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How to Identify Your SaaS Target Market

Close up of SaaS manager holding silver tablet on office couch | Finding the Right SaaS Users

If you can’t identify and connect with the right target market for your Software as a Service (SaaS) product, you can’t succeed or grow. These key users help you sustainably grow by being loyal, spending more money with your product or company, and feeding growth loops. 

Retention and engagement are also vital to product growth. When you can deeply engage your audience, that means you are providing something that meets their wants and needs. They’re more likely to continue using your product, and long-term loyalty leads to factors such as word-of-mouth marketing and referrals. Those activities help product managers reduce the cost of acquisition and lead to potentially viral short-term growth. Positive engagement and retention only happen if you’re connecting with the right target market in the first place, or you may risk the development of dormant users.

Learn more about using proven approaches — including use case mapping, user segmentation and core value propositions — to find the right target audience for your SaaS product in the step-by-step guide below. 

Step 1: Consider Your Competitors

SaaS team smiles while collaboratively reviewing competitor strategy on laptop | Finding the Right SaaS Users

It’s important to look at where you stand in the marketplace against your competitors. Start by conducting a competitive analysis, including factors such as:

  • What products they offer. How are their product ideas similar to or different from yours when it comes to features, benefits and price? This helps you understand gaps and if you can position your solution within those gaps.
  • Their core value proposition. What is it and how can you make yours different so you can stand out in the crowd?
  • How they target users. Where are your competitors advertising? How do they create content for their site and what type of messaging do they use? How your competitors engage with the market can give you good ideas for doing the same and also provide you with a gap analysis so you can target audiences in ways that aren’t being used currently. 

Step 2: Design a Use Case Map

User launches Discord on smartphone while also viewing it on their laptop browser | Finding the Right SaaS Users

To find the right SaaS users, you must understand how your product provides value. What problems does it fix, how do people engage with it and what type of consumer is most likely to be interested in it?

Your product design may appeal to many types of people or be an attractive solution for more than one problem. Many products are multifaceted in this manner, and that’s a great position to be in value-wise. If that’s the case, though, you have even more work to do because you must define how your product differs as a solution between segments.

For example, Discord is a communication platform that supports threaded channels, video conferencing and sharing, and audio calls. It began as a platform where gamers could create communities and play alongside each other while communicating online. Currently, people use Discord for a lot more than gaming. Recreational communities and professional project teams use the platform to communicate, troubleshoot and manage a variety of processes. While the platform is the same, the way it’s used by and marketed to these different groups is different.

To understand those differences in personas, you can rely on a use case map. This tool helps you understand the unique needs and problems of each segment so you can target them correctly within your product strategy.

Follow the steps below for effective use case development.

The Problem

SaaS team members sit in a circle while reviewing common user concerns | Finding the Right SaaS Users

Summarize the problem, if possible, in the user’s own words. Use primary research tools to gather this information: focus groups, surveys, and interviews are all helpful. 

Simply ask people what problem your product solves for them. Often, your product might solve multiple issues. In this case, you may want to ask real users about the biggest pain point the product solves or what the most important issues are and how it helps. To delve deeper, ask follow-up questions related to the experience. Some ideas to start with include:

  • What do you like best about the product?
  • If you could change one thing, what would it be?
  • How often do you use the product?
  • What key features do you use most and why?
  • What is one reason you would recommend this product to someone else?
  • What type of people would you recommend the product to?
  • Can you list your top five most-used features, ranked from most important to least important?

All of these questions help you determine the problems your product design solves for various SaaS user segments. It also helps you understand how people are using it, as that doesn’t always align with your own expectations.

The SaaS Buyer Persona

Close up of fingers picking up tiny wooden block marked with user icon | Finding the Right SaaS Users

Once you have answers to the above questions, consider who provided them. To best target users who have these same problems, you need to know who they might be.

Start by segmenting your audience by similar answers to the above questions. Then you can see what other traits they have in common. Are they all the same age? Do they have similar incomes? Are they located in the same area?

These types of demographic traits are easy to start with, but you must go deeper. Consider the psychographic attributes of users within each segment. This refers to traits such as:

  • Values. What are the missions they support and what type of values do they want to align themselves with? 
  • Desires. What is the most important thing psychologically to them? For example, the budget might be important, but it may be less about the dollar amount and more about the long-term savings opportunities. 
  • Needs. What are the must-haves for each segment?
  • Goals. What personal or business goals are driving the purchasing decisions of each segment, and how can you position your product strategy to help with them?
  • Lifestyle choices. What lifestyle choices might be impacting purchasing decisions and how does that relate to your marketing efforts?

Asking these questions helps you truly understand the minds of your audience so you can understand how to connect with more of the right SaaS users. 

Alternative Solutions

Close up of SaaS user filling out product survey on touch screen | Finding the Right SaaS Users

What alternatives do people have to solve these problems? This includes your competitors as well as in-house solutions people and businesses may create themselves. In some cases, you might also need to consider that people can make a choice not to solve the problem. When that happens, you may need to demonstrate why that’s a mistake and why your solution is a better choice.

To find out what alternatives people are turning to, you can:

  • Ask them directly. Again, you can use primary research tools like surveys and feedback interviews to discover this information.
  •  Utilize data. If your sales or customer service teams are in regular contact with active users, they probably know a lot about their related choices. Poll your salespeople and customer service representatives for information.
  • Use third-party data. If you don’t have access to your own data, turn to third-party information such as consumer reports and industry benchmarks to help you understand alternative solutions in your niche. 

The Frequency

Woman smiles while sitting on couch and looking at smartphone | Finding the Right SaaS Users

It’s not enough to know what the problem is — you also need to know how often people experience it or use products like yours to solve it. This knowledge lets you create solutions that work on the same cadence.

For example, a product concept that helps businesses balance accounts may be used a few times a week on average. Setting up notifications that ping someone’s phone for every single transaction could result in too many touchpoints, creating connections that overwhelm them and make them unhappy with your product. 

Here’s another example: Someone may use project management tools or time management applications daily. But they may use an app to help them choose a household appliance once or twice a year. That difference should change how you approach SaaS users and the types of features and benefits you market to them.

The Why

Couple sitting on couch deciding to watch movie on tablet or TV as video player is displayed on devices | Finding the Right SaaS Users

This is the core reason someone chooses your product over any other, and it relates to the benefits one experiences from or perceives with your products. Again, you’ll need to ask specific questions to discover these valuable insights from existing user personas so you can find more like them. To help you frame questions to get the most out of customer feedback or surveys, consider that benefits come in three categories: functional, emotional and accrued.

Functional Benefits

This is what the product enables people to accomplish. The functional benefit of Slack is open communication in real-time online while the functional benefit of Netflix is the ability to connect with entertainment that fits the audience and mood of the moment. Functional benefits tend to connect with logical reasoning when people are making purchasing decisions. They can be related to considerations like price, convenience, efficiency and productivity. 

Emotional Benefits

Emotional benefits are those that cause someone to feel something. For example, if a mom logs into Netflix and finds appropriate content the entire family can enjoy, she can feel peace of mind or relaxation. Additionally, someone may feel safe when using a known app to book a ride from a highly rated driver. 

Accrued Benefits

These benefits increase as the person uses the product longer. A great example is loyalty rewards. For instance, Dropbox offers loyalty rewards. As people refer others to the platform, they receive extra storage space. Additionally, long-time Dropbox Plus members can gift several months of Dropbox Plus membership to others as a benefit of continued use.

Step 3: Create Core Value Propositions

SaaS manager draws on whiteboard while identifying core value propositions for her product | Finding the Right SaaS Users

All of the above steps help you segment your audience and create a use case for each. Once you know who is using your SaaS product, why they are using it, and what benefits are important to them, you can create a core value proposition. Do this for every use case you created via the steps above.

So, you might have three main market segments. Each segment may have one or two use cases — let’s say two for easy math. That’s six total use cases where you’ll need six core value propositions. In a simpler case, you would have a use case for each segment and a value proposition for each use case.

The value proposition is critical because:

  • It helps you test your product. If your value prop is making accounting faster and easier, then all the accounting functions within your product must work seamlessly. You can pay special attention to testing those given all the use cases and functional benefits you defined with your research in steps 1 and 2. The same is true for any other product. Yes, you want your entire product to work, but it is critical that the functions supporting the core value propositions work flawlessly — even for a minimal viable product. 
  •  It helps you market your product. Understanding the core value propositions that most resonate with your audience segments help you best market your product. It also helps you back up those initial touch points with connections and product use that best supports the aha moment
  • It helps you price your product. Core value propositions also help with other details, including monetization and pricing. If a core value proposition solves a small problem with a low monetary value, for example, you may not be able to price the product high. Or, if the core value solves a scaled problem that many people have, you may have enough of an audience for your product that you don’t have to price it high because you will benefit from economies of scale. 

What Makes a Good Core Value Prop?

SaaS manager talks to customer in meeting about common pain points | Finding the Right SaaS Users

Strong core value propositions come from your own data about what your audience wants or needs. They should not come from guesses or gut feelings. Some traits of strong core value props include:

  • Relevancy. They are directly relevant to known and current needs and problems. You can’t base a core value on a problem you think people might have. If the individual is not aware of the problem, it may not make for a good core value prop unless you do some marketing work to make them aware of it.
  • Positive impact. The core value prop must create a net positive impact for the individual. In short, they must be better off after having used your product than they were before,
  • Different. Your core value can’t be the exact same as your competitor’s. This is where you differentiate your product on the market. 

Step 4: Develop Your Target Audience Strategies

Two employees sitting at desk look at tablet to review audience strategies | Finding the Right SaaS Users

Once you define your use cases and understand how your product helps various segments within your target audience, you need a strategy for connecting with those people and communicating these facts. Your product strategy must be based on each individual use case and value proposition, as the method and content of your message may be different in each situation.

Where Will You Reach Your Users?

User segmentation is critically important in determining which channels you will use to reach your audience. Not all channels are effective for every single use case, as both product experience and marketing channels are not universal.

For example, if you have a project management tool aimed at small businesses, advertising on social media platforms like Facebook or LinkedIn might be more effective than using Instagram or Snapchat. Similarly, if you have a financial management SaaS product aimed at high net worth individuals, you may want to consider targeting them through email marketing and display ads on financial news websites or publications.

When choosing the channels for your audience strategies, think about demographics and online behaviors for your audience. That will often lead you to the right channels. You can also ask your existing users where they found out about you or track where click-throughs and conversions come from to understand which channels have performed well for these segments in the past. 

At What Point Will You Reach Your Users?

Girl’s face is backlit as she looks at smartphone while laying on bed in cozy, dark room | Finding the Right SaaS Users

The time or day when you reach out to people can be as important as what channels you use. Every segment of your audience might be more available or open to engagement at different times of the day or week, and you should always customize efforts to maximize their effectiveness.

For example, college students might be more likely to check email or engage with app notifications later in the night while business managers may be more likely to engage early in the morning, during lunch or afternoon slow periods and right after work. Segments of your audience that work a traditional nine-to-five job might engage with products for personal benefits on weekends more than on weekdays, and educators may engage in the mid-afternoon when school lets out.

These are obviously all general assumptions that don’t take into account many unique factors for your audience segments. The best way to learn what times of the day or week you should reach your audience is by gathering data. Keep an eye on the performance of all your outreach campaigns to understand which times perform best for various segments. 

How Often Will You Reach Your Users? 

How often you reach out is also important. While frequent connections help build the product habits that lead to loyalty and growth loops, you can’t set every campaign on “daily” and call it done. Instead, look at data and preferences to find out how often people want to be reached.

You can give people options when you create email marketing lists. Let them choose daily, weekly, monthly or digest options, for example. Provide features that support people in managing their own notifications and texts whenever possible. This helps you understand exactly how often you should reach users and how to do it.

Step 5: Identify Opportunities to Expand Your Product-Market Fit

Senior man sits at dining table and launches zoom software on laptop computer | Finding the Right SaaS Users

The first few steps above are about creating an initial product-market fit. They help you understand what makes your product appealing to consumers and how to engage people to promote leads and conversions. But once you’ve done that work, you don’t have to start over in your product development and discovery process. You can keep expanding on it by adapting what you know about your product-market fit to help you launch new products or enter new markets.

For example, you can consider the capabilities your current product has that would be attractive to a new market. Plotting these product features on a graph to determine which is most likely to be a good match for the new market can help you prioritize certain features and benefits and create new core value propositions.

Consider the case of Zoom. Before the COVID-19 pandemic, businesses primarily used Zoom as a web conferencing tool. It certainly was not the household name it became during the pandemic. When lockdowns occurred, suddenly many organizations had a specific need: to support face-to-face meetings without anyone actually being in the same room. Zoom supported that capability. Previously, this had been a service that was attractive to businesses with offices and teams in disparate locations. In 2020, Zoom realized this capability would be attractive to a variety of new markets, including schools, libraries, churches and recreational clubs. 

To find areas for expanding your product-market fit, you have to look for these same opportunities. For example, a software company that helps retirees budget might have functions for other demographics. This can include college students who need to make their tuition assistance last an entire semester or single parents who want to do the most they can with limited incomes. 

Step 6: Get Help From a Product-Led Growth Agency

SaaS manager smiles while talking to Teknicks team on cell phone | Finding the Right SaaS Users

Gathering and evaluating all this data, engaging in user segmentation and making marketing, product and business decisions based on those things can be challenging. If you are overwhelmed by the complexity and detailed nature of these steps, don’t worry. A product-led growth (PLG) agency can help.

PLGs can assist you in developing use case maps, value props or entire marketing strategies. They can also evaluate and present business opportunities for expansion based on actionable insights. To find out more about Teknick’s services as a PLG agency, reach out today to schedule a free strategy meeting.

About the Author

Nick Chasinov is the founder and CEO of Teknicks, a growth marketing agency that drives sustainable, defensible, and compounding growth for web apps and SaaS products.

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