5 Key Steps To Identify & Research Your SaaS Target Market
Software as a service (SaaS) has emerged as one of the most popular subscription-based business models today. It has grown not just in market size, but also in complexity.
More and more options and niches are sprouting up. And while SaaS may have started only by catering to startups and small businesses, it now caters to larger enterprises as well.
With all these developments in the SaaS industry’s size and complexity, it’s becoming more and more important to identify and research your SaaS target market.
By doing so, you can ensure that you are focusing your efforts on the right segment of the market, as well as gaining insights into how to best serve that segment.
In this article, we will look at how you can identify and research your SaaS target market.
Why You Need To Identify Your SaaS Target Market
Whatever your strategy is in acquiring new customers for your SaaS company, identifying your target market is always the first step. And there’s a good reason for that.
Scratch that—there are A LOT of good reasons for that.
Let’s talk about some of them.
It Establishes Product-Market Fit
Product-market fit is key in SaaS. Or for any business selling a product or service, for that matter. Without it, you run the risk of building a product that nobody wants, no matter how good it may be.
To avoid this mistake, you need to ensure that your product resonates with your target market—that it solves a problem or fills an unmet need or a particular pain point they are struggling with.
By identifying your target market and understanding their needs, you can build solutions and features catered specifically to them. This helps you create a product that has a significant demand in the market.
It Informs Your Sales & Marketing Strategy
Identifying your SaaS target market also helps inform the way you approach sales and marketing. It allows you to develop more effective strategies and identify channels that will have greater success in driving conversions.
For instance, if your SaaS target market is small businesses, you can use social media platforms like LinkedIn to reach them with relevant content and messages.
On the other hand, if large enterprises are part of your SaaS target market, then paid search ads or email marketing campaigns would be better options for reaching them.
It Helps You Make Data-Driven Decisions
The customer data gathered from identifying and researching your target market can help inform critical business decisions on how to augment or modify your SaaS solution and services.
Using data to inform decisions also allows SaaS businesses to track the success of their marketing strategies and initiatives. This can help you better understand what works and what doesn’t, so you can adjust accordingly or focus more on areas that show promise.
1) Understand Your SaaS Target Market
Now that you know why it’s essential to identify and research your target market, let’s look at what goes into doing this.
The first step is to understand the characteristics of your audience. And there are varying types of attributes that can set them apart from one another.
These include their demographic, psychographic, and (if other businesses are a part of your target market) firmographic information.
Let’s talk about these attributes one by one.
Demographic information describes your SaaS target market in terms of their age, gender, location, income level, and more.
This type of audience data is essential if you want to create SaaS solutions that truly resonate with them. It helps you understand why they would (or wouldn’t) use your SaaS product.
For example, let’s say you know that the majority of your SaaS target market is young professionals. With this knowledge, you can tailor your SaaS solution and User Experience (UX) to fit the needs of these individuals.
For your marketing strategy, it may also be best to use marketing channels that would best reach young professionals. These may include social media platforms like Instagram, Twitter, and even TikTok.
Psychographic information goes a step further than demographic information by describing your target market in terms of their interests, values, and lifestyle choices.
This type of data allows you to understand your SaaS target market on a deeper level—not just what they’re like but also how they think and what motivates them.
For example, if you know that your target market values convenience, you can create SaaS solutions that make their lives easier in terms of time and effort. You can also craft your product messaging in a way that tells your audience how your SaaS solution can make their lives easier.
If you have a business-to-business (B2B) SaaS solution, then understanding your target customer’s firmographic information is also important. This includes the size of the business (e.g., enterprise, SMB), its industry, annual revenue, and more.
This type of data helps you determine what SaaS solutions would work best for them.
For instance, a large enterprise may require SaaS solutions with more advanced features or customization options than those required by a small to medium-sized business (SMB).
2) Define Your Target Audience
As you may discover, there are a lot of possible specific SaaS markets out there. So, early on, you would need to define which particular audience you would be targeting.
This involves narrowing down the various attributes of your audience and creating a focused profile for them.
This helps you make sure you’re not wasting resources on marketing campaigns that don’t reach the right people. It also ensures that SaaS solutions are tailored to fit their needs, increasing their chances of success in driving conversions.
To this end, you need two key definitions of your target audience: your ideal customer profile and buyer personas.
Build Your Ideal Customer Profile (ICP)
An ideal customer profile is a detailed description of your target SaaS customer. It should include all the attributes we’ve discussed earlier (demographic, psychographic, and firmographic information), as well as other specific details such as job titles, business sizes, and more.
Once you have a clear definition of who your SaaS customers are, you can focus on building SaaS solutions that meet their needs. You can also easily identify which marketing channels to use for reaching out to them.
Buyer Persona Development
A buyer persona is a representation of the specific individual that you want to target.
This is more specific than the ICP.
Let’s look at it this way: If your ICP were a basketball team, your buyer persona could be their star player, or their center, or even their coach.
The buyer persona should be based on the ICP and should include more detailed information about the individual such as interests, challenges, goals, and needs.
Let’s look at some examples of common buyer personas in the SaaS market:
“The Executive” Persona
“The Executive” is a C-suite level decision-maker in a business. You may want to specify it even more as the CEO, CTO, or CFO.
One thing about C-level executives is that they won’t actually be hands-on in using your SaaS product. But they are concerned about their company’s overall efficiency, growth, and profitability.
So your SaaS sales and B2B marketing strategy should be focused on showing them how it will benefit their business in terms of cost savings and increased revenue.
“The Manager” Persona
“The Manager” is a mid-level decision-maker who has direct involvement in SaaS product usage. They are focused on getting the job done and they need tools that can help them do so easily and efficiently.
This buyer persona would be most concerned about SaaS solutions that could automate mundane tasks, improve collaboration, or generate reports on their team’s performance.
“The Social Media Manager” Persona
As you target end-users at lower levels of the company hierarchy, you will need to be specific about who you’re speaking to.
For instance, if you’re selling a social media marketing solution, one of your buyer personas could be “The Social Media Manager.” This would be someone responsible for managing their company’s social media presence.
They would be most interested in SaaS solutions that help them work more effectively with their team, monitor performance, and engage with customers.
“The Influencer” Persona
Even if you’re targeting a B2B SaaS market, you won’t necessarily always be catering to businessmen and employees. Sometimes, individuals who want to work on their own passion projects may have a special need for your SaaS product.
In our example earlier, this could be the “Influencer” persona. They won’t necessarily be using your SaaS solution for work or business purposes. They may use it for their dreams of growing their own social media following and becoming internet sensations.
In this case, your SaaS product should be able to cater to their specific needs. You could offer social media management features that help them monitor their social media performance, create content faster and easier, and schedule posts for optimum engagement.
3) Do Your Own Market Research
While it’s important to have a clear grasp of who you’re selling to, you also need to find out what they like and how to best get their attention.
If you’ve already done your research on your ICP and buyer personas, chances are that you already have gathered considerable data about them.
But all of that is just secondary information — meaning it’s from other sources. While it could be useful, it’s possible that some of it is outdated and no longer accurate.
This is why it’s important to do your own market research as well. You need to get in touch with the people you’re targeting directly and ask them questions about their needs and preferences.
There are a few ways you can do this:
Surveys are a great way to get feedback from your SaaS target market. You can send them out via email or use survey tools that allow you to distribute them on social media, blog posts, and more.
Here are some questions you might want to include in your survey:
- What SaaS solutions have you used in the past?
- How likely are you to purchase SaaS products in the future?
- What features are you looking for in a SaaS solution?
- How much would you pay for a SaaS solution that (describes your SaaS solution’s benefits)?
The thing about surveys is that people don’t really answer them for fun. So you’ll need to incentivize them in order to get a good response rate.
You can offer discounts, gift cards, or even money in exchange for their feedback.
Organize Focus Groups
Focus groups are a great way to get feedback from your target market in real time.
You can organize focus groups with your potential customers and ask them questions about their SaaS usage and needs. This will give you direct, first-hand insight into what they’re looking for in SaaS solutions.
These insights can inform your SaaS product roadmap and help you make better decisions when it comes to SaaS marketing.
Again, people don’t go to focus groups if there’s nothing in it for them. So remember that doing this research requires a considerable budget for incentives.
If you want to get more in-depth information about your potential customer, you can even set up interviews with them.
You can either have conversations by phone, video conference call, or even face-to-face if possible. The goal is to talk to people who represent the different buyer personas that make up your SaaS target market and ask questions about their needs and preferences.
These conversations will provide invaluable insights that you won’t be able to find anywhere else. You’ll be able to understand how they think, what they like and don’t like, and where they feel pain points when using SaaS solutions.
4) Analyze Your Market Data
Once you have gathered your SaaS market data, the next step is to analyze it. This will allow you to get a better understanding of what your typical potential customer wants and needs.
Here are some things you may need to look out for:
Common Pain Points
You need to look for common pain points within your target market. Understanding where they are encountering challenges in their business processes or even just in their lives would help you to better serve them in many ways.
If you are still developing your SaaS product, this information would help you craft your solution to better fit the most in-demand needs of your target market.
Or if you already have a SaaS platform, you could use this information on how to communicate and market your SaaS product better.
Customer Buying Trends
As you analyze the primary information you gathered from your target market, you need to identify trends in their buying habits.
What features are they looking for in a SaaS product? What are their motivations for buying? How much are they willing to pay for it?
These questions will help you understand your target audience better and inform your product marketing strategy.
You also need to consider the overall SaaS industry outlook. What are the emerging trends that could affect your SaaS product?
By understanding where SaaS is heading, you can better position your SaaS products to be competitive in the future.
Your SaaS Product’s Perceived Value
Finally, it’s important to understand how your prospective customers perceive the value of your SaaS platform.
Do they see it as a must-have? Or is it just another commodity in the SaaS market? How much are they willing to pay for your SaaS product?
You need to be able to differentiate yourself from the competition and create a unique value proposition for your target audience.
This will also help you come up with a value-based pricing strategy for your SaaS product.
Okay, when it comes to market research, you should rely on cold hard data. However, there are cases where there is no available data on a specific aspect of your target market.
In cases like these, you may pose logical assumptions about those missing pieces of the puzzle.
But that’s the major caveat here—your assumptions should be logical, educated, and based on evidence.
For example, let’s say you are trying to understand the enterprise market in a particular industry and there are only limited resources about this industry.
You could assume that SaaS customers in this market have higher expectations when it comes to customizability and data security. After all, that seems to be the common trend in enterprise SaaS.
You can also assume that SaaS buyers in this market tend to make purchase decisions based on long-term ROI.
You also need to project how much of the market you can have as customers. This will help you determine how successful your SaaS product is likely to be and what strategies you should use to maximize growth.
Of course, this information would be more accurate with a thorough competitive analysis.
And that brings us to our next point of conversation.
5) Perform A Competitive Analysis
Your SaaS product needs to be able to stand out from the competition. And the first step to doing that is to understand how it currently stacks up against your competitors.
That’s where competitive analysis comes in. With it, you can understand the SaaS market landscape better, identify who your competitors are, and identify their strengths and weaknesses.
Here are some steps for a thorough competitive analysis:
Identify Your Competitors
Of course, the first step is to identify who your SaaS competitors are. To do this, you can simply search for SaaS products that offer similar solutions as yours to target markets similar to yours.
For example, let’s say you have a project management solution intended for small businesses. You could look up “top project management software for small businesses.”
That would give you a list of your top competitors.
Examine Their Company Highlights, Product, & Pricing
Once you have a list of your SaaS competitors, it’s time to do a deep dive into their operations. Start by examining the company highlights, product offering, and pricing strategy.
This will give you an idea of how competitive they are in terms of features, scalability, and price point.
Analyze Their Sales & Marketing Strategy
You should also analyze their sales and marketing strategy.
By understanding their approach, you can identify what strategies could work (or note work) for your target audience.
Do A SWOT Analysis On Them
You can even go deeper and perform a SWOT (strengths, weaknesses, opportunities, and threats) analysis on each of your competitors.
This will help you better understand their strategic positioning and what areas they can improve on.
Take note of the SaaS features that stand out for each of your SaaS competitors. Then, use this information to identify potential gaps that you can fill.
Compare Their Data With Your Own
Finally, you need to compare their data with your SaaS company’s data. Are there any common trends that you can use to inform your own strategy?
Are there any SaaS product features that they offer that you don’t? If so, could those features make a difference in customer retention and acquisition?
By understanding the strengths and weaknesses of your competition, you can plan your SaaS marketing strategy accordingly. That way, you’ll be able to maximize growth while staying ahead of the competition.
Final Thoughts About Identifying Your SaaS Target Market
As you can see, identifying your SaaS target market is a critical part of SaaS product success. By understanding your prospective customers and their needs, you can develop an effective SaaS marketing strategy that will help you reach the right SaaS customers.
Plus, by doing thorough research on your competitors in the industry, you’ll be able to better assess their strategic position and find areas where your SaaS product can stand out.
Looking for more guides that can help you grow your SaaS business? Check out our blog site here.