SaaS continues to take up quite an ample space in the software market, as more people rely on SaaS solutions to improve the quality of their company’s operations and daily lives.
To grow your SaaS business, not only would you need a good product—but you would also need an optimal growth framework to guide you towards the right (and sustainable) direction.
In 2020, SaaS growth platform Paddle surveyed key SaaS decision-makers to understand their strategies in chasing growth. Then they used the data from the report in coming up with what they call the Five-Star Framework, a model that includes the five most popular tactics of SaaS leaders in accelerating growth for their business.
1. Monetization
According to the report, 16.01% of respondents said monetization has the most significant impact on revenue growth out of the five levers. If you’re still in the process of building your pricing strategy, assess your customer segments and create an optimized pricing package that provides the most value for them. Set a price point they would be willing to pay and adjust these prices as needed so that you can maximize your profits.
Case-in-point is the straightforward pricing model Google’s G Suite uses. Considering their target market, combining a tier-based pricing model and a per-seat approach proved to be a wise move—their customers are now seeing value beyond the prices set and getting more from the product than they’re currently paying. Whether for basic, business, or enterprise usage, G Suite’s pricing model helps them retain customers and gain more opportunities for market growth.
2. Tapping into New Markets
Global business expansion may sound like a daunting goal to work on, but it is possible and necessary most of the time. Forty-five percent of the respondents said that they are looking into tapping international markets within the following year.
Market research is essential when expanding into other countries—first, you have to determine if there’s a need for your solutions at a global scale. You then have to consider localizing your service to the countries you choose to be in, such as working on language translations and selecting which channels to use.
Shopify’s success in the international e-commerce market is an example. While they already had several global sellers before their expansion, they decided to expand into markets outside the United States, UK, Canada, and Australia. It even established its order fulfillment network to streamline its shipping procedures further and make it more reliable while at the same time helping global retailers manage orders at a quicker pace.
3. Moving Upmarket
Entering into an upmarket segment is often a long-term objective for most SaaS companies, particularly those in their startup stages.
But determining the right pricing plan to help them move upmarket continues to be the central struggle of businesses, accounting for 45% of responses in the survey, with hiring sales teams being the second common reason.
Slack’s story of overcoming price model difficulties was more than phenomenal. Implementing a seat-based pricing model propelled the company to further success, with their enterprise segment contributing to 40% of their revenue at the start of 2019.
4. Moving Downmarket
Moving ‘down market’ is just as effective as its upmarket counterpart in reaching prospects and converting them into paying customers. If you’re currently catering to larger companies, you might want to consider tapping into individual consumers or people looking for solutions for a self-serve purpose. By making your service available to smaller teams, you get the chance to maximize your market potential, boost brand visibility, and increase your revenue in return.
Video hosting startup Vidyard is among the ones who utilized this growth lever strategically. They started appealing to larger companies, then worked their way down to smaller customer segments by introducing a “reverse freemium” model. The result? These smaller segments found value in their service and were willing to pay for it over time. Now, not only did Vidyard capture a larger share of the market, but they were also able to work closely with their enterprise clients in reaching more prospective customers.
5. Product Expansion
As you go along marketing your SaaS product, you most likely have received customer feedback that asks you to develop features you haven’t incorporated into that product yet, or suggestions on a version most of your customers seem to be looking for.
Adding new features to your existing product can enable you to cater to smaller or larger customer segments. With Paddle’s report as reference, 40% of the respondents built specific products for different segments, with 69% of those who haven’t done so yet saying that they plan on expanding their product suite in the next 12 months.
Final Thoughts
While growth is essential for all businesses, there is no one-size-fits-all approach that applies to each one. The growth levers mentioned above should be used in tandem—combine a number of them to keep your business profitable and help you assess its growth trajectory.
Photography by Austin Distel via Unsplash