Product development is integral to a SaaS (software as a service) company. As much as it is crucial, it is also costly and time-consuming. SaaS companies must keep iterating their product to remain relevant in the market and beat the competition. One of the vital things SaaS companies can leverage is understanding customers.
“You’ve got to start with the customer experience and work backwards toward the technology – not the other way around,” Steve Jobs.
It is only through understanding customers that companies can give an excellent user experience. With the rise in market competition, buyers always look for a great customer experience. Understanding customers will lead to a high conversion rate, low churn rate, and a high lifetime value. Happy customers will refer the company to their friends leading to high organic growth.
Some of the benefits of understanding customers in product development include the following:
Customer segmentation is grouping customers according to shared characteristics. It can be demographic, behavioural, psychographic, or geographic.
Harvard Business School suggests that about 95% of businesses fail because of poor market segmentation. Understanding your customers will help you to segment them. This will help the company to focus on customers who matter. You can then tailor your offering based on their needs and the resources you have. Segmentation allows you to personalize. This helps you communicate and offer a product that resonates with the customer.
Focusing on a specific group of customers will help you save time and money on product development.
It helps you to focus on what is important.
Through understanding customers, SaaS companies can focus on features and functions that bring the most value to them. It is interesting how many SaaS startups have 5-10 smart features they believe customers will love. From our validation experience, customers have one feature they love the most and do not care about the rest.
As much as the features are good, focusing on every feature is expensive, and the customer will use only some features. Prioritizing the features that impact a customer most will ensure you are a success.
When working on an MVP, understanding your customers and having buyer personas can save you 10-20% of costs. It can help you separate real customers and true lovers from seasonal customers. This will help you avoid developing too many or unnecessary features that lead to wasting resources.
Once you make your product, you will have to iterate it from time to time. Customer feedback can be a gem when choosing what to change. It will also help you make changes when they are necessary to help you remain relevant. Making small incremental changes will be cheaper as opposed to one significant difference. It will also ensure the product aligns with the buyer’s needs.
Understand how customers use the product
Even though you create a product for use in a certain way, customers may use it differently. You can know how customers use the product through feedback and customer data. This can help you understand how to optimize to suit their needs better. For instance, you can improve the feature they use the most. Focusing on bringing in more customer value will make them happy customers with a high LTV.
Meet a product-market fit
It is possible to achieve a product-market fit if you understand your customers. The ideal product-market fit is when the demand for your product is higher than the supply. Your product resonates with the buyer’s needs when you have a product-market fit. Many startups focus on attaining a market fit. It all starts with knowing your buyers and their pain points to understand how to solve them. Sulma & Sulma has a product-market fit engine to help startups meet their market fit using customer data and insights.
This is common in SaaS companies. Product-led growth is where the customer fuels the company’s growth. Many successful SaaS companies, such as Calendly and Figma, use that to fuel their growth. Many companies use the approach of having a freemium mode or trial mode for customers to try and have a feel of the product. This can give you early insight into how users explore, navigate and use your product. It is a great way to gather behavioural data, which is critical in personalization.
“Trying a product is and will always be an essential part of the buying process,” Wes Bush, Product Led Growth.
Through a product-led approach, you can know what piques the interest of your target buyer. They can contribute to new features and functions. In return, they can give you feedback helping you save on development costs. If they are happy with the service, they can refer your product to their networks leading to organic growth.
Understanding customers helps to increase the efficiency of a SaaS company. This is in different dimensions, such as product development, making iterations, and acquiring customers. When the customer acquisition cost is low, the ROI will be higher. Making the right changes will mean intelligent product development, which will help you develop the best product for your needs.
When a team is united, it is easier to move forward. One of the main challenges facing teams is miscommunication. With understanding customers, you can solve several internal challenges. Internal conflicts, e.g. between product development and sales/marketing, can reduce by understanding buyers.
One of the main things that hinder company progress is poorly defined goals due to poor communication. This is a situation of wrong priorities from the different stakeholders in a company.
For instance, wrong priorities from the development and marketing team lead to friction. A company can solve/avoid conflict by first starting with understanding customers. This will help the team have the right goals. When you are building an MVP, it will manage trade-offs between features, cost, and time-to-market.
When there is team alignment, meeting goals is easier as everyone is on the same page. Better communication means better team play and more done with less effort.
How can you understand customers?
Although understanding customers is a must for every business, most companies need to improve. Hubspot suggests that 66% of customers expect companies to understand their needs. This indicates that the customer is king, and businesses should strive to ensure that.
“We see our customers as guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” –Jeff Bezos.
The first step to understanding customers is a buyer persona. A buyer persona is a fictional representation of your ideal customer. A buyer persona has a detailed description of the person, including their demographics, triggers, pain points, and behaviour. A buyer persona also has a name to make it as human as possible. This will help you or your team to visualize the persona and know how to deal with them. The first step to attaining a product-market fit is a well-defined buyer persona. Working on Buyer Personas is a constant process as customer needs evolve. Startups mistake that once they have a product-market fit, they do not have to update their buyer personas. This gives them a competitive disadvantage with time. Companies may have several buyer personas, with most having at least three. Sulma & Sulma uses data and insights to help companies understand their buyers.
This enables a company to make data-driven decisions to move forward. Understanding customer personas goes beyond making data-driven decisions. It translates to good communication, better decisions, and team alignment. When teams focus on the right goals, all processes are smooth, leading to conversions.
Talking to customers
The easiest way to understand a customer is by talking to them.
What if you don’t have customers? You can talk to prospects who mirror your best customers if you do not have customers. Another approach would be getting test users to be your brand ambassadors. To test your product and give feedback.
Gathering customer feedback
Apart from talking to users, there are other methods of gathering feedback. They include surveys, emails, and analytics. This can help you know what users think and feel about your product or service. You can also know the suggestions they have and what features they use the most.
Tracking and analyzing usage data is a must for any company. It will help you know the demographics of your buyers and their behaviour with your software. This can help you learn the features they love, the time they spend on it, etc.
The information can help you segment buyers, which can help you address them based on their stage in the buyer’s journey. Luckily, various tools help with that, such as Google Analytics and Hotjar.
When you research your competitors, you can identify gaps in the market and fill them. For instance, if you offer the same service as a competitor, you can check for gaps and fill them. An intelligent way of doing it is by checking customer reviews, especially negative ones. That can give you an insight into what your competitors need to do, and if you do it, you will win your competition.
Product development best practices for customer success
Any SaaS needs to follow a set of actions for customer satisfaction and retention. Some of the practices include:
Prioritize customer success in the early development stages
Since you are developing the product for a customer, you must focus on customer success. When you are customer-centric, you strive to understand customers and deliver their needs.
Most SaaS companies will have a customer success manager to ensure they invest their resources where they should. Customer success starts by understanding what job the customer is hiring the product to do and how you can make it better for success.
Define what success means to your customers
Customers may have a different definition of success than yours. To understand how customers define success, you have to talk to them. Surveys are a great starting point for getting feedback. You can adopt it as part of the onboarding process. The sales team can also talk to customers and give you feedback about their goals and triggers. There are different avenues to speak to customers, such as conferences, open discussions, etc.
When gathering feedback, you will notice that customers have different desired outcomes. Talking to customers will help you understand them, their needs, and their triggers. This will help in adjusting your offering.
Customer onboarding process
Customer onboarding sets up the customer for success. The customer success team does this to ensure less friction in using the product. It will also ensure that customers get optimal value from the product through their sign-up.
With the rise in automation, many SaaS companies are automating their process with guides and tips to help their customers.
As much as there are different approaches to it, your goal should be to ensure customers understand the product and get more value from it.
Customer offboarding process
Even though we may have all our processes set right, customers will still churn at some point. Thus, we must take care of the offboarding bit to ensure a smooth experience. When they are offboarding, they might come back when their needs change or refer the company to those in their networks.
You need to ensure the cancellation process is smooth regarding offboarding. If it is a subscription, it should be easy to cancel.
Customers should also be aware of the integrations they are working with and how offboarding will affect the integration.
As much as a customer may offboard from your SaaS system, it is fair if they can access their data when the need arises. This can be for a certain period.
Even with offboarding, you can still give customers access to your product. For instance, if they are cancelling their premium subscription, you can still provide them with access to a freemium version so that you still keep them.
Keep track of consumer data.
For any customer success, tracking data is a must. It will help you know whether customers use the product and how they use it. Tracking data will help you understand the following:
- If they are using the product
- How often are they using the product?
- How they are using the product
- The features they love and those they don’t
- Know customers who are getting the most from your product
- Know customers who are likely to churn
This can help you know what gives customers more value and how to improve it. Through monitoring, you can identify gaps and learn how to fill them. You can also identify upsell opportunities, e.g., from customers who are getting the most from your product.
Every company should have a process of gathering, sharing, and monitoring customer feedback. You can understand customer needs, priorities, and experiences with your product through feedback. You can use several methods to collect feedback. This includes:
- Using surveys such as net promoter or customer satisfaction scores (CSAT) to measure customer satisfaction.
- Reviews can give you feedback about your product. Solid review sites such as G2, Capterra, and Trustpilot are likely to give you unbiased feedback.
- Talk to customers. One-on-one interviews can give you deeper insight into the product and if it solves the customer’s pain point. Many SaaS companies are leveraging communities to gather feedback. Through AMA(As Me Anything) sessions, they can know their customers’ concerns and fears. Through that, they can also get suggestions on what to improve.
Although collecting feedback is essential, you must use it to get value. Otherwise, the input will be of no value. You can use the feedback to implement different solutions and test them. For example, AB testing lets you know which solution resonates better with a buyer’s needs.
There is no shortcut to cutting development costs than understanding customers. After all, you are developing the product for the customers. Understanding buyers will help prevent product backlog problems, help you meet a market fit, and increase conversions.
Sulma & Sulma are experts with a product-market fit engine that help you get deeper insights into your customers. This allows you to unlock a buyer’s mind, which enables you to align with their needs.
Are you looking for ways to upgrade your customers game?