SaaS Product Strategy: Principles and Basics of SaaS Product Strategy 

SaaS Product Strategy: Principles and Basics of SaaS Product Strategy 

SaaS product strategy is a framework that helps a company to implement and achieve its product vision. The product strategy lays out the details on how a company can reach its objectives. A good product strategy is an indispensable element in its success. For e.g. Amazon’s product strategy makes its products an inseparable part of customer’s life. The company relies on speed, convenience & value for its users.

Netflix differentiated itself with a superior streaming service, creative content creation and online distribution channels. A SaaS product strategy creates a framework for the team to understand what they need to do and aligns them to make the tradeoffs with respect to the bigger picture. Here’s a look at the important elements of SaaS Product strategy: 

1. Target Group & Market

Choosing the right market precedes choosing the right customer. A product strategy defines and nails the target market, customer and the outcomes they are looking to achieve. 

One of the golden rules of product strategy is to never work on features that no one is willing to pay for. A good product strategy aligns the team with the vision and helps them develop the best solution for the customers. Targeting the right group of customers requires measuring and defining metrics for the product. Some important questions that are addressed by the product strategy:

Who is our customer?
What is the problem we are solving for our customer?
Who is not our customer?
How do we measure success of our product with well-defined metrics? 

Many product teams are focused on adding features without understanding the key requirements of the product. The product development shouldn’t be driven by the product managers or the development team, but by the customer and the market.

The software developers and engineering teams accomplish the best solutions when they are well versed with the customer problem they need to solve. A good product strategy articulates the need with clarity and gets everyone on the same page. It helps the team deliver the key outcomes customers value & are willing to pay for.

The founders of Airbnb posted a few photos of their apartment on a simple webpage to test the proof of concept. A simple way to test your target customer market and how you can address them goes a long way in articulating the defining your product strategy.

2. New Business Model
An innovative business model can go a long way in creating a differentiated product that customers would notice. When Netflix was a DVD rental company, they operated from a store and rented out DVDs to their customers. It faced a lot of competition from existing players in the industry, they soon started DVD rental over the web. The DVDs were delivered through mail. Yes, this was back in the days when bandwidth didn’t allow video streaming like today.

The company again reinvented itself with a new streaming-based platform for reaching customers around the globe. Uber disrupted the taxi industry by offering a cheaper, faster and more convenient online service.

A strong product strategy looks for ways to disrupt an industry. It asks questions like, how we can revolutionize an industry? What are the ways we can monetize our product without charging more from customers?

An innovative business model analyses the target customer segment and its impact on the business. For e.g. can we eliminate the least profitable segment of our customers? Do we need to serve smaller markets or focus on bigger markets with quality customers? How we can reach a bigger scale for the product without affecting the quality of service to customers?

3. Distribution & Sales

Businesses that scale-up develop innovative distribution strategies to find customers. These could include SaaS product platforms, freemium users, enterprise or government customers etc.

A good product strategy helps teams reach more customers by making the product distribution easier and seamless. For e.g. 90% of Skype customers don’t pay, it means only 10% of customers pay for Skype subscription. But by introducing the product for free, Skype generates its revenue. The company also doesnt incur any infrastructure cost like telecommunication companies. The Skype customer service and support is done in a highly automated way reducing costs.

Technology changes things, it makes a revolutionary impact and reaches scale quicker. For e.g. Chrome launched by Google targeted faster-browsing speeds. It aimed at 10X improvement over existing browsers, similarly when Gmail was launched, it offered an unprecedented improvement over the competition to reach more customers at a bigger scale. 

4. Key Partners


Gone are the days of building things in a silo, today even companies like Apple & Microsoft are opening up their ecosystem to collaborate with others. The key partners for a product can help its visibility, distribution and even offer complimentary value. For e.g. many accounting software needs to be interoperable with tax-filing utilities to provide the last mile service for their customers. 

Salesforce provides a development platform for third party developers and apps. These apps can be hosted on the Salesforce platform and availed by the Salesforce customers. It offers a valuable addition to the Salesforce customers as well as third-party developers to reach more customers.

The platform companies like Youtube, Medium, and Netflix are also incentivizing content creators. The key partners for a product strategy explore the possibilities of maximizing the network effects of a given platform. The product strategy involves ways in which key partners can be integrated into the ecosystem. The development, marketing and outreach efforts are the key partners are vital components of a good product strategy.

5. Technology Capabilities

The technology capabilities and competency of a team go a long way in building the right products. There are many examples of products that scaled prematurely like Pandora and could sustain themselves when facing the heat.

The product strategy outlines the core competencies of the team. It evaluates questions like:

What are the core technology strengths of our team?
How can we build market-leading products?
How well do we receive market feedback to adapt?
What are the innovations that can give us the edge over others?
What are the product technology risks for us and how we can avoid them?
Is our team reskilling itself for the future?
How quickly do we adapt to the market & technology changes?
How do we manage the talent pool of workers and attrition?
What is the basis for our product innovation efforts and how it is measured?
Is our product offering meeting the unmet needs of the customers?

The technology capabilities help teams crack the unaddressed customer problems or provide a better solution than an existing one. The speed of execution, focus & ability to think ahead provides an edge to product teams.

6. Orchestrating Business Functions


Most product teams that fail build things in a silo. They don’t understand the overall picture and how they need to address the customer problems. The marketing, development, sales, distribution, customer service, support, and new opportunity management etc. has to be in synch for building the right product. A good product strategy has a unifying impact, it rallies everyone together and enforces a shared vision for the team.

A good product strategy brings product thinking into the team. Many development teams simply want to add features, fix bugs and do mundane work without deep involvement. But the product strategy is driven at the core by engineering a better product for the customers. It is understanding the overall picture that the product serves and contributing to it. Successful product teams operate with a holistic view of what they are building, but ordinary teams only focus on what they are trying to build now to fill their days.

7. Value Innovation 

Good product teams are focused on their customers, not the competition. While it is easy to copy other products and play the catch-up game, it rarely works. Value innovation identifies what customers value the most and the underserved opportunities for which they are willing to pay.

The term innovation can be vague and may mean different things to different people. However, when the context is clear and the value metrics are defined, innovation takes a different meaning. For e.g. Cisco created routers & network devices with a 60% margin, they uncovered the value innovation with superior products. Value innovation can have a decisive impact on the product & create demand for it. 

HP’s mantra epitomizes value innovation succinctly, “When performance is measured by results.” It simply states that it doesn’t matter what you have done and all the features you’ve added unless it solves a problem for the customer.

Kreyon Systems is a SaaS product company. If you have any queries for us or need help in building SaaS products, please reach out to us.