How to Succeed in the Saturated Market of SaaS Businesses

When the obvious opportunities have large incumbents, is it enough to find a niche?

SaaS Saturation

It’s hard to find any reputable statistics on exactly how many SaaS businesses are trading in 2020, but I think it’s safe to assume the number is in the tens of thousands across B2B (Business to Business) and B2C (Business to Consumer).

In some verticals, such as email, CRMs (Customer Relationship Management) or project management, users have access to hundreds of software solutions that do a lot of same things with very little differentiation.

Even platforms such as Superhuman are “luxury” versions of fundamentally similar concepts - inbox, folders, send, archive. 

If you’ve ever tried to come up with an idea for a SaaS business you will invariably realise that a solution exists already, maybe even hundreds. 

This is where commodity forces come into play as entrants can only compete on price, or race ahead of the competition to develop novel applications / functionalities which will invariably be copied by the competition. Easy / profitable SaaS verticals now have large incumbents who had first, or at least early, mover advantage and a winner takes all market share.

You want to build another Uber? Investors are understandably going to question why you’ll be successful when the graveyard is filled with failed competitors. As the obvious opportunities are eroded, more and more indie hackers and investor backed start-ups are moving into the margins - exploring ever tighter niches and trying to capture ever smaller TAMs (Total Addressable Market). 

How Do You Differentiate?

You can no longer avoid competition and lots of it. Competition means demand, which is good news. 

Even capturing 1% share in a huge market can be extremely lucrative, but you still need to give customers a reason to choose your product over the competition.

Yes you can build more and better features, but as I note above, they can be copied (quickly). So how do you compete?

The answer lies in positioning, community and brand. 

The answer is better marketing. 

Of course this is what a marketer would say and yes product is still important, but it’s no longer a case of build it and they will come. It’s also worth noting that these areas apply to any business trying to operate in a hyper-competitive environment, whether they are SaaS focused or not.

Positioning

As positioning leader April Dunford explains:

Positioning describes how you are uniquely qualified to be a leader in something that an identified market segment cares a lot about.

You need to have a convincing answer to “Why should I pick you?” by clearly defining product is different and better than alternatives. 

Different and better doesn’t have to equal features. John Lewis (a famous UK department store) stocks the same products as many other offline and online retailers, but I shop there again and again for the service and knowledge that my purchase will be hassle free and backed by solid guarantees. 

Positioning also forces companies to understand their audience and how this audience understands their product/service in the context of the wider market. 

Community Building

This is the differentiator that excites me the most as a marketer and consumer. 

If you can connect like-minded individuals around a cause that is aligned with your business, you can build one of the biggest moats available - relationships.

To find out more about building digital communities, I would highly recommend looking at Rosie Sherry’s work.

Brand

This is arguably the hardest area to define and the hardest to advise on from a strategic perspective. 

Suffice to say, your brand is not your logo or visual aesthetics, in the same way you are not your fashion choices. 

A brand is a slippery construct that requires constant negotiation, definition, performance and re-enforcement. It is articulated through multiple channels and represents the entire surface of your business experienced by staff, suppliers, customers and competitors. 

The very fact that brands are difficult to define, let alone create and uphold, makes them another competitive moat. 

The gold lies as the intersection of hard to build, but harder to replicate.

Hi, I’m Bethan. I’m a marketer, tech enthusiast and curious mind. This article first appeared in my Newsletter, The Brave.