Product Growth Strategy: A Guide for SaaS Companies
What is a product growth strategy?
A product growth strategy is a plan that outlines how a company will expand its market reach, increase sales, and drive long-term growth.
In contrast to traditional growth strategies that rely heavily on sales and marketing teams, a product growth strategy centers on leveraging the product as the main driver of customer acquisition, engagement, retention, and revenue expansion.
Why does your company need a business growth strategy?
A well-defined product growth strategy is not just nice to have. It’s vital for ongoing product success and helps the company to maintain a competitive edge. Here’s why:
Increases customer satisfaction and retention
A product growth strategy ensures that your product continuously evolves to meet and exceed customer expectations. This ongoing improvement cycle helps to keep your product relevant and valuable to users.
When customers feel that a product meets their needs and is easy to use, they are more likely to stay loyal. In practice, this means higher retention rates.
Reduces customer acquisition efforts and costs
Higher retention means that you don’t waste your resources on refilling a leaky funnel and can instead invest them into product development and innovation, which is essential for sustainable growth.
It gets better.
Loyal customers don’t just keep using your product and renewing subscriptions. They often act as product advocates, promoting it to their friends and colleagues. As WoM is one of the most effective marketing tactics, it drives further growth and reduces customer acquisition costs.
Provides a competitive advantage
A strong product growth strategy promotes continuous innovation, which enables your company to quickly adapt to market changes and stay ahead of competitors.
This is often done by offering solutions to unmet customer needs that enable your product to stand out in crowded markets and build a strong brand reputation and market position.
Different types of product growth strategies
Ever heard of the Ansoff matrix?
It was invented by a Russian-American manager, and it defines 4 main product growth strategies: market development, market penetration, product development, and diversification.
Let’s unpack each of them.
Market development strategy
Market development focuses on introducing existing products to a new market. And new markets can mean not just different geographical areas but also different customer segments.
Here’s an example:
Slack was built with the tech sector in mind. However, it soon expanded into new verticals, like education and non-profits.
This strategy works for companies competing in saturated markets. It enables them to reach new customer groups and diversify their income sources.
Market penetration strategy
Market penetration involves expanding your market share within the current market with existing products, for example, by offering a superior user experience or competitive pricing.
That’s exactly what Zoom leveraged to dominate the video conferencing software during the Covid-19 pandemic. One of their tactics was offering free access to premium features for educators, who heavily depended on video calls to deliver their courses.
Market penetration is a low-risk strategy because you operate in a familiar environment and don’t need to develop new products. You just need to figure out ways to steal your competitors’ customers.
Product development strategy
Product development is about building new products for existing markets.
This is a strategy that Userpilot has been pursuing consistently since its inception. For example, we have recently added a range of new analytics capabilities like custom dashboards to add value to the product and better serve customers.
For the product development strategy to work, your company needs commitment to innovation, robust product discovery, and idea validation processes. Otherwise, you risk burning your R&D resources on unwanted features and diluting the value proposition.
Diversification strategy
Diversification focuses on building new products for new markets.
HubSpot managed to pull it off with its Customer Service Hub. By expanding its product range, the company gained access to new customer segments.
This strategy offers substantial growth opportunities but carries significant risks. It diversifies your revenue streams and allows you to access untapped markets. However, it requires considerable investment in new products for unknown markets.
How to select the right strategy for your business?
The choice of the strategy for your SaaS depends on multiple factors:
- Market saturation: Start with market penetration until your current market is completely saturated and only then consider market development.
- Resources: Building new products or expanding into new markets can be resource-intensive, so if you’re short of cash, talent, or technological know-how, focus on market penetration.
- Risk appetite: Entering a new target market, especially with a new product, comes with a lot of risk. If your organization is risk-averse, stick to existing markets and product lines.
- Organizational goals and mission: Some companies, prioritize other goals over growth. For example, Patagonia is on a mission to build a sustainable and environment-friendly business model.
How to create an effective product growth strategy?
With the theory ticked off, it’s time for our step-by-step guide to creating a product growth strategy.
1. Understand your product thoroughly
To drive product growth, you need to understand what your product has to offer to its customers.
So, the first step is conducting a SWOT analysis. This popular tool helps you identify your product’s strengths, weaknesses, opportunities, and threats.
For example, if adaptation is your weakness, volatile market shifts could be a threat. Conversely, if you’re strong in the innovation department, rapid technological changes could be an opportunity.
To inform your SWOT analysis, conduct granular customer and market research, and competitive analysis. Map out the customer journey, focusing on major touchpoints, user goals, and challenges.
2. Define your goals clearly
With an in-depth understanding of your product and the markets where you’re operating, you can set meaningful goals for your product growth strategy.
Here’s an example: Increase monthly recurring revenue by 7% by the end of Q3.
To set this goal, I used the SMART goal-setting framework. SMART is an acronym for:
- Specific.
- Measurable.
- Achievable.
- Realistic.
- Time-bound.
For an extra twist, you can make your goals CSMART. What does the C stand for? Challenging.
SMART isn’t the only goal-setting framework out there. Other popular ones include BHAG and OKR.
3. Identify product growth metrics to monitor
To measure progress toward your goals, you need to track the right metrics.
These will normally include:
- A North Star metric: The main metric that guides the work of your teams and reflects your goals, like monthly recurring revenue.
- Auxiliary metrics: Ones that allow you to evaluate different aspects of product performance essential for achieving your main goal. For example, increasing retention rate and expansion revenue are key to improving MRR.
- Counter metrics: Metrics that ensure you don’t forget about other important customer experience aspects while chasing your goals. For example, you could track support ticket resolution time to ensure customer service isn’t sacrificed to maximize profits.
4. Implement different product growth strategies
Using your metrics for guidance, implement relevant growth strategies.
For example:
- To improve product adoption, you may focus on providing personalized onboarding to new users and reduce the time they need to experience value.
- For higher customer retention, you could develop secondary onboarding experiences which help users discover new and more advanced functionality.
- To drive account expansion, target users with upsell and cross-sell in-app messages.
5. Use data analytics to track the performance of your product-led growth strategy
To inform your product growth strategy and track progress, use data analytics.
These tools allow you to track user interactions with the product and analyze them for patterns and trends.
For example, tracking your MRR over time will tell you if your strategy is working on a high level, while other metrics will give you insights into the performance of different strategies, like onboarding.
It doesn’t stop at simply tracking trends.
With tools like funnel, path, or heatmap analysis, you can uncover friction points in the customer journey. Armed with such insights, you can implement strategies that help users achieve their goals.
For example, a hotspot may be enough to help users find a feature they need to complete a task.
6. Collect customer feedback to gather insights
In addition to tracking user behavior, use in-app surveys to collect feedback.
In particular, focus on gathering qualitative data that will help you understand why users behave in a particular way and how you can improve their user experience.
Run your surveys regularly, say every month or quarter, depending on their purpose. In addition, send contextually triggered surveys that zero in on specific user experiences or features. For example, you can use them to measure the success of new features.
Finally, consider embedding a feedback widget in the product UI to collect passive feedback.
7. Experiment with and iterate on your strategy continuously
Your product growth strategy and the tactics you use to implement it aren’t set in stone. As user needs and preferences change, so should your approach.
To identify the best strategies, run experiments.
For example, fake door tests are great for validating your feature ideas before spending any effort on their development, while A/B tests are an excellent tool for testing different onboarding flows.
By running two flows side by side and tracking their performance, you can quickly identify the one that drives the desired behaviors more effectively.
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Best growth strategy examples from leading companies
Now that you have an idea of how to create a product growth strategy, let’s have a look at examples of a few well-known SaaS companies and how they do it.
Slack’s freemium strategy
Slack is a well-known communication platform that’s taken the business world by storm. What’s its secret? It helps teams improve productivity and collaboration by improving information sharing and reducing the need for meetings.
To help users realize its value, Slack offers a freemium plan.
This way, users can use the product and experience the positive change it can bring to their working lives firsthand.
Of course, not all features are included in the free plan. To gain access to unlimited message history or app integrations, users have to purchase one of the paid plans.
Calendly’s viral growth loop
Calendly is a meeting scheduling app. It saves you time by eliminating the need for the endless back-and-forth that was traditionally involved when scheduling meetings. All you have to do is click on the link and choose an available slot that fits your schedule.
The best part? You don’t need to be a registered product user.
But it’s very likely you will want to be once you experience how convenient it is.
If that’s the case, Calendly makes it easy for you to sign up. Just click on the ‘Powered by Calendly’ banner in the top right corner of the calendar.
That’s how Calendly uses its customers to drive product growth with minimal effort.
Userpilot’s frictionless sign-up flow
Userpilot is a product growth tool. It caters to medium and large businesses and enables them to create onboarding experiences that facilitate product growth.
To reduce time to value, we have created a minimalistic sign-up process.
By collecting only essential information (first and last name, email address), we enable users to get inside the product as quickly as possible.
The sign-up flow isn’t entirely frictionless, though. For example, to register, you need a work email address, which enables us to prequalify leads.
Cuvama’s in-app customer support
Cuvama is a customer value management (CVM) platform. It enables B2B software companies to understand and communicate their product value to customers for improved sales, increased retention, and informed product development.
To support their customers and help them maximize their product value, Cuvama offers a resource center. It includes links to onboarding flows, how-to guides, a help center, case studies, and product announcements.
Thanks to the resource center, users can solve simple problems without relying on support agents, who are usually not available 24/7.
Dropbox’s referral campaign
Founded in 2007, Dropbox was one of the first online file storage platforms and still remains one of the key players in the cloud storage space.
Just like Calendly, Dropbox leverages its customer base to drive growth.
They do it through a simple referral program: users get rewarded with extra storage space when they refer a friend to the product, which is a win-win situation for all parties involved.
How can Userpilot help execute your product growth strategy?
As a DAP, Userpilot offers a range of tools that SaaS companies can lean into to drive product growth.
First, there’s an engagement layer that allows you to create in-app experiences. For example, to onboard new customers or drive upsells.
The engagement features include:
- UI patterns (tooltips, modals, banners, slideouts, hotspots, driven actions).
- Interactive walkthroughs.
- Onboarding checklists.
Here’s the kicker: you can create and fully customize these without writing a single line of code. All is done from the Chrome extension.
Next, there are Userpilot analytics features – that no other growth platform can match.
These include:
- User segmentation.
- Code-free event tracking and feature tagging.
- Heatmaps.
- Industry-standard reports: trends, funnels, paths and retention.
- A/B and multivariate testing.
- Custom analytics dashboards.
Let’s wrap up with the feedback functionality.
Just like the in-app patterns, Userpilot surveys are fully customizable without any coding. You can pick a template and tweak it in the visual editor to give it a native look.
Userpilot offers event-based triggering so you can send them to users at a specific time.
Conclusion
A product growth strategy guides growth initiatives by giving them a clear focus. It enables companies to make informed decisions aligned with their high-level goals to better satisfy customer needs and offer them a better experience.
If you’d like to learn more about Userpilot and how you can leverage it to execute your product growth strategy, book the demo!
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