Tax Agency.