The SaaS industry is maturing each year, as more and more businesses are moving from on-premises software models to web-based Software-as-a-service (SaaS) solutions.
Global SaaS market is expected to grow to a value of $117 billion by the end of 2022, according to Market Research Future (MRFR).
The rising market raises competition.
On average, an emerging SaaS business is reported to have more than 9 competitors.
Yeah, the bar is higher than ever to succeed, but we’ve yet to hit peak SaaS. Adopting at least one of the below-mentioned trends can help propel success to your SaaS idea and drive faster, more efficient growth.
Trend 1: Embracing AI and machine learning
This one definitely shouldn’t raise your eyebrows!
It is obvious that artificial intelligence and machine learning have merged into every part of today’s life.
The SaaS industry is halfway through a technological revolution (in fact, we all are) – the software is learning to learn.
According to Forrester, companies can expect software systems “to be trained instead of programmed” by 2020.
Amazon Echo, Google Home, Alexa, chatbots, Uber and so forth – all benefit from artificial intelligence. This trend is able to make a good showing for your software as a service idea (no matter what industry it involves).
Let’s take an example.
AppZen, a B2B SaaS company that offers auditing by means of AI, was considered to be the second fastest growing SaaS company in 2018 with 150% growth in the last 6 months, while, Salesforce, after embracing AI took a foothold as a leading market participant of automated CRM solutions.
Now here are a few ways AI/ML technology can brighten up your SaaS product idea:
- Chatbots and virtual assistants. It is time to back off from lengthy sign-up forms and onboarding in favor of AI-driven chatbots and assistants.
- Dynamic pricing. Artificial Intelligence readjusts pricing in real time according to various data involving customer behavior, market conditions, demand, internal operations and so on. For companies that constantly adjust their pricing for demand, these changes have a substantial positive impact on revenue growth.
Source: Growth Media
- Hyper-personalization. What about offering highly personalized services? For instance, free up your customers from interfaces cluttered with a heap of features. Instead, propose customized user interfaces, taking into account the way the customer has previously used your SaaS platform. 89% of businesses report improved results from personalization.
- …there are more ways AI and ML can make your future SaaS platform more eminent and user-friendly. Now it’s your turn to consider this trend for your product.
And we are moving on.
Trend 2: The integrations boom
With a bunch of integrations your SaaS product can turn into a robust omnichannel business tool.
With the opportunity of your SaaS product to integrate with other SaaS vendors, your customers receive extended functionality and new features. It increases the target audience and number of potential clients.
Therefore, Salesforce has a marketplace AppExchange for apps (more than 300) designed by partners that work on its platform. APIs of Expedia give an opportunity for third-party website users to enjoy its functionality for booking flights, cars, and hotels, while eBay by means of APIs can place auctions on other websites, and add new products for sale and collect information about sold items.
Making your SaaS product integration-friendly will help you scale your business faster and earn income.
Sure, API creation and connection requires time for development, but, as a rule, it doesn’t involve any ongoing costs. Here at MindK, we create API-first back-end systems for almost every SaaS product we work on. Integrations are turning out to be a great investment in your SaaS product in light of data insights, overall product usability and marketing.
Trend 3: Vertical-specific SaaS software
Roughly speaking, the SaaS market consists of two types of SaaS companies – vertical and horizontal.
Vertical SaaS software serves the needs of a specific industry (science, construction, financial services, healthcare, legal, etc), while horizontal SaaS product covers functional needs (sales, finance, marketing, accounting, etc) across different industries.
You might think that focusing on a certain industry or niche market means smaller business opportunities. But it doesn’t.
Just look at such examples of vertical SaaS companies as Veeva (Pharmacy), Guidewire (Insurance) and MindBody (Wellness) and many others. Recently, the share price of Veeva increased up to 48%, Guidewire – up to 21%, and MindBody observed +18% growth.
A pharmaceutical company would in most cases prefer software that is designed for their industry over the one which is not industry specific.
Most emerging SaaS startups select vertical-specific SaaS model as it allows them to focus on the requirements of clients in the target niche and win the market faster.
As a rule, there are fewer competitors in industries, so the early leaders tend to reign supreme.
On top of that, vertical SaaS companies enjoy free marketing (word-of-mouth recommendations). They are reported to have 20-25% higher EBITDA (compared to horizontal SaaS companies) accompanied by lower marketing spend. When a solution able to cover the pain points in the industry enters the market, people can’t resist spreading their happiness.
If you can afford to focus on a specific niche you can expect better upsell, lower churn and customer acquisition costs.
Trend 4: Rise of micro-SaaS
Scaling down from specific niche to specific needs we come up to micro-SaaS.
Micro-SaaS is a product aimed at solving a certain problem in a niche market by means of minimal resources.
There are business spheres which are quite small, so large SaaS companies either don’t want to target them or propose SaaS packages which are unnecessarily big and expensive.
Here is when micro SaaS comes along.
Micro-SaaS businesses have a number of advantages you should consider, such as lower overheads and risk, higher margin, and ability to be location-independent.
Even if the idea of micro-SaaS sounds quite simple, finding something that is demanding may be challenging.
According to Tyler Tringas and his book on micro-SaaS:
you should be five times better or five times better-performing than customers currently pay.
It is rather your potential clients already lay out money for solving the problem you plan to target. While developing micro-SaaS the presence of some competitors is considered to be a good sign, though too high competition shows that you should better think of another micro-saas idea.
For example, Storemapper is a good example as it offers a basic service which covers a clear problem. This app can be installed to the website (with no coding involved) to create a store locator service. It is customizable with CSS and provides the ability to analyze which stores get more traffic -that’s that. Just a useful service for a specific problem.
One more example.
Everhour (monthly revenue is around $120,000) provides an opportunity of time tracking, which may be useful for those businesses requiring a time management solution to increase productivity.
You see that the rise of the micro-SaaS is making creating a SaaS business more accessible for people. And, surely, your SaaS product doesn’t have to remain “micro” forever.
Trend 5: Pricing as a science
(although not an exact science)
Pricing may be tricky for any SaaS business.
The wrong pricing model can turn off potential clients from purchasing (regardless of a good product or excellent marketing).
This is a luxury none of SaaS companies can afford.
SaaS is a subscription-based business that lies in the power of revenue generated by customers at each billing cycle.
Nobody knows which pricing model is the best (and don’t trust those who claim they know).
The pricing involves a lot of factors to consider (all of them are company-specific), such as budget, size of your company, product type (and quality), a number of features you are offering and so forth.
Keep in mind that what works for one specific company may not work for another and also the other way around.
So, you should experiment with pricing to better understand the market and find the right footing for your company.
For example, you can create a pricing committee including key people from all departments, who monthly review KPIs of pricing, monitor the competitors and make decisions (or implement the AI dynamic pricing we have talked about in the Trend№1).
When working on your pricing model remember that clients really appreciate the pricing determined by the value they receive from your SaaS product (or value&usage-based pricing).
The more people who use your software, the more they appreciate its value and the higher their willingness to pay.
According to the Price Intelligently,
Customers don’t care how much something cost you to make or your competitors, they care how much value they’re receiving at a particular price.
Value-Based pricing can benefit almost all SaaS business. Of course, it takes time and resources, but if it’s done right, it is able to provide more profit, more competitive products, and customer oriented development.
Trend 6: Mobilization
(no wonder again, but it is mission critical)
The reality is that in case SaaS company wants to be successful and competitive in 2019, it needs to enhance the mobile experience of its users.
SaaS products are well thought out and organized for a desktop, but today the logic is changing and customers want an ability to interact with a product from their smartphones.
This doesn’t mean you have to present your product to the mobile market only, as it is not enough.
The continued trend toward the mobilization of virtually everything is fast converging with a profound surge in the adoption of software-as-a-service (SaaS) applications. The impact of Mobile-SaaS convergence is that organizations of all sizes are leveraging new, critical mobile applications that maximize employee productivity and spur business growth. – Neumob (now part of Cloudflare)
For example, you can create a prototype and find out the way users interact with the features you are planning to investigate. Using SaaS mobile app should not involve any challenge.
Using mobile apps can better the efficiency and productivity of your business, no matter whether you are a startup or a large enterprise, and regardless of the industry, you are working in.
That is it – smartphones are a huge part of life, and should not be overlooked.
Trend 7: Interactive support
Great customer support is able to single you out of competitors (even better than pricing or unique SaaS idea).
Moreover, most customers are ready to pay more for good customer service.
Here are several examples of customer support you can use:
- Live chats. Make it easier to ask questions and get answers online. Customers should know that they can reach out to you either when are considering purchasing your product or when working with it.
- Co-browsing. It is an ability for an agent to see the customer screen and guide the user. It is very convenient as users not always want to download and set up screen sharing apps+it protects clients private information (as only the user takes control over the product)
- Demos (or webinars). You never know how necessary demo is until you start proposing it to your customers.
Companies increasingly leverage visual engagement – video, co-browsing, screen sharing, and annotations – to cut through the customer conversation clutter, to be better understood, and to connect emotionally. – Forrester Research Paper
So, to join the number of successful SaaS companies, you should:
- come up with a SaaS business idea solving a real customer problem. In case you are in search of SaaS startup ideas, then our ultimate step-by-step guide on how to generate software ideas may become your helping hand.
- validate the product on the market. Test your idea within real market conditions before releasing the product or service is crucial for future success (here are the top four variants to try).
- do it better than others. (the hardest part!). That is why being on the cutting edge of new strategies and technologies provides you with an immediate advantage (and allows serving the customers better!).
Trends in the SaaS world show that SaaS businesses should embrace innovation to stay alive.
So, if you have generated a SaaS idea, think how to adapt the current trends to it in order to win over your potential clients! MindK team is happy to help you with it. Just drop us a line.