Developing a product or service first and identifying a target market later is a disaster in the making. This is especially true for the notoriously fast-paced software industry. For every type of software tool that you make, there are already dozens of SaaS startups offering the same, which can be a roadblock to scaling up. The aptly titled ‘Grow Fast or Die Slow’ study by McKinsey reports that software startups who do not sustain annual growth rates of more than 20% have a 92% chance of not making it — an intimidating pair of numbers that must be taken seriously.
This is where understanding your target market can set you apart. It’s a process that involves asking a lot of questions. In doing so, you’ll be able to develop, adjust, or market your product to the right consumers and in the right way. These are the most important questions that you need to be asking:
1. What problem/s are you trying to solve?
Hopefully, you’ve already answered this question in the product development phase of your SaaS startup. If you haven’t, then you better sit down and think hard about how your SaaS aims to solve a specific problem.
This will allow you to find a specific position in the market and, more importantly, figure out who your potential buyers actually are. For example, the popular marketing platform MailChimp solves the problem of volume when it comes to managing mailing lists on different channels. This tool now services big corporate clients but, like all small businesses, it started out as a humble B2B, which leads us to the next question.
2. Who are your targeted clients?
Whether you’re aiming to offer your SaaS to other businesses or individual consumers, that’s an important question you need to be asking. The thing about MailChimp is that, while the initial market was niche — say, professional bloggers who need to build email lists — there was a lot of room for expansion.
Let’s look at another marketing platform, LeadsBridge, who went through a similar evaluation process. LeadsBridge founders asked this very important question: “Can you apply the solution you currently use to solve the specific problem of your niche to a wider spectrum of problems as well?”
Answering ‘yes’ means there’s potential to scale up your business. To answer in the negative is a sign that your SaaS might be <em>too</em> niche. Finding your niche is important, yes, but there should be enough market mass to tap into when you’re ready for expansion. Otherwise, turning a profit long-term will prove to be an impossible challenge. That should call for you to further develop your SaaS, adding features and benefits that can attract a greater number of leads.
3. How do you understand the needs of your market?
We don’t need to look at tech startups to understand how this process works. Let’s use coworking companies as an example as they are at the forefront of the changing business world. For their part, the Industrious coworking community in Kansas City places importance on flexibility that fellow startups need. Unlike traditional offices, there are community memberships available and access to common areas where other entrepreneurs can collaborate. And after work, those who use Industrious’ Kansas City branch can even treat themselves in the surrounding shops, as it is located in the Country Club Plaza. This is also how WeWork became NYC’s premier coworking community. Not only do they offer networking opportunities for a growing number of startups, they also aimed to solve the problem of rising commercial real estate prices. Both companies have an understanding of what their target market needs — so how do you develop that knowledge for your own SaaS?
Although laborious, this is actually the most straightforward part of this entire process. You can either choose to outsource a marketing agency to do this for you or conduct the primary and secondary market research on your own. Secondary research means reading through industry reports and news. On the other hand, primary research involves a lot of face time with your consumers.
Simply put, you need to reach out to your clients through workshops, focus groups, interviews, and surveys. For instance, if you are providing software to coworking spaces like those above, then flexibility has to be built into your product, too. Moreover, All Business pointed out that trade shows help startups gain immediate feedback simply by interacting with attendees and gathering insight. You can already deepen your understanding of your ideal customer, as well as the particular features and benefits they’re looking for in your SaaS. Create a buyer persona, and host group discussions or reach out to them on social media or surveys.
Altogether, these techniques can help you more effectively reach out to your prospective clients and grow your startup to a fully-fledged SaaS company.