Ucraft SaaS Startup Guide: A Brief Introduction
When it comes to entering the SaaS (software as a service) industry, many startups make the mistake of developing elaborate, intelligent solutions without checking whether there is even a demand for them in the first place. We’re not trying to bring anybody down for doing the hard work and developing a fantastic product - effort and innovation should always be applauded. Nonetheless, it’s essential to take into account user requirements as well.
Ucraft is a good example of this. When developing the first version of our website builder in 2014, we could have gone the route of elaborate SaaS product design and included an array of intelligent features and endless options for our soon-to-be users. However, after conducting an industry demand analysis, we realized that there was a lack of simple, straightforward website builders without many features that often confuse beginners rather than entice them.
That’s where the idea for Ucraft was born: a simple, straightforward, user-friendly, drag-and-drop website builder that would allow even the most tech-averse users to build stunning websites without any prior experience. Could we have gone the route of developing something more flashy? We could have. And maybe we would have, if not for the simple fact that we wanted to prioritize user demand over everything else.
Eight years later, we are developing an intelligent, AI-powered eCommerce solution, which takes a different direction from our initial website builder and includes more elaborate features. Although we’re very proud of what we’re currently building, it’s safe to say that entering the industry with such a sophisticated product would not have been the best decision.
That being said, we believe our nearly decade-long experience in the SaaS market comes with a responsibility to guide startups and give them advice that we had to figure out for ourselves. Welcome to the SaaS Startup Guide, where you will learn all there is to know about entering the industry and growing from a start-up to an established business - with customer satisfaction at the forefront of your operations.
As you may have guessed already, our first article will be about analyzing the industry to develop products users actually need. Whether you are on your first product launch, or looking to market a new product to existing customers, this guide is for you. So without further ado, let’s dive into all the tips and tricks!
What is Industry Analysis?
You’ve got a great idea for a SaaS product. All that’s left is to create and launch the product, right? Not so fast! Before putting in all the work it takes to plan, design, code, and launch your software, you should check the current dynamics of the industry you are planning to enter. How much competition is there on the market? What are the potential threats? What external factors may be influencing the industry of your choice? This is where industry analysis comes in.
Businesses use industry analysis to get a better understanding of what is happening in the industry they want to enter. Industry analysis focuses mainly on demand-supply statistics, the degree of competition, similar emerging industries, future prospects (including technological changes), and the influence of external factors.
This is an excellent tool for assessing both opportunities and threats, as well as understanding the bigger picture and whether the industry is worth entering in the first place. Although every industry analysis will be somewhat unique, some universal steps should be taken to conduct a valid, helpful assessment. Let’s take a closer look at what these are.
How to Conduct an Industry Analysis
When it comes to conducting industry analysis, there are several blueprints used to make a successful assessment. We’ll be focusing on the two most widely used models in this article:
1. Porter’s 5 Forces
Established by Michael Porter, this model helps businesses gain a multi-faceted picture of the industry they plan on entering. It focuses on five competitive forces that impact an industry most, helping you understand how profitable your chosen direction may be.
These forces include:
• Competition in the industry
• Threat of new entrants
• Bargaining power of suppliers
• Bargaining power of customers
• Threat of substitute products
Competition in the Industry
This refers to the number of competitors and potential strategies they may use to undercut or affect your product. The more competitors there are, offering solutions similar to yours, the fewer chances you have of competing unless your product offers something they don’t have. For example, when we came up with the idea for Ucraft, we had several competitors that had already established their positions in the industry. Therefore, we had to offer something they didn’t - e.g., ease of use and 24/7 customer support.
Threat of New Entrants
If your chosen industry is easy to enter without incurring significant costs, this can work both to your advantage and against you. Yes, you may save money in the short run, but in the long run, you may notice that the competition is growing. This is why it’s important to, once again, offer something unique and establish your place in the market and reputation before competitors come rushing in.
Bargaining Power of Suppliers
This refers to how easily suppliers can drive up the costs of raw materials or services needed to make a product. The point may seem irrelevant to the IT industry, but only in the case if you’re doing everything in-house. If you plan to outsource developers or web designers, consider that the cost of their work may increase if their services become more in demand. Although this may not be a significant factor, in theory, consider hiring your own staff from day one if you can afford it - it’s simply more reliable.
Bargaining Power of Customers
As well as suppliers, customers can also have significant bargaining power that can result in price fluctuations. Industries (and companies) with fewer or more influential customers allow them to negotiate for better deals and lower prices. Likewise, an industry (or company) that is saturated with customers or has many small, independent customers can set better deals for themselves - i.e., charging higher prices.
Threat of Substitutes
And last but not least, we have the threat of substitutes - goods or services (in this case, software solutions) that can be used as a replacement for your product. Once again, we had to overcome this barrier by offering extra features that competing websites did not provide. In an industry with many close substitutes, you really have to power up the user experience to get your customers to stick around.
Make sure to research each force carefully and document your findings in order to plan in advance and be successful upon launching.
2. SWOT Analysis
The SWOT analysis is another popular tool used to conduct a valuable and informational industry analysis. SWOT stands for: strengths, weaknesses, opportunities, and threats.
Strengths - the factors of your business that can give you an advantage over your competitors. For the SaaS industry, this can include (but is not limited to): how much capital you have, the uniqueness of your product, the quality of your product, your user experience, etc.
Weaknesses - factors that can give you a competitive disadvantage. These can include a lack of capital, an unclear solution, a lack of funds for advertising, etc.
Opportunities - the market opportunities your company possesses. If you have the chance to satisfy the demand of many customers, that’s an opportunity. If you have the option to go global later in the future, that’s one as well.
Threats - factors that can endanger your profitability. If your chosen industry is at risk of declining, that’s a threat. If one of your competitors comes out with a similar product to yours, that’s also a threat.
Industry Analysis: 6 Tips to Follow
Choosing a model and gathering information is just part of the equation. If you want your industry analysis to be a reliable blueprint for developing and launching your product, make sure to follow the tips we have compiled below:
1. Document everything. If any information can be helpful to take into consideration, write it down or type it up. Even if this information does not support your initial product idea or design, it will help you make better decisions and tweak some factors that could have hindered your success.
2. Choose a specific category. You don’t want to be all over the place with your product, not in the beginning anyway. Likewise, you don’t want to be all over the place with your research. Investigate information specific to your chosen industry, market, and product.
3. Consider supply and demand. How many software solutions are already offering what you are planning to offer? How many of them actually satisfy user requirements?
4. Analyze your competitors thoroughly. It’s better to be overinformed than under-informed. Analyze their products, business, and marketing strategies, and even read customer reviews.
5. Consider prospective customers. You can use surveys, readily available statistics, or any other method of your choice - more on that below.
6. Research industry trends and forecasts. Conduct a more detailed analysis of your chosen industry and its direction. Is it shrinking? Expanding? What opportunities are there for the future?
Now that you’ve obtained all the information on your chosen industry, it’s time to tailor your software solution accordingly. This is where demand analysis comes in.
Moving on to Product Demand Analysis
Suppose the industry of your choice has turned out to be a suitable environment for a product or service launch. In that case, you should start product demand analysis - i.e., checking whether the product idea is valid or whether it requires some alteration to be successful.
Product demand analysis can be done anytime; you don’t have to be an established company to conduct one. A simple outline of your product is already enough to see whether it is a good idea. Likewise, product demand analysis will help you understand more about your direct competition, your customers, what factors can affect your business, and which features are in demand (or not).
But first, it’s essential to distinguish between the four main types of demand:
1. Direct demand: how many customers want to buy a product.
2. Indirect demand: how the demand for one product may affect the demand for another product. A decline in fast fashion may lead to less demand for dropshipping solutions.
3. Joint demand: when the need for two products is correlated - e.g., more demand for dropshipping solutions will lead to more demand for online store builders.
4. Latent demand: a key demand category in the SaaS industry, referring to unsatisfied demand, which usually arises for three reasons:
• The product consumers want is too expensive.
• The product (in the form they would like) does not exist.
• Consumers aren’t aware of its existence.
If you plan to launch a SaaS product that provides users with certain features or experiences they can’t find elsewhere, you are looking to satisfy latent demand. However, prior to building and launching your product, you need to figure out precisely what your future customers are looking for, how competitors do not entirely satisfy them, and the features and experiences you need to focus on. For Ucraft, it was the ease of use, freedom of customization, and top-tier customer support. For you, it might be something else.
Analyzing Product Demand: Where to Begin
You can take several steps to assess the demand for your future product and confirm whether it’s a viable option in its current state or if changes need to be made. Let’s look at some of these options below:
The best way to find out what people want is by asking them. You need to set a goal for your demand survey and construct your questions based on this principle. Use social media to your advantage and share your survey with your target audience. You can make it anonymous or allow prospects to share their thoughts with you directly.
How you decide to build your survey and what settings you choose is entirely up to you since this will vary depending on your product, chosen industry, etc. The key here is to collect as much information about your idea as possible and then tweak your product based on what customers want. Remember to include direct questions, and don’t make your survey longer than a few minutes to fill out. You can share your survey through email, social media, or both, but try to grasp a large audience.
Research Consumer Trends
Consumer trends are a valuable tool in your demand analysis because they show the direction in which the market is going and the priorities of your future customers. Google Trends is an excellent tool for exploring this further, as well as keeping an eye out for trending topics on social media that are relevant to your chosen market or industry (more on social media in a bit).
Don’t hesitate to join Facebook groups or other online communities that can give you a better insight into what potential customers may be looking for, and even participate in online forum discussions to really merge yourself with your target audience.
Dig Into Social Media
Social media can be a source of distraction or a valuable pool of information, depending on how you utilize it. It provides ample data on customer demands, user satisfaction with your competitors, industry trends, etc. Platforms such as Twitter, Reddit, YouTube, and even Facebook can be valuable tools as long as you search for relevant keywords related to your product, market, and industry. As mentioned above, you can even share surveys, collect data on prospective customers, and facilitate 1-1 interactions with them and find out what they are looking for.
Observe and Study
Don’t underestimate the power of competitive intelligence! Study your competitors, and observe what they are doing. Find relevant data and statistics on your chosen market, and include them in your presentations and brainstorming sessions. Try to also uncover case studies of companies similar to yours and observe what decisions made them successful or, on the contrary, resulted in failed products.
Although search engine optimization is mainly associated with boosting existing websites and optimizing content for better reach, it can also be an excellent research tool to determine what prospective customers in your industry are looking for. Simply pick an SEO tool of your choice, and you will be able to view keyword suggestions, search volume, and traffic for pages related to your product, market, and industry. Such tools will also allow you to filter by time period and region, providing excellent insights into your demographic. Who is searching for what, and from what location?
Oftentimes, especially after you’ve done all the prior research, the best way to finalize your idea and get an understanding of user expectations is to launch your product and gather feedback. Ideally, you should have a product that satisfies user demand if you’ve put some effort into your research, but expect some minor tweaks along the way. This is why you need a great customer support team to help record user queries, feedback, and even problems and report them back to you so you can tweak your product to perfection. Don’t be afraid to tweak features, pricing packages, and even your product design to provide a better user experience and offer a product that customers really care about.
Analyzing industry trends and product demand should be at the forefront of your brainstorming and planning sessions. You don’t want to enter the highly competitive SaaS industry with a product idea that has been offered many times before or, even worse, a dying market with no demand for what you are planning to offer. Remember to record your findings and categorize them to allow for clear reflection before your product launch.
Stay tuned for more valuable tips from the Ucraft team, and good luck with your research!