1. Target Group & Market

Choosing the right market precedes choosing the right customer. A product strategy defines and nails the target market, customer and the outcomes they are looking to achieve. 

One of the golden rules of product strategy is to never work on features that no one is willing to pay for. A good product strategy aligns the team with the vision and helps them develop the best solution for the customers. Targeting the right group of customers requires measuring and defining metrics for the product. Some important questions that are addressed by the product strategy:

Who is our customer?
What is the problem we are solving for our customer?
Who is not our customer?
How do we measure success of our product with well-defined metrics? 

Many product teams are focused on adding features without understanding the key requirements of the product. The product development shouldn’t be driven by the product managers or the development team, but by the customer and the market.

The software developers and engineering teams accomplish the best solutions when they are well versed with the customer problem they need to solve. A good product strategy articulates the need with clarity and gets everyone on the same page. It helps the team deliver the key outcomes customers value & are willing to pay for.

The founders of Airbnb posted a few photos of their apartment on a simple webpage to test the proof of concept. A simple way to test your target customer market and how you can address them goes a long way in articulating the defining your product strategy.

2. New Business Model
An innovative business model can go a long way in creating a differentiated product that customers would notice. When Netflix was a DVD rental company, they operated from a store and rented out DVDs to their customers. It faced a lot of competition from existing players in the industry, they soon started DVD rental over the web. The DVDs were delivered through mail. Yes, this was back in the days when bandwidth didn’t allow video streaming like today.

The company again reinvented itself with a new streaming-based platform for reaching customers around the globe. Uber disrupted the taxi industry by offering a cheaper, faster and more convenient online service.

A strong product strategy looks for ways to disrupt an industry. It asks questions like, how we can revolutionize an industry? What are the ways we can monetize our product without charging more from customers?

An innovative business model analyses the target customer segment and its impact on the business. For e.g. can we eliminate the least profitable segment of our customers? Do we need to serve smaller markets or focus on bigger markets with quality customers? How we can reach a bigger scale for the product without affecting the quality of service to customers?

3. Distribution & Sales

Businesses that scale-up develop innovative distribution strategies to find customers. These could include SaaS product platforms, freemium users, enterprise or government customers etc.

A good product strategy helps teams reach more customers by making the product distribution easier and seamless. For e.g. 90% of Skype customers don’t pay, it means only 10% of customers pay for Skype subscription. But by introducing the product for free, Skype generates its revenue. The company also doesnt incur any infrastructure cost like telecommunication companies. The Skype customer service and support is done in a highly automated way reducing costs.

Technology changes things, it makes a revolutionary impact and reaches scale quicker. For e.g. Chrome launched by Google targeted faster-browsing speeds. It aimed at 10X improvement over existing browsers, similarly when Gmail was launched, it offered an unprecedented improvement over the competition to reach more customers at a bigger scale. 

4. Key Partners


Gone are the days of building things in a silo, today even companies like Apple & Microsoft are opening up their ecosystem to collaborate with others. The key partners for a product can help its visibility, distribution and even offer complimentary value. For e.g. many accounting software needs to be interoperable with tax-filing utilities to provide the last mile service for their customers. 

Salesforce provides a development platform for third party developers and apps. These apps can be hosted on the Salesforce platform and availed by the Salesforce customers. It offers a valuable addition to the Salesforce customers as well as third-party developers to reach more customers.

The platform companies like Youtube, Medium, and Netflix are also incentivizing content creators. The key partners for a product strategy explore the possibilities of maximizing the network effects of a given platform. The product strategy involves ways in which key partners can be integrated into the ecosystem. The development, marketing and outreach efforts are the key partners are vital components of a good product strategy.

5. Technology Capabilities

The technology capabilities and competency of a team go a long way in building the right products. There are many examples of products that scaled prematurely like Pandora and could sustain themselves when facing the heat.

The product strategy outlines the core competencies of the team. It evaluates questions like:

What are the core technology strengths of our team?
How can we build market-leading products?
How well do we receive market feedback to adapt?
What are the innovations that can give us the edge over others?
What are the product technology risks for us and how we can avoid them?
Is our team reskilling itself for the future?
How quickly do we adapt to the market & technology changes?
How do we manage the talent pool of workers and attrition?
What is the basis for our product innovation efforts and how it is measured?
Is our product offering meeting the unmet needs of the customers?

The technology capabilities help teams crack the unaddressed customer problems or provide a better solution than an existing one. The speed of execution, focus & ability to think ahead provides an edge to product teams.

6. Orchestrating Business Functions


Most product teams that fail build things in a silo. They don’t understand the overall picture and how they need to address the customer problems. The marketing, development, sales, distribution, customer service, support, and new opportunity management etc. has to be in synch for building the right product. A good product strategy has a unifying impact, it rallies everyone together and enforces a shared vision for the team.

A good product strategy brings product thinking into the team. Many development teams simply want to add features, fix bugs and do mundane work without deep involvement. But the product strategy is driven at the core by engineering a better product for the customers. It is understanding the overall picture that the product serves and contributing to it. Successful product teams operate with a holistic view of what they are building, but ordinary teams only focus on what they are trying to build now to fill their days.

7. Value Innovation 

Good product teams are focused on their customers, not the competition. While it is easy to copy other products and play the catch-up game, it rarely works. Value innovation identifies what customers value the most and the underserved opportunities for which they are willing to pay.

The term innovation can be vague and may mean different things to different people. However, when the context is clear and the value metrics are defined, innovation takes a different meaning. For e.g. Cisco created routers & network devices with a 60% margin, they uncovered the value innovation with superior products. Value innovation can have a decisive impact on the product & create demand for it. 

HP’s mantra epitomizes value innovation succinctly, “When performance is measured by results.” It simply states that it doesn’t matter what you have done and all the features you’ve added unless it solves a problem for the customer.

Kreyon Systems is a SaaS product company. If you have any queries for us or need help in building SaaS products, please reach out to us.

The post SaaS Product Strategy: Principles and Basics of SaaS Product Strategy  appeared first on Kreyon Systems | Blog | Software Company | Software Development | Software Design.

The increasing dependence of businesses, governments and consumers on SaaS products augurs well for the growth of the SaaS companies. The pandemic has in many cases driven unexpected growth for SaaS companies. Product led growth is pushing companies to new heights at an unprecedented pace. As per Mckenzie report, 92% of SaaS companies fail within 3 years despite growth and funding. The remaining ones master the art of adaptation, grow at a sustainable pace and stay resilient to the challenges. Here’s a look at the key takeaways from successful SaaS companies.

1. Product Market Fit

According to CB Insights, 42% of startups fail due to poor product-market fit. Companies that are successful are able to build a product for which customers are willing to pay. These companies establish their customer needs with the right product.

The SaaS products that are successful define the core features with precision. These products test their hypothesis with customer feedback. SaaS products that serve their customers well typically answer the following questions about them:
Who they are?
What do they do?
What makes them successful?
What are their pain points?
What does their typical day look like?

Marc Andreessen & Ben Horowitz have suggested the following definition for product-market fit:
“Product-market fit means being in a good market with a product that can satisfy that market.” When there is a good market that is ready & you have a product that can satisfy the market, you can build a successful product around it.

2. Frictionless Experience

The customer acquisition costs for a SaaS product have increased many times in the last few years. Customer onboarding plays an incredibly crucial role in building frictionless experience for them.

Most SaaS products have a high churn rate, the conversion ratio from a trial customer to a paying customer is typically low. Companies that provide hand holding support to the users & help them with their day to day tasks are able to retain their customers longer.

Customer experience and smooth product experience shape the journey of the users. Studies have shown that 44% of companies spend more on customer acquisition than customer retention. Infact, just 18% go the other way. But customer retention is an important metric for SaaS companies. When companies invest in building superior customer experience for the users, the customers can use products with ease and derive greater benefits from them.

Successful SaaS companies follow-up with their customers by sending them emails and scheduling calls to ensure active usage of their products. They ensure that users get the best out of their trial period and do everything to assist them. Companies like Slack have built dedicated training sections for customers to use the software effectively, in addition to its intuitive product & stellar user experience.

3. Smooth Checkout & Recurring Payments

The customer retention rate is one of the keys to building a SaaS company. Companies that have a smooth checkout process and automation for recurring payments are able to reduce the customer churn rate.

Platforms like Netflix, Amazon Prime etc. are great examples of how payments can be done with minimum fuss. These platforms help you create subscription based recurring payments for their products.

SaaS products that are equipped & leverage payment automation are preferred by customers. Many companies have successfully employed annual subscription fee models for their SaaS products. They charge customers one time for the year, but payments are deducted monthly. Payment automation, reminders and automated billing reduces friction for customers.

4. Customer Insights

How organisations plan, understand and use insights from customers makes a great difference. Organisations who listen to their customers often provide them with better products in the process. Great SaaS companies use strategic ways to listen to their customers. For e.g. Salesforce has a conference dedicated to listen to its customers where they share their experiences and aspirations.

Customer insights can unlock great features and capabilities in building better products. Customer service, support and marketing teams can all bring in insights for the product teams to work on. The priorities and roadmap can then be charted by the management teams to serve their customers. Data driven product development efforts are far more effective for building SaaS products than building them in silos without quality customer feedback.

5. Sustainable Growth

One of the highest causes of failures among startups is growth. Yes, you heard it right. When SaaS companies grow too quickly, don’t have the necessary infrastructure, product and capabilities for handling growth, it can create trouble.

SaaS companies that are well funded oftentimes scale up prematurely. It can create unnecessary hurdles for them. When resources are hired at a fast pace, sometimes teams don’t have the right people in right places. Technologically, the product is not architected for exponential growth and the underlying sustainability of the business is questionable.

The successful SaaS companies are built on strong value propositions and sustainability. They have a focused approach of delivering value for their customers, have the right teams in place for building, supporting, marketing and sales of the product. They look at their most important metrics, take a process driven approach and track progress religiously to meet their goals.

6. Switching Costs

The switching costs are the additional efforts & money to switch from your product to another one. Typically there is a learning curb involved when customers use a new product. More often than not, they will not switch, if the effort and costs are high.

Studies have also shown that users and customers typically value something when they have spent efforts on it. For e.g. if your customers have been frequently using your SaaS product, they would value it more compared to products where they didn’t spend time or efforts.

The best SaaS products create triggers for their users. These triggers help users to accomplish tasks and make them feel good. When users spend time and efforts, they are more than likely to continue using the product. A process driven approach to help users accomplish what they want creates a hook for the users.

Kreyon Systems is a SaaS development company with expertise in building end to end ERP, Finance & Accounting, CRM, Lending, Document management & other software products.  If you need any assistance in implementation or have queries for us, please get in touch.

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