There are mistakes we made selling a tool instead of a solution. When you’re a young SaaS startup everything comes back to this:
We’ve seen this awesome graphic from useronboard countless time, we’ve liked it, we’ve shared it and yet we did the mistake of selling the flower instead of super mario throwing fireballs.
Is your SaaS a tool or a solution?
The idea behind this graphic seems obvious, yet finding the benefit your product really delivers to whom and more importantly articulating it properly are not that easy and in fact depend on the type of your SaaS you’re selling.
Some products fall naturally in the “tool” category while the others more in the “solution” one.
Let me illustrate it through two examples:
- Aircall: we’re a phone system, we’re enabling users to get a number and make / receive phone calls (with extra features like taking note, call forwarding, answering machine etc…). As such we can be used by many types of customers for many different use cases (sales, support, internal communications, marketing etc…). We fall naturally into the “tool” category.
- close.io: is the “inside sales CRM of choice for SMBs”. close.io also enables sales to make / receive calls and shares a lot of features in common with us (call forwarding, notes, answering machine etc…) but there are completed built and dedicated to one use case: sales. Thus close.io falls more in the “solution” category (they make you close more deals).
If we come back to the useronboard graphic above then it’s clearer why for some startups it’s easier to become fireball resellers while others are more flowershops. This is our case.
The last 4 months we’ve been selling flowers and here are the 5 lessons we’ve learned along the way.
1 Vision: It’s harder to find the right path to your final vision
This picture can actually be used not only for product development but also for your business vision. The majority of founders have a clear vision of where they want to go (that the vision changes or might be wrong is not the question here). But when you’re selling a tool it’s much more difficult to come up with the right playbook as your options as where to start are infinite.
As a phone system aiming at SMBs in general we could have started by targeting ecommerce companies first (dedicated features, specific value proposition, targeted acquisition channels) or SaaS companies or brick and mortar shops… and then expand from there to other verticals. It’s an option we didn’t choose as we didn’t spot our obvious niche from the start.
Another strategy is, rather than starting with a specific target, to start with a specific use case / feature. A good example of this is Intercom.
Intercom now sells itself as a communication tool between businesses and their users, whether this communication happens during onboarding, for support or for marketing reasons. As such it appeals to a wide variety of businesses for a lot of use cases.
But Intercom didn’t start as a “global” communication tool, it started as a customer lifecycle email solution, enabling startups to send emails to their users based on their behavior. From there, they later added support features (the intercom discussion box) and recently marketing features (to send newsletter).
2 Product development: the feature creep monster is waiting for you
A corollary of the first mistake is that by having a very “global” approach rather than a “laser focused” one the feature creep trap is easier to fall into. By not restraining the use cases we wanted to tackle, we ended up developing too many different features in parallel.
We’ve mapped on this diagram three types of customers we currently have (small ecommerce, startups with international offices and freelancers) and on the right the features they use / need. As you can see a lot of the features we have developed don’t overlap between these customers.
We clearly underestimated the resources required to build and maintain all these features leading to an average user experience on some of them.
The positive aspect is that by having really sold our product we could see which features our customers were really using. The learning here: don’t assume that their usage pattern will match the studies / customer development you’ve made beforehand (what they request is not necessarily what they end up doing). So a lot of good data can be collected at that point.
3 Customer support: you won’t be able please everybody
As we appeal to many different types of businesses we got many types of different early users: from a hairdresser to freelancers, startups in the sharing economy, a fortuneteller, companies needing a hotline etc…
Having so many different types of users is not a problem by itself, the problem is that at early stage you have few resources (time and people) and it’s almost impossible to please all of them. Also you’ll get more contradictory feedbacks and feature requests that might go in completely different directions.
Again restraining your targets or your use cases might reduce the noise to signal ratio.
Be careful when you have too many types of customers as their feedbacks / requests might lead you in many different directions. At Aircall we have users asking us for tens of different features: from sms to number portability or hotline features. The difficult thing is to focus on the right subsets of customers who share the same needs (at least at the beginning)
4 Marketing: your marketing effort will be diluted
From a marketing point of view selling a tool rather than a solution is way, way harder. When you don’t have a clear audience and that you don’t focus on a single value proposition you generally dilute most of you marketing efforts:
- poor content marketing as you’ll have a very “cold” approach trying to appeal to many different people on a wide range of needs (and content needs to be hot)
- higher competition in paid acquisition channels as you’ll compete with many more opponents and potentially way bigger than you (they don’t care about spending tens of thousands of dollars on very general keywords like “buy a phone number”, you do!)
5 Pricing: your pricing plan will lack of coherence
A good SaaS pricing is in general coherent, meaning that the price increase from plan to plan is indexed on the usage volume (the more I use it the more I pay) or better features (I keep the features from the previous plan + extra ones).
So a customer who starts with the cheapest plan (plan A) might buy more expensive plans (B and C) as its company grows and as he needs to use your tool more and more.
An “incoherent” pricing plan is a plan for which this evolution is not possible (no upsell).
This is what we discovered with our two plans “Starter Plan” ($6 /month) and Pro Plan ($24 / month). We assumed that the starter plan would be a good entry point for people to start using Aircall and once they perceive the value they would upsell to the Pro plan (to invite more collaborators.
In reality the majority of our startup customers directly bought the $24 plan and the Starter plan mostly attracts freelancers which will never upgrade to Pro as they don’t need our collaborative features, more users or more phone usage.
Our problem is that these two targets have totally different needs and in term of support we cannot handle all of the requests / feedbacks. We’ll probably kill the Starter plan for the moment and maybe come back to a specific offer for freelancers later as we grow.
Selling your product to very different types of customers is possible but only once you’ve reached a certain size and that your brand start to be known. At very early stage it’s more complicated.
How to avoid these mistakes
Short answer: you probably won’t avoid them and you probably shouldn’t.
From vision to product development, customer support, pricing and marketing we don’t regret any of the mistakes we’ve made simply because:
1 – The knowledge learned far outweighs the mistakes done
2 – Reading the theory beforehand is nice but the reality is that selling a “tool” is necessarily more complicated at the beginning than selling a “solution”. If I go back to the Intercom example you can, on the other hand, check all the other competitors which also started as lifecycle email tools and are still stuck at this stage. Choosing a specific audience or a specific use case from the beginning is risky as it can be harder to expand later if you chose the wrong path / don’t know how to expand it.
3 – Having explored many types of use cases and customers during the last 4 months what we might have lost in “efficiency” we definitely got it back in knowledge. We were able to better identify what were the different needs of our targets and more importantly to understand which ones we cannot / shouldn’t address at the moment (knowing what not to do is really important too). Now we’ll adopt a more focused approach but with much more experience and data to back it.
So no, the point is not to try to avoid these mistakes, the point is to be prepared to make them so you’ll know when to stop and which path to follow after analyzing the situation. As Tawheed Kader explains in this fantastic post:
“It takes roughly 3 years for you to truly figure out if what you’re working on can be a business.”
Once you hit that 3-year mark, and you’ve figured out a way to stay alive, some magical things do happen.”
We still have a long way to go but at least we’re starting to understand how it’s going to be.