Value-Based Growth in SaaS: Definition, Strategies, and Examples
What is value-based growth? And does it work with the product-led growth model?
That’s just a couple of questions I asked Krzysztof Szyszkiewicz and Jakub Jukowski of Valueships, a leading pricing optimization consultancy.
From the article, you will learn why you should develop a value-based growth strategy for your SaaS and how to do it. It also provides examples of SaaS organizations that have mastered it and explains how Userpilot can help you follow in their footsteps.
TL;DR
- Value-based growth is a strategy that prioritizes delivering value to customers. By helping them grow, your business grows as well.
- The approach makes your company more customer-centric, improves customer satisfaction and retention, and gives you a competitive edge.
- A robust customer success strategy enables customers to get the most out of the product. For example, personalized onboarding reduces time to value.
- To measure the value you deliver, create a system of relevant value metrics, like NPS or Customer Lifetime Value (CLV).
- Transparent pricing, for example, based on JTBDs, is one of the characteristics of value-based growth.
- Increase customer perceived value by collecting user feedback and analyzing user behavior to identify improvement opportunities and guide product development.
- Another way to deliver more customer value is by educating them, for example, through product-led webinars.
- Companies that have nailed value-based growth include Salesforce, Slack, and Zoom.
- Userpilot is a product growth platform with feedback, analytics, and engagement features. Book a demo to learn how to use it to deliver more value.
Try Userpilot and Take Your Product Growth to the Next Level
What is value-based growth?
Value-based growth is a strategy with customer value as the main growth driver. The more value you provide to customers, for example, by creating new products or improving existing ones, the more growth they experience.
And so does your company and all its stakeholders, like shareholders or employees.
How does it fit into the product-led growth strategy?
Krzysztof and Jakub believe that the two strategies aren’t mutually exclusive – they complement each other.
For example, building a killer feature can enhance the product value. You can leverage this value in your PLG motion to acquire new customers, improve conversions to paid plans, and drive account expansion.
Why should SaaS companies go for the value-based growth strategy?
The value-based growth approach can bring a bunch of benefits to SaaS companies.
Promotes customer-centricity
Value-based organizations are customer-centric. All business decisions and aspects of their operations revolve around generating value for customers.
In practice, this means investing in product and customer discovery to identify genuine user needs and building outstanding products to satisfy them.
Improves customer retention and satisfaction
Addressing customer needs and pain points increases customer satisfaction.
And customer satisfaction is closely linked to their retention. If your product delivers on its value proposition and helps customers grow, why would they look for another product?
Provides a competitive advantage
In saturated markets, consistently delivering a valuable product or service to your customers gives you an edge over competitors.
By prioritizing customer value over short-term gains, you can enhance your brand reputation. This helps acquire new customers and attracts talent to further drive product innovation.
Constant innovation is possible because you have the resources to fund it over the long term. After all, value-based growth is much more sustainable.
How can companies incorporate value-based growth in their SaaS?
Let’s get down to the nitty-gritty of how to embed value-based growth into your SaaS business. Here’s what Krzysztof and Jakub had to say.
Create an effective customer success strategy
Krzysztof and Jakub believe that a robust customer success strategy is the foundation of value-based growth as it enables users to achieve their goals.
Focus on customer success. Creating a solid customer success capability that ensures the customer achieves the desired outcomes is necessary for value-based growth success.
How do you create such a strategy?
- Define your user personas with their unique needs and preferences. Then, map their customer journeys.
- Develop personalized onboarding experiences for all personas. Use interactive walkthroughs and checklists to guide them through the setup process and help them discover the core features. Back them up with onboarding emails.
- Create a resource center for self-service support.
- Build a customer success team to provide users with high-touch support and guidance.
- Use secondary onboarding to introduce advanced functionality and maximize the full product potential.
- Drive upsells and cross-sells with contextual in-app messages.
Develop a value-based metrics system
How do you know how much value you deliver to your customers? By tracking the right metrics.
Creating a solid value metrics system—developing robust KPIs around customer value (e.g., LTV or NPS) is crucial in measuring the value delivered to your customer.
Value-based metrics include:
- Retention rate: the percentage of customers who remain active subscribers over a specified period. This metric is a direct indicator of how well you can maintain your customer base. A high retention rate implies that customers find continuous value in the product.
- Churn rate: the percentage of customers who cancel their subscriptions within a certain time frame. A high churn rate might indicate dissatisfaction, a lack of perceived value, or competitive disadvantages.
- Customer Lifetime Value (CLV): the total revenue a business can expect from a single customer throughout their relationship with the company. A higher CLV suggests that customers see sustained value in the product.
- Net Promoter Score (NPS): a customer loyalty and satisfaction measure taken by asking customers how likely they are to recommend your product or service to others on a scale of 0-10. A high NPS means high customer-perceived value.
- Customer Satisfaction Score (CSAT): a measure of customer satisfaction with a product, measured by asking how satisfied users are on a scale of 1-5. A low CSAT score may indicate that customers don’t find enough value in the product.
Provide transparent pricing
How you price your product – and how you present your pricing strategy – is one of the key factors in value-based growth.
Implementing transparent, easy–to–understand, value-based pricing of the product (using either tiered pricing or jobs-to-be-done pricing) will be a clear indicator of what the customer can get and what to expect from your product. If transparency is there (and it is fair), growth will follow.
Here’s how to create a transparent pricing strategy:
- Limit options. Three to four pricing tiers or JTBD-based plans differentiated by features and value will do.
- Set prices based on value. Analyze how much money or time your product saves your customers.
- Display the final price only – no hidden fees.
- Communicate pricing changes. For example, if the price increases or the customer exceeds their usage allowance and goes into a higher tier.
- Explain why your product is priced like it is.
- Offer custom plans, so that customers can build their packages.
Create effective customer feedback loops
Feedback loops are the key to understanding user expectations and challenges.
Creating and maintaining robust feedback loops with your customers to understand their needs, challenges, and experiences will enhance product development and service improvements.
They also show your customers that you care about their success. This strengthens their loyalty to your brand.
Here are a few tips on how to build tight feedback loops:
- Use in-app surveys to collect customer feedback and requests to identify areas for improvement.
- Analyze user interactions with your product to identify the most valuable features. And find ways to optimize the user experience.
- Monitor social media, forums, and review pages for user comments. Analyze conversations of the customer-facing teams.
- Create a public roadmap where users can submit feature requests, vote them down or up, and follow their development progress.
- Always acknowledge customer feedback even if you don’t implement their ideas in the end.
- When you build a feature or roll out an update requested by customers, let them know. Stress the fact that it was based on their insights.
Provide educational content to guide users
A consistent customer education strategy is essential for their success.
Providing your customers with educational content and resources will help them get the most out of your product. This can include tutorials, webinars, and detailed guides.
In addition to resource center materials, other end-user educational resources include:
- Live training sessions and webinars. And their recordings for people who can’t attend.
- Video tutorials: step-by-step guides, or those covering specific use cases and scenarios.
- Product documentation and how-to guides.
- Community forums. Where users can share their expertise and resources or seek help.
- Online courses with certificates for extra motivation.
- Product-led blog posts (MOFU and BOFU).
Examples of SaaS companies acing the value-based growth strategy
Let’s look at companies that have achieved success using their value-based growth strategies.
Salesforce
Salesforce is one of the leading CRM platforms. The company has successfully built its growth engine around delivering customer value:
Salesforce has long been adept at value-based growth, focusing heavily on customer success and delivering comprehensive CRM solutions that evolve with customer needs.
How do they do it?
One way is through their ecosystem with over 2,500 apps. It enables customers to seamlessly integrate the platform with other tools in their workflow, for improved efficiency and productivity.
The company also promotes community engagement through:
- Trailblazer community where customers can ask questions or share knowledge.
- E-learning platform Trailhead provides gamified learning experiences to help users master Salesforce.
- Events and conferences, like the annual Dreamforce conference facilitate networking and knowledge-sharing.
- IdeaExchange. A platform for sharing new features or improvement ideas.
- The Salesforce MVP Program. Recognizing outstanding community leaders with extensive Salesforce knowledge for their contributions to the community.
Slack
Slack is a business communication app.
The company is clear about how it delivers customer value: by making team communication efficient and reducing time spent switching between different communication apps.
Slack’s growth has been driven by its focus on making communication and collaboration easier and more productive for teams. Slack is very transparent in its value delivered (and its pricing!). By continuously improving its product based on user feedback and providing integrations that customers value, Slack has built a loyal customer base.
Zoom
Zoom is a well-known video-conferencing platform that has dominated its industry during the COVID-19 pandemic.
What made it so popular?
The product offers an excellent user experience and ease of use without sacrificing the quality or security of the video calls.
Zoom focused on delivering reliable, high-quality video conferencing that was easy for anyone to use. Their attention to user experience and the value of keeping people connected, regardless of location, has made them a go-to solution.
How can Userpilot help your SaaS become value-led?
Userpilot is a product growth platform that can support your transition to the value-based model.
Collect and analyze customer feedback frequently
Userpilot’s feedback capabilities allow teams to gather customer insights and requests to inform product development and improve user experience.
Creating the in-app surveys is intuitive thanks to the template library and visual editor. Once the survey is ready, you can trigger it for a particular user segment, either at a specific time or contextually, for example, when they engage with a feature.
There’s also the feedback widget for collecting passive feedback whenever the user feels the need to submit it.
Analyze customer behavior data in-app
Userpilot helps teams make data-driven decisions on how to deliver more value with its analytics features. For example, you can use it to identify the most valuable features for different user segments.
The analytics features like Funnels and Paths can also help you spot and remove friction from the user journey. This is to help customers reach value in less time.
Finally, you can use Userpilot to track all your value-based product metrics from one dashboard which you can customize to fit your needs.
Conduct product experiments to measure behavior changes
Userpilor offers you tools to run experiments.
This includes A/B and multivariate tests which allow you to compare the performance of different in-app experiences, like onboarding flows.
You can also use it to run fake door tests to validate feature ideas and determine how willing users are to pay for them.
Conclusion
The value-based growth strategy serves both customers and companies by building valuable products that help customers grow their businesses.
If you’d like to learn more about Userpilot and how to use it to deliver more value to your customers, book the demo!
Try Userpilot and Take Your Product Growth to the Next Level
