saas growth strategy

4 SaaS strategies for growth

Stijn Hendrikse
May 8, 2020

 

Growth Matrix

How you think about future growth can establish your marketing plan, your marketing budget and your marketing strategy. That’s why it’s helpful and interesting to think with your leadership team about the ways you can grow in the four different quadrants described below: 

Market Development

One would be the current type of customers you’re serving and servicing them with the current type of products or offerings. If you’re in the wine business, this would mean you go from selling them a little bit of wine to a lot of wine or to find more customers who would buy wine, and you would find more customers who look like customers who would buy more wine. 

This is all about optimizing the products and services you bring to the market to grow your business by selling more to your existing customers and to find more customers that look like your existing customers. This is a core when you have achieved product-market fit to use as your main growth strategy. Most companies that are not over $20-30 million in ARR would probably do fine by just focusing on this quadrant. 

Market Penetration

Another option could be to find, based on your current offerings you’re already selling today, to find new types of customers to sell those products or services to. This could be a new industry you haven’t sold in yet, and you decide to go penetrate that. It could be going to larger customers - from going to small businesses to enterprise. 

This could be a new geography that you haven’t entered before. And all of these things basically mean you have to invest in sales and marketing. If you’re deciding that your growth needs to be $10 million, and $million comes from here and you want to have $1 million coming from a new industry, then you need to invest in sales and marketing to communicate with that industry, build the right content, find out where their personas and Ideal customer profiles are and market to them. 

Diversification Strategy

Another way to grow would be to sell your current customers, or current type of customers, more new offerings. In addition to selling wine, maybe you would also sell a wine rack with completely different production value and a completely different product, but you could sell it to the same customers. If you know people buy wine, they may also need to store that wine. 

The example here would be instead of selling wine to a Costco, you also want to sell wine to restaurants and this would be an example of selling to a new type of customer with the same product. This, of course, is less of an investment than sales and marketing but here you actually have to invest in R&D because you have to develop this new type of product or service. 

That’s why, for most of the B2B SaaS companies that we work with, this is the more logical path. They have figured out product-market fit, they start their growth by optimizing what they can get out of the first quadrant, and then adding on a few other industries or markets. 

Doing new product development, feature development or capability development probably has a longer time horizon and this is something you’d probably do before you invest in sales and marketing. 

Product Development Strategy

In the last quadrant, this is not something that a lot of companies do successfully - you typically go to the upper left of the lower right and then from there you might go here, but you never really see this. This would be a pivot. A company in the wine business that sells to people who drink wine says; Hey, we have a certain capability, [maybe it’s a chemical process that we’ve developed], that allows you to do something completely different.

To produce a different product or different service and sell it to hospitals. Being able to use some kind of alcohol product to clean medical instruments would be an example of a total pivot of a company that might be built on top of certain capabilities, but means a completely new type of product in a completely new market. 

We don’t see this a lot because this is not very easy to do - you would typically see the growth matrix filled out in the first three quadrants because most of the growth would come from market penetration, market development and finally market diversification. 

That’s what we see with our B2B SaaS Companies under $30 million. 

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