Why is establishing a SaaS Product market fit so important? Well, according to CBInsights, “Tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 1 reason for failure, noted in 42% of cases.” The product market fit is the holy grail of SaaS companies that are looking to scale. The SaaS product market fit is the no. 1 reason SaaS companies succeed.
To win your share of the market, you have to ensure product market fit before you can achieve scale. Here’s a look at some of the strategies adopted by to achieve SaaS product market fit.
1. Customer Interactions Precede Development
The best way to build something customers value is by taking their feedback before building it. In most cases, customer inputs, needs and feedback can be taken proactively before product development. It is a sure fire way to identify the core focus area for your SaaS product.
Building the wrong product and then making amends can be hard. It is much easier to interact with the customers before product development and seek their ideas on what they want. Asking simple questions like the following can give you strong feedback, inputs and ideas on building a much better product for your customers:
Would you use something like this?
Do you think this product will add value for you?
How can we make it better for you or what does your ideal product look like?
What do you want to accomplish with this product?
Asking open ended questions with clients gives you valuable insights into the minds of the customers and their needs. It helps you build a product that they would be willing to use.
2. Good Market
According to Marc Andreesen, “Product market fit means being in a good market with a product that can satisfy that market.”
Being in a good market makes a crucial difference to the fortunes of a SaaS product. You can have a great product, but if you have a market that is not willing to pay, you will fail. Great products don’t succeed in bad markets. Building a product for the right market is the first and foremost step to establish product market fit. You cannot win by building the right product for the wrong market.
SaaS product market fit requires a deep understanding of your market after you’ve chosen the right market. The market could be based chosen based on:
Is your product built to meet the demand of the market?
Is there sufficient demand for the product in your market?
How does your product differentiate itself from the competitors?
A good market has a large number of paying customers for your product. Typically, large market size is a prerequisite for scaling a SaaS product. SaaS companies can often lose by winning in smaller markets. The market size, paying capacity and quality of customers matter a lot for your SaaS product market fit.
3. Core Problem
Almost all successful SaaS products achieve product market fit by solving a core problem for their customers. The idea is to create compelling differentiation and a strong value proposition by offering a great solution to an existing problem for the customers.
The SaaS product market fit requires companies to solve one problem for their customers. Take for e.g. Zoom built a video conferencing tool and did it better than others. Slack solved the productivity and communication conundrum. Uber solved the taxi problem. SaaS products that try to do everything for everyone are harder to scale and please the customers. Identifying a core problem of your customer is important to nail the product market fit. A few questions to zone into the right problem:
How does the problem impact your client?
What is the cost of not solving this problem?
What are the constraints for the prospect i.e. time, finance & authority?
How do they solve this problem currently?
4. Rapid Prototype
The product development should start once the needs of your customers and the core problem you solve for them is validated. The prototyping phase involves development of the core product with a singular focus. The product can be built and beta tested by early customers.
The early versions of the product can give you a good indicator of the customer’s interest. When the customers take keen interest, provide inputs and use your product, it can help you improve your SaaS product appreciably.
Quick and rapid prototyping involves working on customer feedback. It is an iterative approach for adding value with every new version of the product. But the core focus remains on the problem you want to solve.
5. Sustainable Business Model
A sustainable business model can be an often overlooked aspect for fast growing SaaS companies. But it matters for most of the companies, your product’s value proposition lies in its business model. As long as you can have a steady stream of paying customers and build things for them, you can grow your SaaS company.
A good market is where you can find a sustainable business model for your SaaS product. It has customers who are willing to pay the right price and offer scalable opportunities for your business. SaaS products typically need to provide tangible value on a repeated basis for recurring revenues. Some SaaS products also offer premium services and alternate models like one time revenue, service fees etc. for increasing revenues.
Your SaaS product market fit can be ascertained by offering a great value proposition for your customers. What will customers lose by not having your product? Do customers know the value of your product in tangible terms? A sustainable business model is built when customers can articulate the value proposition they get from your product with clarity.
6. Competition & Existing Solutions
The SaaS product market fit hinges around the options for your customers. Your product must address these aspects:
What options does your customer have if they need to replace your product?
Is your product offering something better than the competition?
What is the price your customer pays if they don’t use your solution?
Is your product value tangible and visible enough for the customer?
Do you offer services and support that helps your customers solve an existing problem?
A careful study of your competitive landscape can help you define a clear differentiation strategy for your product. Identifying the gaps in the existing solutions and the customer needs can help you build a better SaaS product.
Customers are typically reluctant to switch, especially when they need to make efforts to do so. How your product can smoothen their onboarding journey & help them solve their problems swiftly over competitors makes the difference.
7. SaaS Product Market Fit is Dynamic
Your product initiatives are linked to customer problems and needs. But the customer needs are dynamic and changing. So, your SaaS product needs to stay ahead of the curve. It needs to provide state of the art technology solutions to make it easier for customers to use your product.
Typically new technologies cause inflexion points that bring new solutions to the market. A new product or solution can address the needs of the customers more effectively than past solutions. This is an innovator’s dilemma. You need to constantly innovate and build things to advance your product with the latest tools and technologies.
When your long term vision is aligned with customer needs and technologies for the future, your product market fit remains dynamic. The SaaS product market fit has become the lever for expansion, growth and scale for companies today.