7 SaaS Growth Strategies That Work for Startups

by Imed Bouchrika, Phd

Co-Founder and Chief Data Scientist

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Software-as-a-service (SaaS) is a buzzword for many, but for businesses, it’s the recipe for success. The SaaS market is also showing exponential growth and, in 2022, has touched the $214 billion market value. What’s more intriguing is that the market is expected to cross the $250 billion mark soon (Statista market insights, 2023).

However, as compared to serial entrepreneurs, SaaS startup owners struggle to find the right growth strategy. Being a data scientist, I’ve seen so many SaaS platforms getting tanked because of poor marketing over the years. Drawing from my expertise and experiences, I’ve rounded up the best SaaS growth strategies that are bound to work. This article will provide you with a tactical approach toward SaaS growth and marketing.

SaaS Growth Strategies Table of Contents

1. SaaS Growth Statistics
2. SaaS Market Trends
3. What is SaaS Growth Strategy?
4. 7 Effective Growth Strategies for SaaS Startups
5. 5 SaaS Growth Metrics that Start-Ups Should Track
6. How can SaaS startups leverage customer feedback for continuous improvement?
7. SaaS Growth Software and Tools

SaaS Growth Statistics

• The USA leads the SaaS market with over 17,000 companies, seconded by the UK and Canada (Statista).
• The number of unicorns in the B2B SaaS industry is increasing exponentially; as of 2022, over 100 businesses have touched this mark globally. (CB Insights)
• More than 50% of VC investment in 2022 was received by SaaS startups, whereas SaaS solutions were the first preference of 47.6% of venture capital investors in 2023. (Dealroom)
• 79% of technopreneurs admit that around 25% of applications that they use are SaaS platforms. (Productiv)
• Companies with over 1,000 staff members utilize more than 150 SaaS applications on a daily basis. (BetterCloud)
• With over 41% annual growth, cloud security is the fastest-growing SaaS segment. (Gartner)
• Salesforce is the biggest SaaS business in 2023, with $160 billion in market capital and over 73,000 employees. (Mike Sonders)

SaaS Market Trends

• 13% of customer loss in the SaaS industry happens because of poor onboarding. (Market Splash)
• Over 92% of SaaS marketers consider ABM an effective approach for software sales. (Sirius Decisions)
• 57% of SaaS businesses say content marketing is their key growth strategy. (Gitnux)
• 47% of businesses say case study blog posts have been effective for their SaaS growth. (Uplift Content)
• More than 41% of SaaS companies say visual graphics were their top engagement content. (Venngage)
• Above 30% of customers cancel SaaS subscriptions during the first 3 months. (Zipdo)
• 42% of SaaS businesses say annual subscriptions are their best billing option, whereas monthly and quarterly accounts for 36% and 11%, respectively. (Cloud Zero)

What is a SaaS growth strategy?

A SaaS growth strategy, in essence, is a set of marketing tactics to acquire and retain customers. A good growth strategy for SaaS involves targeted marketing for specific purposes, such as onboarding, customer engagement, or brand awareness. SaaS startups normally focus on generating leads and building partnerships. On the other hand, established businesses prefer ensuring sustainable growth and a strong brand presence.

All in all, SaaS growth strategies revolve around customer acquisition through targeted inbound and outbound marketing. On a broader scale, it’s linked to optimizing the user experience and employing data-driven analytics to drive retention and continuous improvement, respectively.

Basic Elements of a SaaS Growth Strategy

Growth strategies normally consist of content marketing and lead generation tactics and include customer success initiatives. The purpose is, of course, to increase market share, maximize subscription renewals, and ensure sustainable growth.

A good SaaS growth strategy usually has the three below components (gartner).

Product Strategy

SaaS products are all about making things easy for businesses and resolving their pain points. So, before selecting a target audience, make sure your software is the right solution for them. This involves meeting their needs and improving your SaaS product based on their reviews and feedback.

Marketing Plan

Once you know who your ideal audience is, the next step is to reach them the right way. A comprehensive market plan can help you find innovative yet inexpensive ways to introduce your SaaS. Obviously, you’ll have to pick suitable marketing channels and craft a go-to-market strategy for this.

Go-to-Market Approach

The purpose of chalking out a go-to-market plan is to reduce the risks. Since SaaS startups are often low on budget, they often juggle with marketing approaches. However, there is no such thing as the perfect SaaS growth strategy but options. So, the ideal way to grow your software memberships is to mix and match the best SaaS sales strategies.

7 Effective Growth Strategies for SaaS Startups

There’s no one-size-fits-all strategy for SaaS businesses, as each is different from the other. However, there are SaaS growth strategies that have proven to be effective in the early stage of a SaaS company. Below are the most effective growth strategies for SaaS that can help you with brand awareness, bringing traffic, and generating leads.

Start with Customer Acquisition Strategy

The most frightening part of the entrepreneurial journey for first-time startups is finding clients. It’s something that cannot be achieved without a sound customer acquisition strategy. SaaS companies should be aware of problems that their target businesses are facing and how they can

For that, SaaS startups should:

• Define target audience
• Create buyer personas
• Develop targeted marketing campaigns

Account-based marketing (ABM) is the go-to approach of most SaaS ventures right now. Around 87% of SaaS marketers believe that ABM outdoes other marketing strategies (Momentum ITSMA). About 80% of SaaS entrepreneurs accept that an ABM program generates more sales. (Superoffice)

Explore Different Marketing Channels

You cannot acquire quality leads without employing a comprehensive marketing strategy to generate traffic. The key is to reach potential customers at the right time and in the right channels. Moreover, you should have an inclusive sales strategy in place to nurture and close leads. For this, you’ll need a professional team as well as the right tools.

For example, all the best gym software focuses on email marketing to generate leads and earn subscribers. SaaS email marketing is the best channel to engage potential customers and segmentize them into groups for targeted marketing (clickfunnels).

However, instead of relying on one or a few channels, you should select the right mix. Identify the high-value marketing channels and equip your sales team with tools to monitor and track key metrics.

Craft a Comprehensive Pricing Strategy

Pricing is the most crucial among all SaaS growth strategies, as it can make or break your software startup. If done right, your pricing strategy can generate fruitful results within a year, if not months. SaaS companies have seen 25% higher annual recurring revenue (ARR) by simply adjusting their pricing (OpenView Partners).

Startups tend to offer lower prices as part of their SaaS growth strategies. It’s an apparent practice that seems viable, as improving pricing with expansion has proven effective.

SaaS companies offer pricing based on:

• Cost
• Competitor
• Penetration
• Value
• Freemium

However, there is no hard and fast rule for SaaS pricing as every software is different in nature. The industry and customers, such as small, medium, or large, also play a vital role. So, to capture a wider client base and become more profitable, SaaS companies tend to adapt different pricing models.

You can set:

• Usage Pricing
• User-Count Pricing
• Tiered Pricing
• Flat-Rate Pricing
• Per-Feature Pricing

It’s entirely up to startups to pick a pricing model that fits their needs and marketing norms.

Invest in SEO and Content Marketing

Content marketing is undoubtedly a long-term strategy, but it has an everlasting impact on SaaS brands. About 97% of SaaS businesses reported success in content marketing, whereas 70% have progressive content strategies (SEMrush content marketing report, 2023). The report also states that 65% of SaaS companies have a $3,000 monthly budget for content marketing.

Content marketing is more rewarding when you blend search engine optimization (SEO) to target a specific audience organically. Your goal should be to produce informative content that provides value to your potential customers (ahrefs’ SaaS guide). Furthermore, try hiring diverse talent to onboard experienced people with a wider range of marketing skills.

Don’t Ignore Affiliate Marketing

Affiliate marketing is trending, and even SaaS businesses are utilizing this strategy to grow their customer bases (Forbes). The retail industry alone earns more than 40% of revenue through affiliate marketing (Authority Hacker). According to Influencer Marketing Hub, affiliate marketers are getting up to 70% commission from SaaS companies.

SaaS entrepreneurs can expand their reach and see quick results by joining hands with renowned industry influencers. However, companies need to utilize this SaaS growth strategy considering their Quarter-over-Quarter (QOQ) or Year-over-year (YoY) growth. (Paddle)

Expand into New Markets and Regions

One major mistake that SaaS startups make is that they tend to bind themselves to a specific market. Of course, the software should meet the needs of your targeted market. But this shouldn’t be at the expense of losing other potential markets. You are missing out big time If you are only targeting a specific country or region.

The expansion starts with market research, which brings new opportunities. B2B SaaS startups with market research investment have shown 2-3 times better growth than their peers (Customer Think).

Create Opportunities with Analytics

SaaS companies are known for following trends and making data-driven decisions, as it guarantees solid results. Analytics tools provide a 360° view of your business and predict upcoming opportunities after considering historical patterns (chargebee).

Analytics can help you with:

• Marketing
• Operations
• Sales
• Finance

Furthermore, data-driven analytics can help you prevent churn by tracking existing customers’ behavior patterns. Additionally, SaaS startups can segmentize freemium customers on the basis of their trials and do conversion optimization.

5 SaaS Growth Metrics that Start-Ups Should Track

Every SaaS company follows different benchmarks to track its performance and evaluate market growth. But there are some SaaS growth metrics that can really help you grow with pace. Here are a few key areas most B2B SaaS companies should pay close attention to.

Traffic-to-Lead Rate

The traffic-to-lead ratio is often the first key metric that SaaS businesses use to measure growth. The reason is simple: it helps them evaluate marketing efforts by providing real-time, data-driven insights. They can get a clear idea about what percentage of prospect visitors are turning into leads.

For instance, having more than 40 landing pages can increase conversions by over 500%. (HubSpot)

Here’s the calculated formula that you can use for different lead channels:

Traffic-to-lead rate = (No. of visitors / No. of leads generated) x 100

The percentage may vary depending on your industry, but anything above 4-5% is a good traffic-to-lead rate. Traffic to lead rate helps you evaluate your marketing efforts and inform whether you need to change or upscale the strategy. On the other hand, visitors leaving your website due to pricing or features means your software needs improvement.

Customer Conversion Rate

Nothing is more significant for SaaS growth than conversion rate optimization. SaaS startups should focus on capturing and nurturing whatever leads come their way, be it a demo or a freemium request. The goal at the start should be to entice users and urge them to try your SaaS service.

Therefore, the conversation rate is measured in terms of the following:

• Visitor to paid
• Freemium to paid
• Free trial to paid

Below is a simple formula to measure this SaaS growth metric.

SaaS Conversion Rate = No. of paid subscriptions / No. of trial users or visitors

However, the conversion rate tends to change depending on service packages and prices. For example:

• A 3-7% conversion rate is the par freemium percentage in the B2B SaaS industry. (User Guiding)
• 25-50% is the average free trial conversion rate for SaaS, depending on the industry. (Ada Chen)

Similarly, the SaaS conversion rate changes with respect to different acquisition channels.

The trick is to measure and follow the conversion rate optimization (CRO) approach to get better results. Optimizing your website and landing pages is the go-to SaaS growth strategy if you are working on organic reach. Unfortunately, out of $92 that B2B businesses spend on user acquisition, only 1$ is spent on Conversion rate optimization (CRO). (Econsultancy)

Retention Rate

A higher lead generation and conversion rate means nothing if you fail to retain customers. But retaining clients is easier said than done. A slight issue with integrations or bad customer experience can lead to customer attrition. However, lack of features or higher pricing are usually the major reasons why clients leave SaaS software.

Therefore, SaaS startups should focus on providing value for money and better customer experience. However, many software entrepreneurs fail to realize this as they are more concerned about generating new leads. They often realize the mistake when it’s too late.

So, to identify high-risk customers, you should keep an eye on your customer retention rate.

SaaS Retention rate = (No. of customers at the end - number of new customers) / Total customers at the beginning

The biggest impact of measuring the customer retention metric is perhaps on the marketing budget. Having a better retention rate means you’ll be saving acquisition cost, which is usually 5 times higher (Invest). That’s why high retention and low acquisition rate is considered make-or-break metrics for SaaS products.

For example, a 20% growth rate is ideal for a healthcare business or a fitness company like DMoose. But 92% of healthcare SaaS companies with this growth rate will cease to exist after a year or two. (McKinsey)

Churn Rate

The marketing industry measures success in terms of customer churn rate. It represents the percentage of clients that have stopped using the SaaS services. Suppose a SaaS company has 2,000 customers in January, but there are only 1600 at the end of the year. In this case, the churn rate would be 20%, which would eventually help the company improve its growth strategies.

The reason why churn rate is considered among the necessary SaaS growth metrics is its projections. Your churn rate indicates whether the business is running effectively and when you should start worrying.

Here is how you can calculate the churn rate:

SaaS Churn rate = (No. of customers lost ÷ total customers in the start) × 100

For SaaS startups, churn is inevitable but not as crucial as for established software companies. You can always replace those 2-5 customers that you lose quarterly or biannually. But it’ll help you in the long run when you’ll be measuring SaaS valuation after 5-10 years.

Recurring Revenue

Small SaaS businesses usually assess their revenue growth either monthly as well as annually. It’s a great SaaS growth metric to evaluate financial performance over the months and years. Measuring monthly recurring revenue (MRR) provides an opportunity to adjust prices and saves SaaS startups from undervaluing their services.

You can calculate MRR using the below formula:

MRR for SaaS = No. of monthly users X Average revenue per user (ARPU)

Again, the key to success is measuring your MRR against the value you are providing and adjusting service pricing accordingly. Your goal should be to ensure your SaaS startup keeps generating profit and remains sustainable.

How can SaaS startups leverage customer feedback for continuous improvement?

Customer feedback is an invaluable resource for SaaS startups aiming to refine their product and enhance user experience. Actively listening to customer feedback helps companies make data-driven decisions, address pain points, and create a customer-centric product roadmap. Here’s how SaaS startups can effectively utilize customer feedback:

• Collect Feedback Consistently: Implement regular feedback channels like in-app surveys, NPS (Net Promoter Score) questionnaires, and post-interaction surveys. These allow you to gather insights at different stages of the customer journey and capture real-time reactions to new features.
• Analyze Patterns and Pain Points: Use analytics tools to identify recurring themes in customer feedback. By tracking common issues, startups can prioritize improvements that will have the most significant impact on user satisfaction and retention.
• Engage with Customers Through User Communities: Establish a user community or forum where customers can discuss their experiences, request features, and suggest improvements. This not only fosters a sense of community but also offers a wealth of unfiltered feedback.
• Implement a Customer Advisory Board: Invite a small group of power users to serve as a customer advisory board. This group can provide in-depth insights, beta test new features, and offer valuable perspectives on strategic decisions.
• Regularly Update Customers on Changes Based on Feedback: Show customers that their feedback matters by keeping them informed about changes and improvements that resulted from their suggestions. This transparency builds trust and encourages ongoing engagement.
• Develop a Feedback-Driven Product Roadmap: Incorporate key customer insights into your product roadmap to ensure you’re developing features that genuinely address user needs. By aligning product development with customer feedback, startups can improve customer satisfaction and reduce churn.
• Monitor Customer Sentiment Over Time: Track sentiment across customer interactions to gauge the overall health of customer satisfaction. Use this data to identify shifts in user sentiment and adjust your approach as necessary.

SaaS Growth Software and Tools

To effectively implement and scale your SaaS growth strategy, leveraging the right software tools can make a world of difference. Various SaaS solutions are designed to automate, track, and optimize essential functions, making it easier to execute your strategies and measure results. Here are some critical tools that every SaaS business should consider:

1. Customer Relationship Management (CRM) Tools: CRM tools like Salesforce or HubSpot streamline customer acquisition and retention by centralizing all customer interactions, tracking behavior, and managing communication across channels. These tools help personalize outreach and improve customer experience, which is essential for increasing conversions and reducing churn.
2. Marketing Automation Platforms: Marketing automation tools, such as Marketo or ActiveCampaign, enable SaaS businesses to automate lead nurturing, segmentation, and campaign management. This frees up valuable resources while ensuring that marketing efforts remain consistent and effective. To find a comprehensive list of the best marketing software platforms that integrate seamlessly with your SaaS system, explore marketing software platforms.
3. Analytics and Reporting Tools: Data-driven decisions are at the heart of successful SaaS growth. Analytics platforms like Google Analytics, Mixpanel, or Kissmetrics help monitor user behavior, track important KPIs, and make informed adjustments to your growth strategies. By utilizing these tools, SaaS companies can optimize user engagement, predict churn, and fine-tune their marketing efforts.
4. Email Marketing Tools: Email marketing remains one of the most effective methods for nurturing leads. Platforms like Mailchimp and ConvertKit allow SaaS startups to run personalized email campaigns that drive conversions, keep users engaged, and encourage renewals. Automated workflows can ensure timely follow-ups, upsells, and updates to customers, fostering stronger relationships.
5. Customer Feedback and Survey Tools: Tools such as SurveyMonkey and Typeform provide SaaS businesses with the ability to gather customer feedback easily. Collecting and analyzing customer input helps refine product offerings and improve user experience, ultimately contributing to better retention and lower churn rates.

Incorporating these tools into your SaaS growth strategy can significantly increase efficiency, improve performance tracking, and streamline marketing efforts, leading to long-term success.

How can business intelligence drive optimal SaaS strategy?

Leveraging advanced business intelligence can empower SaaS leaders with actionable insights that directly inform operational and strategic decisions. By integrating BI tools with existing data sources, companies can track emerging market trends, optimize pricing models, and proactively identify revenue opportunities. This approach supports precise segmentation of customer behavior, enabling targeted interventions that reduce churn and boost retention. Advanced analytical frameworks provide a competitive edge by transforming raw data into clear strategic directions. For instance, utilizing business intelligence software solutions can streamline reporting and drive data-led decision-making across departments.

The Bottom Line

There’s no single strategy or approach that can lead businesses to successful SaaS marketing. Each SaaS platform and application is different, solves a unique problem, and targets a different audience regionally or globally. However, you can explore SaaS growth strategies that have worked for other software and should pick those that meet your SaaS marketing needs.

However, don’t rely on a single growth strategy instead, combine two or more. The key to SaaS marketing success is keeping an eye on the metrics to see what’s working.

Key Insights

• Exponential Market Growth: The SaaS market was valued at $214 billion in 2022 and is expected to surpass $250 billion soon.
• Leading Markets: The USA leads the SaaS market with over 17,000 companies, followed by the UK and Canada.
• Venture Capital Investment: Over 50% of VC investment in 2022 was directed at SaaS startups, with 47.6% of venture capital investors preferring SaaS solutions in 2023.
• Market Utilization: Companies with over 1,000 employees use more than 150 SaaS applications daily.
• Content Marketing Success: 57% of SaaS businesses rely on content marketing, with 47% finding case study blog posts effective for growth.
• Customer Churn: More than 30% of customers cancel SaaS subscriptions within the first three months, highlighting the importance of customer retention strategies.
• Subscription Preferences: Annual subscriptions are preferred by 42% of SaaS businesses, while monthly and quarterly subscriptions account for 36% and 11%, respectively.

FAQ

What is a SaaS growth strategy?

A SaaS growth strategy involves a set of marketing tactics aimed at acquiring and retaining customers. It typically includes targeted marketing efforts, customer engagement initiatives, and optimization of user experience through data-driven analytics.

What are the basic elements of a SaaS growth strategy?

The basic elements include a product strategy to address customer pain points, a marketing plan to reach the target audience, and a go-to-market approach to reduce risks and maximize customer acquisition.

Why is content marketing important for SaaS growth?

Content marketing is a long-term strategy that helps build brand awareness, engage potential customers, and generate leads. It is effective in providing value to the target audience and driving organic traffic through SEO.

What role does pricing play in SaaS growth?

Pricing is crucial as it can significantly impact customer acquisition and retention. A well-thought-out pricing strategy can lead to higher annual recurring revenue (ARR) and help SaaS companies capture a wider client base.

How can SaaS startups improve customer retention?

SaaS startups can improve customer retention by providing value for money, enhancing customer experience, and addressing customer feedback. High retention rates reduce acquisition costs and ensure sustainable growth.

What is the significance of the churn rate in SaaS?

The churn rate represents the percentage of customers who stop using the service. It is a critical metric for assessing business health and identifying areas for improvement in customer retention strategies.

How does affiliate marketing benefit SaaS companies?

Affiliate marketing allows SaaS companies to expand their reach and generate quick results by partnering with industry influencers. It is an effective strategy for growing the customer base and increasing brand visibility.

Why is analytics important for SaaS growth?

Analytics provides a comprehensive view of business performance and helps in making data-driven decisions. It can identify trends, predict opportunities, and optimize marketing, operations, and sales strategies.

What are the most effective marketing channels for SaaS?

The most effective marketing channels include email marketing, content marketing, social media, and account-based marketing (ABM). A combination of these channels can maximize reach and engagement with potential customers.

What metrics should SaaS startups track for growth?

SaaS startups should track metrics such as traffic-to-lead rate, customer conversion rate, retention rate, churn rate, and recurring revenue. These metrics provide insights into business performance and guide growth strategies.