10 Biggest SaaS Challenges: How to Protect Your Business and Ensure Growth
While product growth may seem as simple as “attract customers to your Software-as-a-Service solution” there are countless SaaS challenges and customer issues that you’ll need to overcome along the way.
This article will go over 10 different challenges across product, sales, and general business to help SaaS businesses identify (then overcome) these obstacles!
- Software companies are facing a wider array of challenges due to the increasingly saturated and competitive nature of the SaaS industry.
- As the number of software tools and subscriptions increase, so too do the expectations of SaaS customers.
- Most challenges that a software company will face fall into one of three categories: product, sales, and business/operations.
- Getting the positioning, messaging, and product-market fit right will be one of the earliest determiners of whether or not a SaaS solution will find success within its target market.
- Creating a personalized user journey (based on product analytics) from the first touchpoint to the point of conversion and beyond is crucial to keep retention rates high in the long run.
- Creating valuable content that educates customers, helps them discover new features, and keeps users engaged will pay dividends for your software company in the form of higher revenue or adoption rates.
- Automating processes, streamlining operations, and ensuring the security of customer data are becoming increasingly important as the reliance on IT teams grows.
- Using no-code tools to outsource business processes can cut down on internal operating costs and save your company a lot of money in the long run.
Why do SaaS companies face challenges?
With so many SaaS businesses operating in the same market, it should come as no surprise that the industry has become quite saturated and competitive. New SaaS apps, tools, and products are constantly being released, which makes it harder for a SaaS business to stand out.
With more SaaS solutions to choose from, customers now have higher expectations for their SaaS provider of choice and won’t hesitate to switch if the product’s functionality, ease of use, or customer service is deemed subpar.
Let’s take a look at common challenges a SaaS business might face, along with the marketing and sales strategies that can help you overcome them. Overcoming these hurdles could very well mark the difference between growing your SaaS business or endless customer churn.
Product health metrics are one of the most important KPI sets to track when running SaaS businesses. This is even more important as the SaaS model relies on recurring revenue, unlike traditional software models that can get away with offering a subpar product after the first purchase.
Here are the four most common product challenges for SaaS tools.
1. Product positioning
Correct product positioning can be a make-or-break point of failure for SaaS applications. If you don’t even know how you want your target market to feel about the SaaS solution, then you have no shot of finding the right positioning to beat your competitors.
To properly position your SaaS solutions, you should:
- Do extensive market research
- Establish product-market fit
- Study your audience (and their wants/needs)
- Create a compelling proposition
- Have a strong marketing strategy to get the message to SaaS customers
2. Product experience
The term product experience (PX) may not be as popular in the SaaS industry as user experience (UX), but it’s equally important.
The product experience covers the time spent inside the application itself while the user experience can include other processes like creating an account, talking to support representatives, and canceling/upgrading a subscription.
A user’s product experience encompasses the entire experience with a product from the first interaction to the end of the customer journey. A negative product experience will lead to higher churn rates, driving users toward the competition — an issue commonly faced by SaaS companies.
As such, SaaS businesses need to toe the line between providing all the functionalities a user needs and keeping the SaaS platform easy to use. Finding the right balance between the two can be tricky for SaaS products but is nonetheless essential.
To build a solid product experience, businesses need to break it down into its core components and take steps toward bettering each. These components include in-app messages, self-service support, intuitive UIs, smooth navigation, and seamless integration(s) with other tools.
3. User education
No matter how simple some SaaS platforms are, SaaS providers should keep in mind that technical expertise varies from customer to customer. As important as customer education is, it can often still be overlooked or undermanaged by SaaS companies.
Well-educated users are better equipped to get value out of your product and, therefore, more likely to renew or even upgrade their subscription in the future, generating expansion revenue.
SaaS providers should strive to give their users a healthy mix of general industry insights and product-specific knowledge. When it comes to product knowledge, efficient onboarding flows are a great way to continually educate the user in an in-app setting to increase both user retention and account expansion long-term.
4. Product analytics
Despite an abundance of product analytics tools available, many SaaS providers still struggle to leverage the data and insights to get the upper hand against their competitors.
Regular feature audits, in-app behavior tracking, and UX analysis are all effective methods of measuring how your product is performing — which itself is key to making the right data-led optimizations moving forward.
With a tool like Userpilot, SaaS startups, SMBs, and enterprise companies can keep an eye on detailed analytics like:
- In-app user behavior
- In-app events
- General product growth
SaaS businesses face a multitude of challenges, but sluggish sales on their SaaS product is among the most alarming.
Let’s look at how your Software-as-a-Service company can acquire more potential customers, boost trial conversion rates, and keep customers happy.
5. Initial customer acquisition
Next to hiring new employees that will do their jobs effectively as part of a management team, user acquisition is one of the biggest challenges that SaaS companies will face throughout the course of their growth lifecycle.
Once you’ve managed to capture leads through a marketing agency, sales funnel, mailing list, or social media campaigns, you need to jump on the opportunity. If you don’t offer real value and get users to an Aha! moment soon, your marketing expenses could very well go to waste.
Free trials and product demos are good ways to let users experience the value a product provides first-hand, especially when paired together. This product-led acquisition approach can prove to be more cost-effective in the long run than dedicating all your online resources to marketing campaigns.
6. Free-to-paid conversions
Whenever sales-qualified leads (SQLs) enter the funnel, they should have a clear and optimized path that leads them toward converting into a paying customer. After all, leaky funnels can be a huge money sink for SaaS businesses.
A solid conversion funnel is instrumental as it will greatly impact the average number of conversions you get out of your lead generation efforts. Here’s how you can measure your free-to-paid conversion rate:
Active communication, continuous customer education, quality support, and a personalized user experience all boost conversion rates. But to smartly plan out your approach to these, you’ll need a user journey map to identify all the critical touchpoints and find the best way to capitalize on these conversion opportunities.
7. Pricing model
The subscription-based pricing model is the most common approach for SaaS companies, but it does come with a caveat. Convincing prospective users to make long-term commitments to a product doesn’t always come easily to SaaS businesses.
Choosing your own pricing model can be tricky among all the options available. The common pricing models in SaaS include flat-rate, freemium, tiered, and usage-based pricing, to name a few. Each SaaS pricing model has its own pros and cons, but you need to pick the one that’s the best fit for your product and your target audience.
Pricing models are bound to change depending on your target business size. In the example below, Monday uses a per-user model to make the platform more accessible to each target group. Charging a flat rate for all teams regardless of size wouldn’t benefit users since they’d end up paying for seats they aren’t utilizing.
8. Retention and loyalty
Once you convert users, retaining these newfound customers is another challenge entirely. The best way to keep product growth going is to nurture long-term relationships with your customers by extending the sales funnel beyond the point of acquisition (PoA).
This helps you weed out any funnel leaks further down the user journey that might not be immediately obvious. Keeping a close eye on user behavior, watching engagement trends, investigating reasons behind churn, and spotting drop-off points are all crucial.
Giving users consistent Aha! moments is a great way to keep them engaged and loyal to your product. You can also run in-app flows that teach users about advanced features that will make your product stickier and thus boost retention rates.
Building confidence in your brand and turning casual users into loyal advocates requires a long-term commitment. This includes nurturing customer relationships, providing stellar support, investing in customer education, and maintaining a positive brand image overall.
Last but not least, it’s important to look at the tangible business challenges that SaaS companies need to face. These mainly come down to streamlining operations, automating tasks, and ensuring that sensitive data isn’t leaked during a data breach.
9. Business operations and processes
Team management, IT dependence, and process automation are all common areas that challenge SaaS companies before they can live up to their full growth potential.
There’s a rising dependence on IT teams to utilize the power of cloud computing while keeping a competitive edge with the latest technology. But as the bandwidth of IT teams is limited, and hiring a larger team can be costly, companies can use code-free tools to automate processes, reduce expenses, and increase efficiency.
Code-free third-party tools are a great way to save money on the hidden costs of handling every process in-house. In addition to cutting unnecessary costs, these types of SaaS products can also be massive time savers.
10. Data security
SaaS providers often deal with large data storage requirements, which is why risk management is so important. Plenty of cloud-based services can collect and store data in bulk. But staying compliant with regulatory standards as you gather, store, and distribute data is another question.
Beyond the regulatory considerations, SaaS companies also need to be transparent with their customers to establish and maintain a sense of trust. This requires clarity on how data is collected, what it’s used for, and which security measures are in place to protect the user’s data.
Finally, make sure you have the right tools to ward off malware. Cybercriminals have shifted their attention towards creating viruses that integrate easily with large companies’ software, so investing in cybersecurity is more important now than ever.
As you can see, there’s no shortage of challenges that a software business will face. That said, enduring this gauntlet can lead to a steady stream of new customers building up your business’ client base over time — if and when you get to the other side.
If you want to give your software business its best shot at success, then it’s time to get your free Userpilot demo. Our no-code product growth solution will arm you with the insights you need to take your product to the next level.