SaaS products and services account for the most popular form of cloud computing. Cloud is a metaphor used in the technology world. It translates as a service provider that can be used by many customers using any sort of device as long as it supports a web browser.
The concept comes from the 1960s. Since the inception of computers, companies used a single instance of software to work. They used computers to access information on the same device for a specific duration of time.
Cloud computing is the on-demand provision of online data resources. Instead of possessing a physical system, this technology provides services like networking, accessibility, storage, and databases as needed.
There are three kinds of service providing models in cloud computing:
- IaaS- Infrastructure as a service
- PaaS-Platform as a Service
- SaaS-Software as a Service
Here we are going to discuss what the SaaS product and services are and how to build a SaaS product:
What SaaS is?
SaaS stands for Software as a Service. SaaS is a software delivery model that sells applications to customers on a subscription basis. Customers only need to open a cloud-based app to perform their said or subscribed process. SaaS products provide you with cost-effective, enhanced quality, and swift access to daily chores. Contrary to the time taking process of downloading and installing software on the hard disk, Software as a Service makes it quite effortless to cope with routine tasks.
There are enormous companies providing these services. The most common of them are Microsoft, Google, Apple, Salesforce, AWS, GCP, MailChimp, and countless more. Email, calendaring, managing servers, and google services (google slides, spreadsheet, drive and google forms) are all the most popular SaaS products.
Desktops were used as centralized mediums for performing digital operations by a lot of companies on a regular basis in the 70s. Such systems are now referred to as Legacy Systems. The modern world is changed as companies have an access to their files remotely thanks to the internet for providing ease of inaccessibility. Technology has made it trouble-free to roam around without carrying a lot of physical stuff. You just have to enter your login credentials on a cloud app using the internet as a necessary medium.
SaaS products bring a whole new dimension to the world of the internet. Its scope not only spans on an individual level but also on company-level tasks.
SaaS usage in real-world (examples):
A number of companies who started providing their services have started using SaaS. Cloud computing and its market size are expected to be 362 billion US dollars by 2022. SaaS companies cover a huge global market share. Salesforce is the largest company. According to the data of 2019, it has a market share of 117.8 billion US dollars. Most renowned companies such as Microsoft, Google, and Zoom are the popular SaaS product examples. Moreover, ride-hailing, food delivery, courier like Uber, FedEx, and Food Panda are popular B2B & B2C SaaS products.
- Food delivery software solutions not only boost sales and productivity but also offer scalability in the business. Along with all the benefits, this SaaS business software also furnishes cost-effective solutions.
- Understanding Zoom as an operational product of SaaS is necessary to have an idea about how it works. Zoom is a popular SaaS product that provides its server and infrastructure to its app users for performing business activities. On the app, one can hold video group chats of 100 people at the same time. Webinars, Video conferences, and presentations through screen sharing can easily be done.
- Zoom is not the only popular SaaS product representing how SaaS works. In fact, there is a diversity of applications that work in their own way. If we take dropbox as an example, then we can say that it stores images, documents, and videos on the cloud. And, it offers several subscription packages to entertain both individual and business users. Also, just like any other SaaS product, it allows easy access to the end-users via login to manage their cloud storage.
- In the same way, Netflix also charges a fixed amount for monthly or annual subscriptions and sells its usage of content aka videos.
When to implement SaaS?
The implementation and use of SaaS depend on the end-user. B2B is a business model which stands for business to business, while B2C stands for Business to consumer For determining a company’s business model, we pay attention to the type of product that it sells.
B2B SaaS Product business model:
These companies provide services to an organizational or a business setup. Companies design applications according to the company users’ needs and demands. Google, Amazon web services, and Salesforce are few examples.
Business to business software includes inventory management, budgeting, order taking, customer service, and CRM software. Moreover, there is a single and unified piece of software system carrying out such tasks. These tasks include inventory management, CRM, order taking, payment, and order dispatch, and customer support operations.
Hence, making it smooth for business persons to carry out these tasks with minimal effort.
B2C SaaS Product business model:
B2C SaaS models provide services on more of a personal usage level. There can be a number of software layouts and user interfaces. For such software type, user experience and feedback systems provide basics for new needs and developmental updates.
Entertainments, daily task manager, data storage, are all personal level tasks. An employment-oriented personal networking site such as LinkedIn is the prime example of such a business model. Dating, meeting, and networking site Bumble and budgeting app Xlerant are all B2C SaaS companies.
Following are the factors that aid in decision making regarding the use of a specific business model:
Number of users:
B2B models are used if the number of users for a particular software is few. In comparison, a lot of users for a particular application are present in B2C.
Your goals decide on what type of software you need to implement for your business model. If your goal is to build a solution that solves a business problem, which is associated with an individual user. Then, B2C application is the answer. Similarly, if your software model provides a solution for a specific business niche then the B2B software system is the way to proceed.
An advertisement is necessary to enhance the popularity of a particular product. For this purpose, product advertisement is focused on the target audience. For B2B applications, decision-makers are the target audience. On the other hand, making software widely approachable, B2C applications are focused on mass media.
The SaaS products and services that you offer to the customers always need to consider their usage in their day-to-day personal or business-oriented activities. Moreover, it also puts emphasis on how they are making business feasible and easier for their end-users.
Keeping in mind the SaaS application development company needs to provide consistent and recurring content. This content must be accessible anytime when your customers need it. The inclination of consumers toward the business increases with the increase in its refining and maintenance efforts.
The following check must be completed to optimize the SaaS product business model.
- Business model objectives are transparent and consistently updating
- Consumer-oriented approach
- User privacy and security must be held high and fully respected
Automate billing for the services rendered for your customers:
The subscription-based model offers great flexibility in terms of licensing. It is also quite easy to use and custom-made for the kind of business role a user has. In order to enhance your business and give it a boost, you must include SaaS as a business model. Business model compatibility with SaaS is often neglected. This negligence can be indispensable when left unattended. Billing automation is now an evolving solution to grow your business revenue.
Having a wide user base to the SaaS brings complex and lengthy billing systems. We all agree here that manual billing for app usage can introduce human error.
SaaS applications include as many features as you want. In order to generate one-time or recurring billing, there are a variety of features that can be added. Data management for an expansive user base is quite difficult regarding manual billing management. SaaS helps to reduce this strain by providing a mechanism to charge your users in an automatic fashion. There are many billing models. A few of them are, which we have covered next-up:
- Monthly recurring model
- Usage-based recurring model.
- Annual recurring model.
There are many third-party systems that support the aforementioned billing models. For example, both Stripe and Braintree offer recurring modules. Any software can inherit and customize within its system boundaries via Integrating its API.
How to build a SaaS product?
In order to implement a SaaS product or to introduce a SaaS feature in an existing software application, the following points should be kept in mind.
Estimating software running expenses:
A successful business model ensures its budget plan to be optimal. Income generation must be more than spending on software development and maintenance.
- In order to run the system smoothly, development, management, and maintenance charges must be kept on track. However, it is not that easy to run things smoothly while coping with continuous challenges during a system run.
- SaaS is no doubt a less energy-taking business system, but it needs continuous effort to be kept on track.
- Risk management, technical problems, regulatory affairs, customers support, staff regularities, running cost, negative feedback, compliance risk affects the software negatively. One must be fully aware of all the operational spending when starting a SaaS business.
Budget optimization is necessary for it and it leads to developing well-organized systems to keep a track of expenses. To evade splurge, identifying the expensive business processes and finding a way to reduce their running costs. Or, devising SaaS plans in a way to take care of such business processes is extremely vital. Keeping a check on customers’ analytics who are existing customers leads to better system handling and prevents the loss of unnecessary funds.
While building a SaaS product it is very important to identify the product you are selling. Deciding a worth for it and then giving it a price tag. Market rate evaluation of similar products can help in marketing your product. In other words, know your market and then develop your product according to what’s in popular demand. It will enhance the quality and worth of the service that you are offering. Building a certain type of service and attaching the best-suited pricing model carries huge importance in order to be acceptable in the market. In addition to the above words, one of the most important parts of developing your SaaS product is deciding on the pricing models to offer your customers.
A variety of SaaS pricing models are available that are best suitable for the services. These can be used as a single model or maybe used as a combo of any of them.
To create awareness for the best use of service few of them are mentioned below:
In this model, the business charges consumers on the basis of how much service is used.
Business does not charge consumer until he/she needs to use the complete features.
The consumer needs to pay on a monthly or yearly basis. Subsequently, he/she can get access to the software for a particular duration of time.
Pricing per Active User:
Usage of features according to active user availing whole product or features in a batch.
Pricing per Feature:
The consumer can reach and use some features commonly available in the market, but charging for the features exclusively available in your software (USPs).
Identification and remodeling of SaaS products and services as per users:
If you are interested in the growth of your service and business you must know your target audience. It is important to have the target audience’s way of using the service aid in collecting data for future improvements. The SaaS type business model market has doubled in 2020 than in 2014. This shows an increase in the trend of its usage.
- Gaining trust over your users gives you a grip on your business. It also favors referral-based marketing and makes your software stand out in the market.
- By knowing the user’s needs and paying close attention to their feedback ensures the long-run and sustainability of your business application. The questions arising from your user base and addressing them promptly and effectively is the key to success.
- Diversification of your business application. Meaning, broadening your application usage by offering its accessibility across all of the widely used platforms. It helps to increase the customer base as well. To run a seamless application, you must know how much stuff you need to hire. Various applications fail to gather the number of consumers. It happens due to the fact that the application’s reachability is either narrow and is being developed in a way to run on specific platforms. The best way to devise a SaaS product is via a web-based system, which must be accessible via famous web browsers such as Firefox, Safari, Opera, Internet Explorer, Binge, and Google.
- Usage of Technical Stack that is famous and backed by a dense pool of developers to build an application is also important for the SaaS. And, Devices like tablets, phones & desktops are also the deciding factors for the usage of an app. Maybe your application will be phone or tablet-based instead. Again, you’ll have to make certain significant choices as per the selection of a target platform for your SaaS product. Operating systems made for a particular type of application influence the user base, such as Android and IOS.
After considering all points, the decision of developing a SaaS product becomes easier.
The Lifetime Value (LTV) calculation:
Lifetime Value (LTV):
It is the total amount of money; a customer can spend on the subscriptions of the services. LTV helps you decide the extent of features to include and the type of service to provide to consumers.
(SaaS plan amount – service cost) X (Retain Time of your customer)
So, if you are selling a plan for 35$/month. And, the service plan costs for 10$/month. An average user of that plan uses it for 10 months. Then LTV should become: (35-10) *10= 250$.
LTV turnover should be greater than the cost to acquire a customer. For instance, normally, some famous companies such as Salesforce.com are employing 4-5 times more LTV than it is to acquire a customer.
- When setting a price model for the service, considering the ratio between LTV and CAC (Customer Acquisition Cost) is necessary. Profiting from the SaaS business model depends vitally on this ratio. The ratio should not be lower than 1. Hence, it is important to get profit from customers because a ratio less than 1 indicates a loss of money on getting a new customer. If a SaaS business does not pay enough attention to the LTV/CAC ratio its business becomes endangered towards loss.
The optimal ratio must be not too much or too little, it must be on average. For instance, 3:1 is the optimal ratio of LTV/CAC. It shows that the business model is getting 3 times revenue on spending 1-time investment for getting a customer.
A ratio of 5 to 1 is not ideal. In other words, it’s because you spend so little to get a customer. We calculate LTV on monthly basis. It shows how much a customer is going to pay for usage of service in a month.
Testing the plans while conducting A/B testing pre and post-launch of software application:
Testing two versions of an application to check which one performs better is essential for most steps in the process of implementing a SaaS business model. For an efficient process, try and test your application before and after the launch.
A/B testing has many test types under its roof, but to increase the conversion rate of software applications following tests are most common:
User experience test
Two methods are available to test user experience:
- Laboratory Usability Testing
- Remote Usability Testing
Laboratory Usability Testing:
Laboratory user experience testing runs the test in a lab. In that lab, both the observer and testers are present in the same physical location. After that, during the test observers provide software to testers and ask them to run it on their devices. Observer silently observes their expressions and notes them. Obtained data is now available for the performance of data analysis.
Remote Usability Testing:
When testers and observers are not sitting beside each other and both rooms are at a far place. Then we perform such a test. Therefore it’s called “remote” usability testing. Automatic software is used to record expressions, behavior, and actions of testers by the observer. Example, Hotjar and Google Analytics.
It takes 0.05 seconds to build an impression of a design for a customer. So, it is equally important to running software. Following are simple methods to run a design test:
Two different variants of a SaaS business model are developed. Testers observe these and observe notes them, and generate data.
Sometimes the testers are those people who are already using that software. Moreover, they know the details about the software so it’s an important method for design tests.
Often the first expressions are considered as the last impressions. Similarly, in this test testers watch the design and the observer notes their expressions in the first 5 seconds.
Designs need to be easy-to-use and non-complicated. Therefore, for testing the simplicity and easily approachable buttons, we use this method. It is quite simple, as testers perform a simple task on a website or software. The concept of A/B testing is simple and the competitive advantage lies in the prioritization of experiments. This lies in the execution of all the fine details.
In conclusion, SaaS is the most favorite type of cloud computing service provider. It provides software as a service. For a business to function smoothly needs continuous and recurring maintenance. Therefore, expense management, user data, and user experience testing must be the topmost priority when developing SaaS. To refrain from loss, a business must keep an eye on the LTV/CAC ratio. To sum up, SaaS products made customer and business models easy, fast, and cost-effective to run.
Connect to Status 200
Nowadays, in the era of digital businesses, every business demands SaaS products and services to uplift their user experience and business feasibility. Status200 offers a high-quality SaaS application development. Firstly, here at Status200, business ease services are provided by using the latest technology stack. Secondly, our professional team is available to give you guidance about app development services. Moreover, they will also help you implement the best SaaS products and services.
You can also have our free consultation to review the development approaches for your business website or app. For highly professional and dedicated IT services at reasonable prices, we’re the best place. Contact us today, and we will help you in doing ease of business. Client satisfaction is our top priority.