The SaaS product management process is fundamentally different from the typical traditional software management in quite a number of ways. The SaaS product manager finds metrics very important in the product management process. While there are several key performance indicators (KPIs) that help SaaS managers perform their duties, they tend to focus on two main objectives: to minimize the cost of acquiring and retaining customers, whilst maximizing customer lifetime value (CLV).
Before the SaaS product manager can tackle any of these two areas, he or she has to develop a timely SaaS solution because it can solve a specific inefficiency that exists within an organization. In most cases, it means developing an application that is easy to use and appeals to a particular persona (IT manager, marketing administrator, salesperson, etc.), and aids in performing a specific task or function historically known to be difficult to complete due to the complexities of their legacy software, or maybe simply because there currently isn’t an application that thoroughly addresses this particular need.
A business should possess a rapid deployment capability as well as the agility to tactfully maneuver competition. On the other hand, time to market is critical, especially in the typical SaaS market place, where there is escalating competition and ever-rising expectations among SaaS clients who keep hoping that their “on-demand” apps will be able to keep pace with their dynamic or rapidly evolving needs.
So, successful SaaS companies have concentrated their energies, efforts, and limited resources on creating and promoting their own solutions. Additionally, they have also selected leading Infrastructure-as-a-Service (IaaS) providers to partner with so that they can satisfy their various service delivery requirements.
SaaS Product Management – Best Practices
The following are the reasons to partner with a leading IaaS provider:
Cost Mitigation and Focus
Contracting for IaaS allows the SaaS vendor to focus on creating winning apps. It also makes sense because few SaaS companies can predict their data center requirements from the beginning, or make the necessary upfront investment in the costly resources. Moreover, this is important because it enables you to keep your Cost of Service (COS) and Customer Acquisition Costs (CAC) down as you build your Monthly Recurring Revenue (MMR).
Investor Appeal: Managing Customer Acquisition Cost to Sales ratio
Doing this while optimizing Monthly Revenue appeals to investors who could fund future growth can help a company to get funding. Venture capitalists, private equity firms, and angel investors fund SaaS firms that provide compelling solutions and are able to demonstrate control over finances, as well as a highly scalable operations model.
Security, Service Reliability, and Scalability
Delivering secure, reliable services is crucial in mitigating risks and minimizing churn. Losing your customers to competitors is costly, as you lose opportunities. It may also tarnish your SaaS company’s reputation and lose a market share if word goes round that you offer substandard service quality.
Apparently, optimizing CLV by maximizing cross-sale and upsell opportunities within customer’s accounts is largely dependent on delivery of secure, productive, and highly reliable SaaS solutions. There might be a debate on which business applications are “mission critical”, but no business wants a service outage to disrupt their SaaS applications and prevent them from doing their jobs.
By creating a robust SaaS ecosystem to provide clients with complementary SaaS solutions, you will also be boosting customer loyalty. It is also imperative to ensure efficient integration, as well as the ease of provisioning from different SaaS providers. SaaS vendors can leverage the security certification and integration of IaaS providers and partners to quickly and economically address these issues, potentially reducing their costs. For example, a SAS70 certification may cost up to $75,000 and take several months to obtain. But leveraging integration tools can accelerate the deployment process, lead to better SaaS product management, and increase the chances of success.
Measurement, Monitoring, and Management
You can only manage what you can measure. Successful SaaS companies measure virtually everything. They even track user keystrokes to gain an in-depth understanding of how users utilize various solutions. They also monitor systems that affect application performance in order to optimize their responsiveness and minimize operational costs.
Additionally, successful SaaS companies use in-depth analytics in running their business and maximizing service delivery capabilities of the company or business. SaaS product management involves tracking the effectiveness of the company’s marketing campaigns, customer service satisfaction, as well as sales productivity. Product managers depend on integrated report systems found within their IT service management (ITSM), customer relationship management (CRM), and marketing automation systems. SaaS companies also leverage their IaaS provider’s management portal to gain visibility (real-time) into service delivery availability, as well as performance levels.
To succeed in the increasingly competitive marketplace and industry, SaaS companies have to understand these best practices and work closely with SaaS managers.
The industry is changing and so are product management skills and responsibilities under SaaS. A few examples are highlighted below.
- Market Intelligence
For instance, while traditional product managers can make client calls, customer visits, and win/loss reports as a major source of market intelligence to get to understand business problems, SaaS product managers turn to online communities to increase customer value. Product based communities drive product direction, as well as development, forcing product managers to quickly adapt their skills and techniques for this new paradigm.
The days of basic P&Ls and 90% margins are long gone. SaaS product managers have no choice but to familiarize themselves with fixed and variable cost. They have to know the cost of acquiring one new customer. In addition, they must establish how to integrate computing consumption into their new pricing, the total cost to service a single customer, customers’ needs and when to expect a profit, target margin, expected payback period, as well as how to account for new sales commissions, marketing ramp-up, and support.
It takes hard work and numerous alterations to successfully create a winning SaaS product. It often requires an in-depth understanding of your customer’s needs, choices, and preference. Some consider SaaS to be a delivery model, and regard product management as “business as usual.” As a result, they implement traditional practices while ignoring the nuances of SaaS. Many SaaS product management evangelists are yet to address how SaaS impacts product management.