Identifying your SaaS product market fit

Building and delivering a new SaaS product is hard.

But building and delivering a new SaaS product that customers can’t wait to use is harder.

Developing software solutions takes (often substantial) time and money. So, working out where a SaaS solution can profitably slot into the market isn’t a case of just developing products until something sticks.

Enter the concept of ‘SaaS product market fit’.

What is SaaS product market fit?

Product market fit refers to the alignment between the product you offer, and the market you offer it in.

In simple terms, this means that your offering is both needed and wanted by your potential customers. So, in SaaS, this looks like customers subscribing to your service, staying subscribed, and even recommending your offering to others.  

Another way to understand SaaS product market fit is to view it as the state of your key value hypothesis being validated.

Key value hypothesis: the (assumed) key reason underlying why a customer will use your product.

So, your product market fit is when this hypothesis is proven true, and your SaaS offering is meeting user requirements.

The importance of your SaaS product market fit

For SaaS companies, identifying and understanding your product market fit is the first rung on the ladder of success.

SaaS product market fit is a signifier that you’re on the right track. That is, that the SaaS you’re offering will gain subscriptions. Or, indeed, is wanted enough to warrant efforts placed into business growth. When the market fit is validated, it paves the way for you to scale your offering.

Without understanding your product market fit, you get a very different picture. Built software needs costly changes and improvements. Meanwhile, scaling efforts funnel resources into marketing and hiring without return.

In short, SaaS product market fit is the difference between a good start, and a troubled one. As such, it’s important to start identifying your market fit early on.

Identifying your market fit

You need to find the market fit before you dive into the creation of your software or detailing of your services. So, how do you go about identifying where and how your SaaS offering will slot into the market?

It starts with your customers. Or rather, by understanding customer needs.

A good approach is to interview potential customers to uncover their pain points. Where is there an under-served need? What problems do they complain about? From there, you can build your software and service around the need, rather than trying to fit an existing idea into the wrong-shaped mould.

You can also use some quantitative data to support your search for product market fit. Specifically, your organic growth, and your subscription retention. If people are subscribing and staying subscribed, it indicates you’re meeting a market need.

It doesn’t stop there

SaaS product market fit remains an important factor throughout the lifecycle of your offering. Identifying it includes continuing to collect feedback about your product and service as your company grows. Only this way can your SaaS offering evolve with the market that uses it.

As your customer acquisition gains pace over time, you can start to measure your market fit by asking these new users for feedback. A particularly useful question revolves around what would happen if the SaaS offering became unavailable. The more customers that would miss it, the stronger the sign that you’ve identified — and are meeting — your SaaS product market fit.

Continuing to check your SaaS market fit can alert you to scaling opportunities as well as any need for product evolution.

SaaS product market fit

TL;DR: Identifying your SaaS product market fit is one of the first steps on the road to success. It’s all about making sure your software meets a need. A SaaS offering with good market fit is one that’s wanted by customers. And so, identifying it is all about talking to your target market.

Useful links

The tech market and why the winner takes it all

SaaS pricing models explained

What’s the difference between a software upgrade and a software update?