This article will discuss the top challenges in product management for software as a service (SaaS), which, as we’ll discuss shortly, is inherently a faster-paced discipline than traditional product management. And what is product management for SaaS, exactly? At the risk of stating the obvious, the product management process is a multifaceted one that works with multiple stakeholders at your company (including, but not limited to, marketing, sales, engineering, and customer support) to create products your customers love. After all, your customers love products that solve their problems and address their genuine business pain, which you, in turn, have studiously researched and clearly identified.
And of course, product management is so much more. Product management is about being the voice of, and internal advocate for, the customer to ensure their needs are being met. Product management is about developing crucial product management skills, such as being a cross-functional communicator and influencer who builds consensus across multiple teams that each has very different priorities and timeframes. Product management is about being the analytical researcher who arbitrates disagreements with data-driven reasons based on objective, performance-based metrics, not on hunches or personal bias.
So why does SaaS product management move so much faster than in other disciplines? Part of the reason is that SaaS is an extremely competitive market that shows no signs of slowing down. SaaS applications have shown double-digit, year-over-year growth for years, with the market hitting an estimated value of $150B+ in 2020.
SaaS continues to show double-digit growth with a $150B+ valuation. Image courtesy Statista.
New developments such as open-source software and accessible, bootcamp-style training programs have dramatically lowered the barrier to entry on software development and led to the infamous “SaaS explosion.” There are more than 7,000 different software applications for marketing alone, to say nothing of different classes of software for other professional functions. As a result, the market is competitive, and customers are demanding. Is your SaaS product missing a key feature your competitors have? Because the pace of software development is so fast, SaaS users have high expectations and aren’t shy about asking for additional product enhancements. And because signing up for a SaaS product usually isn’t anything like the commitment of, say, purchasing an office building, users also aren’t shy about walking away from their current SaaS products in favor of something newer and shinier.
Here are some of the toughest challenges in SaaS product management today.
Focusing too much on short-term needs and immediate customer asks is a universal challenge for most product managers, but tends to be especially challenging for SaaS product management. After all, the pace of developing and releasing SaaS products tends to be faster than the pace of developing and shipping new models of cars or airplanes...which means your product roadmap changes frequently, and prioritization can become especially tough. In a perfect world, the only reason your product roadmap would change would be because of all the highly functional and valuable product releases that go flying out the door, on time and on budget.
In the real world, SaaS product managers know that roadmaps frequently change in response to competing priorities. Of course, the north star goal of every SaaS product manager is to create best-in-class products that delight your customers and edge out your competitors. But the reality is that every SaaS product manager has a short-term tasklist that grows at an alarming rate. You have immediate requests from customers. Internal technical gaps that threaten your company’s revenue. And the dreaded asks from prospects that will make all the difference in winning new deals, or so your sales team tells you. (And you don’t want to cost your company deals, do you?)
As a SaaS product manager, you know you could and should be getting more strategic about how you approach developing new products and enhancing existing ones. Sadly, the reality is that in SaaS product management, it’s commonplace for tactical concerns to occupy most of your time. In fact, according to a recent survey with more than 2,000 respondents, product managers spend about 73% of their time on tactical issues. Immediate asks from customers. Internal process blockers and technical gaps that are blocking company revenue. And not the next great evolution in product.
Surveyed product managers reported spending 70%+ of their time on tactical issues. Image courtesy ProductCraft.
SaaS product management is arguably as much about soft skills as it is technical skills. While there are definitely organizations in which product sits atop other teams, it’s far more common to see product managers own product development while not directly managing any dedicated teams. Even so, successful product management is all about influencing multiple internal teams that have different goals, timeframes, and in some cases, live in completely different worlds than you:
As a result, the typical queue for SaaS engineers often extends beyond the boundaries of product development. To make the obvious point, your engineers’ time is precious and there are many parties competing for it. In fact, engineers routinely cite a lack of capacity as their #1 top challenge.
In a perfect world, product marketers also have the bandwidth to regularly sync with growth teams to pass valuable VOC insights to their growth teams to address concerns proactively and keep customers engaged. At a typically busy SaaS company, partnerships between product management and GTM teams tend to be a series of one-offs. You have new launches, version updates, or broader product communications (or in less-fun and hopefully more-infrequent cases, delivering the bad news about bugs, errors, and system outages).
The #1 challenge for engineers is having the capacity to do everything they need to. Image courtesy Coding Sans.
As mentioned, SaaS customers tend to be more fickle than your average homebuyer. Instead of being stuck with a ten-year mortgage, SaaS customers usually sign a much shorter contract, and might simply churn and walk away forever if they don’t feel they’re getting value from your product.
The challenge in SaaS product management is driving higher retention for your products. From a purely product development standpoint, retention means making your product “stickier,” or harder to churn. Since a binding ten-year mortgage is usually not an option for SaaS contracts, the best SaaS products tend to be “sticky” because they’re so valuable and enjoyable to use that users can’t imagine churning. There are powerful product management strategies such as building in accruing benefits and mounting loss into your products to ensure that the more people use them, the more compelled they are to stay.
From a business standpoint, higher retention is also a matter of visibility into user behavior patterns. For instance, SaaS products tend to have telltale early warning signs for churn, such as decreasing engagement over time with your product, or a lack of multiple logins access a team plan. Conversely, extremely happy customers that are ready for cross-sell or upsell will also show signals, such as repeated multiple team logins and extensive product usage, sometimes in excess of their usage allowance. By having visibility into product usage analytics, product managers can work with growth teams to dramatically improve the effects of their work on their entire company’s bottom line. Visibility into product usage not only prevents churn, but also paves the way to overall revenue growth.
How much do retention and upsells grow your company? As your growth colleagues will tell you, retaining and growing existing customer accounts is an incredibly efficient way to generate revenue for your company. Upselling existing customers can be 2x less costly than acquiring new ones; renewing can be 7x less costly!
Upsells to existing customers can be 2x more cost-efficient than acquiring new logos. Image courtesy Forentrepreneurs.
As if jockeying for valuable development resources against ad-hoc customer or prospect asks wasn’t enough, your engineering team also regularly fields a variety of internal requests. One request might be assisting with InfoSec (including both data security and customer privacy, which can include compliance for regulations such as GDPR, CCPA, and even HIPAA for healthcare-related issues). Another might be for cloud migration and database launch/maintenance (particularly for larger SaaS firms that are still in digital transformation mode). And of course, there’s also integrations - the messy business of making sure the various software applications your company uses actually talk to each other properly.
While security and migration projects may come and go, integrations are increasingly becoming an ongoing burden for product management and engineers in SaaS. Again, as a result of the SaaS explosion, companies are using more and more software internally. Enterprise companies use 1,295 software applications on average (including 120 marketing applications on average, 100 HR applications, and many more for other departments). Sadly, in most cases, none of those applications talk to each other. As a result, every application that doesn’t have a “native integration,” that is, a robust, pre-built connection that integrates at the software (or API integration) level, becomes an individual data silo. The more data that gets siloed, the more that marketing, sales, support, HR, finance, and other teams find themselves bogged down in manual data entry and transfer from software to software until they hit critical mass and request integrations to be built.
When integration requests come from within your company, they get tossed into your IT department’s internal helpdesk queue, frequently somewhere near the bottom. When integration requests come from your most valuable customers to connect your company’s SaaS product to their internal tools, such requests tend to float straight to the top of the priority list. At this point, your product management team must contend for development resources. Meanwhile, engineering works on the far less-thrilling project of making sure your product properly talks to a customer’s marketing campaign platform or a CRM, usually by building a brittle, stopgap internal integration. (And then continually expends more development cycles maintaining that integration. Why? Future version updates to that marketing platform or CRM will require your engineers to go back and make subsequent fixes.)
The average enterprise uses 1,295 different cloud software applications. Image courtesy Netskope.
Now that we’ve covered the top challenges for SaaS product management, in subsequent articles, we’ll go over actionable tactics on how to make progress against each of these areas.
Read up on additional resources for product managers: