5 Common SaaS Mistakes to Avoid While Growing Your Business
August 30, 2021
SaaS is one of the fastest-growing industries in the world today. In the next five years, it’s projected to grow at the compound annual rate (CAGR) of 11%!
Therefore, it makes sense that the SaaS market is also fiercely competitive. If your business has a stake in this neck-to-neck game, there are a couple of things you definitely don’t want to get wrong. Otherwise, you risk falling out of the race altogether.
This article will present you with some common mistakes SaaS business owners make while delivering their products to customers. It will also empower you with actionable advice and good practices you should adopt instead.
Let’s dive right in with the first SaaS mistake you should avoid.
Table of Contents
Hiding Your Product’s Prices
Being transparent and upfront about your prices is one of the quickest ways to a customer’s heart. That’s why hidden pricing is at the top of our list of SaaS mistakes you don’t want to make.
We’ve all been there. You get excited about a piece of software you could really use. You’re seriously considering purchasing it.
But then, you go over to the pricing page, almost ready to buy, only to encounter this:
A pricing page that doesn’t actually contain the price, only a contact form.
How do you feel? Frustrated? Ready to quit the software entirely?
Well, you’re not alone.
One of the first questions buyers have when considering purchasing software is how much it costs.
In fact, a G2 study found that transparent pricing is the most useful feature SaaS companies can offer to help buyers decide if they want to purchase their software. It was found to be even more helpful than reviews!
In practical terms, this means that buyers who are unable to quickly find the price of your product on your website will get frustrated and take their business elsewhere.
Interestingly, hidden pricing is an almost unique feature of the SaaS business model. Can you imagine if other industries did the same thing?
Not much could deter us from buying a dozen donuts, but this pricing model sure would.
The SaaS business model is all about putting the customer first.
Obviously, failing to reveal your prices isn’t conducive to an enjoyable user experience.
That’s why you should avoid hiding your prices as much as possible. It will prevent your potential customers from churning before they’ve even had a chance to use your software.
Exceptions To The Rule
That being said, there are cases when not revealing your pricing upfront is inevitable.
For one, setting a fixed price gets more difficult as the complexity of your software increases. If your product has many features and can be customized according to the client’s needs, pricing should indeed be determined on a case-to-case basis.
However, when this happens, it’s essential to make your contact information easy to find and have a sales team ready to articulate offers based on the customer’s needs.
For example, HubSpot does a lovely job connecting prospects to their sales channels. They offer multiple contact points, such as calls, chatting with customer service, and a handy chatbot.
Another exception is called “enterprise” pricing. This applies when your software can be used by individual customers as well as large teams that work in massive corporations.
Enterprise customers often require a different level of service or different product customizations and so custom pricing makes sense.
In that case, subscribers who use the basic plan could be allowed to circumvent the sales team, while bigger accounts would have to go through the sales team.
After all, local SMBs and giant corporations have different needs and requirements, so it makes sense that the pricing is different for enterprise companies.
To sum up, price transparency is vital for your users. If you decide to hide your pricing, make sure you have a good reason to do it.
Copying Your Competitors’ Pricing
We’re going to talk about how to set your price a bit more because it is one of the most crucial aspects of your SaaS business. Have a look at the graph below to see why that is.
As you can see, improving your pricing by just one percent can yield tremendous results in terms of profits.
Apart from hiding your prices, you should also avoid another widespread practice in the SaaS business world—copying the prices of your competitors.
SaaS products are usually priced according to one of the following models:
- Cost-based pricing. This method consists of calculating production costs and adding a markup percentage to articulate the price for your product.
- Competitor-based pricing. It involves examining your competitors’ prices, determining your position among them, and copying the price of other products at your perceived level.
- Value-based pricing. The model that puts the customer first. It determines the price according to the value the customer receives.
On the surface, competitor-based pricing may seem like a good idea. It’s simple enough to do, and there’s minimal risk of severely overestimating or underestimating your product’s value.
That’s why it’s a common practice in other industries.
For example, two famous products that base their pricing off of each other are Coca-Cola and Pepsi. They have very similar products and compete for the same audience.
Consequently, they have very similar prices, with Pepsi always lagging just a little bit.
However, when you’re developing a complex piece of software, there’s no way for you to know how your competitors arrived at their prices. Their production costs may be entirely different from yours. Also, how do you know your competitors didn’t copy their prices for someone else?
There’s no getting around it. Basing your pricing on your competitors always leads to misunderstanding your customers and the value of your product.
SaaS Marketing: Imitation is the sincerest form of flattery… and the quickest path to mediocrity http://t.co/1yEyfX7bpg
— Lincoln Murphy (@lincolnmurphy) May 18, 2013
If you don’t understand your customers or the value you can offer them, how do you expect to give them the best possible service? That’s why competitor-based pricing leads to mediocrity, just as Lincoln Murphy, a renowned SaaS expert, argues.
For these reasons, pricing should typically be based on the value your software brings to customers.
Keep in mind that your customers don’t want software that’s cheaper than what the competition offers. They want software that will solve their problems and make their lives easier.
Nevertheless, it’s a good idea to keep an eye on competitor prices. For example, you can take a page from the book of Madison Kaylo, the product manager at Process Street:
“I take screenshots of our competitor’s pricing plans about once or twice a year, and file them away so we can see how they’re evolving over time—but that’s it. Customers come first, competition comes second.”
Therefore, what you need to focus on is the value of your product. As long as you provide great value, customers usually won’t mind paying more to keep receiving your excellent service.
Tracking the Wrong Metrics
There is a veritable sea of metrics that can be tracked, and keeping an eye on all of them is pretty much impossible. Avoid the mistake of devoting too much effort into tracking metrics that don’t tell you anything useful.
Instead, try to decide on a handful of metrics that point to concrete actions and help you reach your goals. Here’s a list of characteristics every metric you track should have.
- Easy to understand
- Easy to access
If your metrics are easy to understand for your whole team and accessible to your entire organization, actionable insights are much more likely to arise. Every team in your company can draw their own conclusions and provide you with steps to improve your service and grow.
That’s where analytics and querying software, like Trevor.io, can come in handy.
Trevor.io makes it easy for anyone on your team to get answers from your company database, empowering people to learn and contribute in real-time.
Furthermore, we can distinguish between three very different types of metrics.
- Vanity metrics are the ones you should definitely avoid. Their very name is indicative of their function: making you feel good and giving you a reason to brag. These include things like website visits and new signups. They may look good, but they don’t tell you how to make your product or workflow better.
- Lagging metrics can tell you a lot about the overall performance and health of your company. However, these take a long time to develop, so they’re not very actionable. A couple of essential metrics fall into this category, like ARR, MRR, Churn, ACV, and so on.
- Leading metrics measure your input directly. Unlike lagging metrics, they’re relevant here and now, which means you can act on them immediately and expect results soon after. Examples include the number of prospects added, and the number of customer tickets closed in a month.
If the distinction is a little vague, here’s an example. Let’s say you wanted to track how your revenue is growing.
To do this, you would need to know your annual recurring revenue (ARR), but that data would only become available at the end of the measurement period.
In the meantime, you can track the number of leading metrics that will indicate your growth and point to aspects that are failing and need to be improved.
Some Valuable Metrics to Track
You probably already have a good idea of which metrics are most valuable to you.
Nevertheless, here’s a short list of metrics that are widely considered benchmarks for success in the SaaS business model.
- MRR and ARR or monthly and annual recurring revenue.
- Churn rate. One of the most important metrics for SaaS businesses, churn tells you how many users are abandoning your product and can point to actions to prevent that.
- CAC or cost of acquiring customers. This one is essential because it doesn’t matter how many customers you’re acquiring if the cost of acquiring them eats up your revenue.
- CLV or LTV, which means customer lifetime value. Keep in mind that long-time customers are more valuable than new customers in terms of revenue. That means that lifetime value needs to be kept as high as possible.
Those metrics provide insights for your SaaS business.
Having a Content-Thin Website
There are many software solutions to any given customer problem. That’s why it’s crucial to put your best foot forward and impress potential customers with your expertise and the wonderful features of your software.
You can do that by enriching your website with quality content and valuable resources that will convince your customers to put their trust in your product.
In fact, studies have shown that 82% of consumers harbor more positive feelings about companies whose websites are filled with quality content, and 90% find this kind of content useful.
Content marketing also gives you ample opportunities to plug your products and entice users to subscribe.
For example, Wordable offers software solutions for content publishers. They write a blog about content publishing that’s full of great advice. Every article also features a subtle and excellently positioned plug for their product.
In the example above, the article offers solutions for a problem shared by many content creators and includes the company’s own product as one of the solutions.
In addition to that, content falls squarely into the SEO category, meaning that search engine algorithms will reward your efforts to produce it with better rankings on the results page.
As you can see below, fresh content is the second most important ranking factor for Google.
Customers like content-rich websites, and it’s essential to include as many different types of content as possible so that every visitor to your website can find something valuable.
For example, the Kissmetrics blog offers articles, guides, case studies, expert opinions, as well as a demo presentation.
Blogs like this are a treasure trove of information that will have users coming back frequently and eventually subscribing to the product.
Another great way to provide content for your users is to create separate landing pages for every software feature that users might find useful.
VEED does this very well, for instance. They added links to landing pages for each aspect of their video editing software to the footer of their website.
Finally, knowledge bases are another excellent asset for your website. You can fill your knowledge base with valuable resources, like answers to frequently asked questions, how-to guides, and troubleshooting tips.
Helpscout’s help desk page is an excellent example of a knowledge base.
Apart from keeping your customers happy and engaged, knowledge bases will also go a long way to relieve the pressure from your customer support team, as users will be able to find solutions on their own.
Having great customer support is another important factor you don’t want to mess up, so more on that in the following section.
To sum up, content is the lifeblood of your business. It attracts new customers, keeps existing customers engaged, and establishes your company as a leading expert in your field.
Don’t forget to create and publish customer-oriented content on your website as often as possible.
Providing Poor Customer Support
The SaaS business model is an innovative approach to offering software. It relies on subscriptions that need to be renewed monthly or annually instead of one-time purchases.
That means you need to stay with the user for the entire customer journey and ensure she achieves success using your product, month in and month out. Otherwise, you’ll face significant churn rates, the nemesis of every SaaS business.
To be exact, poor customer service can cost you as much as 42% of your client base.
All of this means that your customer base relies on you to provide excellent customer support, so do your best to meet their needs.
So, what are the characteristics of good customer support?
The first benchmark is efficiency. That means devoting enough time and resources to train your support team, so they have enough know-how to fix any problem quickly and effectively.
This also includes resources for customers to solve problems independently, such as knowledge bases, as discussed in the previous section.
Quick response times are another aspect of great customer support. This is especially important for B2B SaaS companies, where time is money.
As you can see above, replying to a support query after more than 24 hours is almost unacceptable to customers.
Furthermore, having multiple contact points between customers and the support team is a must-have for any SaaS company.
People have different communication preferences, such as dedicated phone numbers, emails, live chatting, support forums, and social media, and it’s your duty to cater to them.
Salesforce leads by example in that regard. Their customer support page offers multiple points of contact for the customer to choose from, all in one place.
Finally, the best customer support service is one that goes above and beyond.
One of the biggest SaaS trends right now is empowering your customers to achieve their goals using your software instead of just making sure they use your product correctly.
That means supplementing your dedicated customer support service with customer success reps. It can be difficult to differentiate between the two, so here’s a handy cheat sheet.
Traditional Customer SupportCustomer SuccessReactiveProactiveTransactionalRelationalFor maintenanceFor realizing goalsFocus on quality and speedFocus on product adoption and valueCost centeredRevenue centered
As you can see, customer success is all about taking the initiative and focusing on the value of your software.
To sum up, your product is a complex piece of software, and most users will need help learning to navigate it. Plus, bugs and glitches are an inevitable part of any SaaS product, and your customers will count on you to fix such problems.
Don’t leave your clients to fend for themselves. Instead, help them overcome any issue they may encounter and show them value every step of their customer journey to ensure they stay with you for a long time.
As you may have noticed, big mistakes and bad practices in SaaS stalk your every step toward success.
Bad billing practices, incorrect approaches to analytics, neglecting content marketing, poor customer support—these mistakes can make you lose your edge and lag in the race to provide cutting-edge software for customers who need it.
Use this article as a starting point to learn about SaaS mistakes and keep your eyes open to ensure your company stays healthy and robust.
Remember that we live in the age of the customer, so do your best to meet their needs, and you should be just fine.