Hey Pre-Launch SaaS Startup, You Have a Leaky Bucket Problem

Scott Beechuk
Dec 11, 2018 · 6 min read

If you’re reading this post and you’re not my mom, chances are you know what SaaS stands for. There once was a time in the not-so-distant past when software only came in one form: boxed. It was something you could hold, feel the weight of, throw away the physical instructions for and put on the shelf. And, if you’re the corporate developer, it’s something you sell and rarely give a second thought to once it has been delivered to the new owner’s satisfied hands.

Today, more and more the world has moved to software as a service — so named because the product is no longer physical, rather it’s hosted in a third party cloud and made available via web browsers, mobile apps and APIs. Similar to the way architects, doctors, and housekeepers sell invaluable yet intangible services, when the physicality of the product is removed, you are consciously or subconsciously going through the motions of buying the said service every time you access it. Or, if you’re the developer, you should view each touch point as an opportunity to “sell” your service. However you wish to approach it, unlike purchasing a physical product, services cannot be contained: a customer is always evaluating a service’s worth every time they use it. Every time.

Being aware of these human-scale economics is an essential factor for success, yet it’s frequently forgotten in favor of metrics and engineering. The setup for this pitfall is often the same: SaaS companies build a customer base, get excited about revenue, but then notice early users leaving. This is when our instincts to kick into growth hacking overdrive, which can make it seem as though everything is on an improved trajectory.

Overemphasizing growth isn’t surprising — it’s something that can be measured, you can wrap your head around the numbers, and can actually be quite addicting. As a result, many startups make a serious mistake by merely doubling down on growth hacking to replace the users they failed to retain.While there’s no question that growth hacking can be critical in building a brand and capturing market share, it cannot replace the essential cultivation of early customer loyalty that is created through every single customer interface with the service.

So, what steps can we take to ensure that the customer is the focus of the service?

Don’t Alienate First Adopters

It’s important to first understand why early customers leave. With SaaS businesses, there are multiple reasons, but a couple that you can control are flawed onboarding processes and poor user experiences. These stem from a failure to gather intelligence about your customers’ needs right away. Without a dedicated customer base, early users will defect to competitors and share their poor experience with your product with colleagues and partners. In the meantime, as these users leave, growth hacking becomes as inefficient as trying to fill a bucket with a hole in the bottom.

To avoid this user depletion, startups should prioritize the critical window of early customer retention and focus on building a robust early-user base. This base will serve not only as a foundation for growth, but also as a pool of delighted brand advocates who broadcast their excellent experiences through social networks and word-of-mouth. In turn, that publicity can be one of the best growth hacks of all.

Three Keys to Create Loyal Early Users

Fortunately, it’s not difficult to embrace early customer curation and integrate this view into your business. Here are three simple ways to get started now:

1. Invest early in building a Customer Success team then test like there’s no tomorrow (or like launch is tomorrow)

At least six months before product release, hire a leader and build a team that will spearhead your customer success efforts. Provide enough time to allow the team to utilize the software at an expert level, particularly from a user experience perspective, as well as familiarizing themselves with the customer onboarding process and what it takes for a user to obtain the most value from the product.

A State of the Connected Customer Report by Salesforce found that 59% of customers say tailored engagement based on past interactions is very important to win their business. As a result, SaaS companies need to be targeting customers specific needs from the beginning.

To augment the activities of your customer success team, engage in “hallway testing,” where people who have no understanding of your product are observed while navigating through it. Have your team take well-organized notes and fix anything confusing to users.

2. Equip your Product with User Engagement Analytics

Offering killer features that make you stand out in the marketplace is what early adopters frequently get excited about. What I get excited about is understanding how they are using these features since it’s the user/community who will truly be pushing the limits and capabilities of your product. By building in user engagement analytics technology, you will understand exactly what early customers are doing and what is going wrong so your customer success team can take action in real time, minimizing the loss of early users.

The reason why a lot of startups ignore this step is because these analytic features can be quite extensive (read: expensive). After all, analyzing the full dimensions of how a customer uses your product is a tall order. These measurements should include reporting and notification capabilities, as well as have the ability to capture and present data on such metrics as total visits, repeat visits, frequency of feature use and overall time spent in the application. It should also be, of course, logging errors. Even if you can’t invest in a full-featured third-party tool, at a minimum, you can always instrument your app by generating a basic log file that tracks this data.

3. Offer Thought Leadership on your Website

It turns out that excellent user experiences are not enough to build brand loyalty from the start. Customers will also look to your company as a thought leader in its space. Top SaaS companies invest in thought leadership to establish credibility, and most early users are experienced and savvy enough to align themselves with a community or company with whom they believe are leaders in their field and/or who understand the industry’s complexities. Putting a face and personality to the message is one of the best ways to promote trust and loyalty in your base. Make use of blogs and other pages on your main site where you can provide valuable content that is relevant to your business and customers.

Strong thought leadership also allows engagement with customers by fielding questions about online resources or answering on a company forum. For example, Bluecore, one of my portfolio companies, has a blog and a resources section on its website that offers everything from quick how-to guides to original research. This gives customers a sense of shared purpose with your mission. And the more involved customers are with your brand, the more likely they are to stay customers for the long term.

As competition for users grow fiercer every year, it’s important to remember that behind every account is a customer who really wants to find a great product that they can get behind. Early users are not only your biggest fans, they can be your best allies or your worst enemies. So, while growth hacking is still an important tactic for any SaaS startup, don’t delay in investing in the right people, processes and tools to shepherd your earliest users and assess their experiences carefully. Devotion to customer success will pay off in robust sustainability and a strong foundation for growth.

Scott Beechuk brings over 20 years of product management, engineering, and SaaS expertise to his role as a partner on the enterprise investment team at Norwest Venture Partners. Throughout his career, Scott has held senior product leader roles at Salesforce, co-founded multiple companies and has served as an advisor and angel investor to several startups.

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