Experimentation holds the key to scaling for SaaS companies 

Who invented the first light bulb? Thomas Edison? No – he was, in fact, a latecomer in a field that was already alive with over 20 other inventors. Inventors had already created earlier versions of the light bulb (arc lamps) used as street lights and to light large buildings. So how did Edison become a winner of a quest in which he was so far behind? 

Experimentation. 

Edison and his team spent over a year working tirelessly, conducting thousands of experiments. Finally, on 21st October 1879, he succeeded in creating the first light bulb that could be used in homes. Edison pioneered several multi-billion dollar fields, including sound recording, telecommunication, and motion pictures — and the reason for all his successes — deliberate experimentation.

Today, the success of that kind of maddening experimentation still holds. Mark Zuckerberg has revealed that “at any given time, there isn’t just one version of Facebook running. There are probably 10,000.” Jeff Bezos claims that Amazon’s success is “a function of how many experiments we do per year, per month, per week, per day.” Both strongly emphasize that experimentation is not one of the many strategies for their success – but THE most crucial one. In a dog-eat-dog world, today’s mantra is: Fail fast and experiment faster.

Fail fast and experiment faster

Today’s most innovative SaaS companies find several ways to experiment, knowing that most of these tests will fail. But, like Bezos tells the co-authors of the book, The Innovator’s DNA: “If you can increase the number of experiments you try from a hundred to a thousand, you dramatically increase the number of innovations you produce.” For early-stage SaaS companies, it’s important to fail fast and experiment faster to find a suitable product-market fit and grow to scale.

Failing fast means launching quickly instead of spending time and resources trying to perfect a product/ service before launching it. This approach allows you to test your assumptions and validate your ideas with real customers. You learn from feedback and adjust your strategy as needed. 

Experimentation allows you to pivot your business model or product strategy based on what you learn from your customers. It could involve testing new pricing models, user acquisition strategies, or even wholly rethinking your product or target market based on what you learn through experimentation.

The benefits of faster and continuous experimentation

Faster experimentation leads to quicker success: The faster you start experimenting, the quicker you can gather data, measure KPIs, and make informed product decisions.

Continuous experimentation can identify and remove unconscious biases in product roadmaps and UX development. You might believe that a particular feature you have created is guaranteed to be a hit with your users. It’s easy to fall victim to assumptions or perspectives that might influence how you design or prioritize features. You can gather data and feedback from diverse users by constantly testing your hypotheses. The process can reveal any biases you may have, so you can iterate on your ideas and ensure your product roadmaps and UX development are free from any unintentional bias.

Note: While continuous experimentation can help to mitigate biases and improve the user experience, it’s not a silver bullet. It’s still important to be aware of and address your biases proactively.

 Continuous experimentation helps you find lighthouse customers easily: Lighthouse customers or “early adopters” are often ready to adopt a new idea or technology and greatly influence getting a product off the ground. They often make up as high as 15% of an early-stage company’s consumers. Continuous experimentation helps you identify these valuable customers, better understand who they are, and tailor your product to their needs and preferences.

Faster experimentation leads to customer satisfaction: Thorough testing 

includes researching the target audience, benchmarking similar products, and testing the product with potential customers. You can create products that exceed your customers’ expectations with the right approach and faster experimentation.

The three critical pillars of SaaS experimentation

You can broadly divide SaaS experimentation into product, pricing, and UX. Each of them focuses on a different aspect of the SaaS offering. By experimenting across all three levels, SaaS companies can optimize their offering and drive revenue growth by keeping up with the needs of changing trends, geographies, and customer requirements.

Product experimentation

Product experimentation comes with the understanding that the product roadmap is constantly evolving. It focuses on testing and refining the core features and functionality of the SaaS product.

Be multi-product ready

Being multi-product ready means having a flexible and adaptable infrastructure to accommodate new product features and functionalities. This strategy allows you to quickly test and quickly access more data about product changes. You can respond to changes in market demands and customer needs, simultaneously keeping up with the fast-paced development cycles of the SaaS industry. Plus, if the need arises, you can pivot to new products that fit your value proposition better quickly and decisively.

But how do you manage multiple products simultaneously? Subscriptions can get messy when you have to manage multi-product offerings. Maintaining a complicated product catalog is time-consuming, especially if you have a multi-product offering. Then there are billing frequencies, currencies, add-ons, discounts, and charges to each subscription plan to juggle. A new product addition can significantly increase complexity, requiring you to build an entirely new subscription plan and subsequently affecting your existing customers’ billing process.

A reliable subscription management tool can be indispensable in helping you stay on top of your product catalog and to help you run quick experiments without significant disruptions. 

For instance, Chargebee’s Product Catalog allows you to adapt, evolve and experiment with your product offerings. You can streamline multi-product offerings without rewriting code repeatedly. The solution enables you to maintain a lean catalog by mapping currencies, add-ons, charges, and the billing frequency of each plan. You can launch plans and pricing strategies on the fly. Chargebee’s Product Catalog also enables you to

• Improve your operational efficiency, and reduce the go-to-market time for new product launches, currencies, and billing frequencies.
• Manage multiple product lines and their pricing.
• Have better control in areas of feature management and subscription change management.

So, launching a new product doesn’t have to be a quarter-long project anymore. 

Allow multiple packages and plan customization

Today, innovative SaaS companies recognize a shift in customer demands. So, they offer their products and features “à la carte,” tailoring specific offers to target various groups of customers rather than offering all customers the same package. Offering a choice of multi-tiered packages is one of the most effective ways to determine what your customers want. A single customer can have multiple subscriptions within a plan or subscriptions within multiple plans so that each subscription has only one plan associated with it(while there can be multiple add-ons and charges).

Product Catalog in Chargebee helps you define your product/service offerings and also enables you to package them for your customers. You can set up your product catalog in Chargebee by defining Product Families, Plans, Add-ons, Charges, Coupons, and Coupon Sets. You can manage customer feature access, set limits, provision, or revoke access effortlessly, making packaging experiments quick and easy. Chargebee’s API is built to handle all billing cases with minimum coding requirements, so you are not dependent on a developer.

Offer free trials and freemiums

Free trials and freemium offerings can be powerful tools in SaaS product experimentation. It provides the perfect user base for experimenting with new features and getting valuable feedback without upsetting the workflow of your paid customers.

There are also several other advantages – attracting new customers and giving them a taste of what your product can do. It leads to better customer acquisition – which can lead to improved revenue. Free trials and freemiums lower the entry barrier and reduce the risk for customers unsure if a particular product will work for them. You can also use freemiums to introduce a product’s new features and benefits and collect feedback to improve its positioning. A better product can reduce customer churn and convert those free/freemium customers into paying customers.

For instance, Chargebee’s Trial Management allows you to manage your freemium model easily. You can start a trial with/without payment information. You can provide extensions to a freemium model to retain free customers and send them engaging emails to increase product adoption and convert them to paying customers as the trial period continues. So, not only do you attract new customers with a freemium model, but you nurture them until you can finally convert them to paying customers.

UX experimentation

UX experimentation ensures you create a successful product with fantastic user experience and usability. Improving a product’s UX can increase user satisfaction, reduce churn, and drive revenue growth. As a SaaS company, you have a wide range of revenue models to choose from to enhance the user experience (UX). The big ones are – the self-service model, the transactional sales model, and the enterprise model. 

Build self-serve subscriber experiences (scale-up/down)

As Gokul Rajaram, author of an article titled Self-serve first: the overlooked but essential paradigm underlying great software companies puts it: A self-serve SaaS product is where a customer can go through the entire product experience — from signing up to first use to activating new features to managing their account to upgrading or cancellation — all without ever needing to interact with another person (unless, of course, the product is designed for the express purpose of interacting with other people).

The self-service sales model offers a fully automated customer journey. With a self-serve option, users can add users to their subscriptions, change their subscription plans, and easily track their usage. Every touchpoint between potential customers and actual purchases must be lean and optimized so customers can buy without friction.

The goal of every self-service SaaS business should be to get the product in the hands of the user as quickly and seamlessly as possible. Getting new users to try your product early via a freemium edition or free trial allows them to truly experience your product, free from marketing, sales, or any other distractions.

Chargebee allows SaaS businesses to roll out new business models quickly and easily scale up or down their service offerings to ensure their users get the needed experiences. The ability to quickly and easily adjust subscription plans based on customers’ needs can help SaaS businesses create innovative UX experiments and discover what works best. 

Chargebee’s self-serve portal helps with acquisition and onboarding, helping businesses turn every visitor into a paid/signup customer by providing them with a seamless subscription experience. 

Offer more personalized retention

Retention is as critical as customer acquisition for a SaaS business that thrives on recurring revenue. It doesn’t matter how many active customers your acquisition strategy acquires if none stick around after signing up.

Chargebee Retention helps reduce voluntary churn by helping SaaS businesses understand why their customers want to leave, then convincing them to stay through targeted and tested personalized offers. 

Here’s how it works: When customers click “cancel” on a subscription, they are redirected to a personalized cancel page. If they like your offer and decide to stay, Chargebee Retention allows you to send alerts, trigger workflows, update the customer’s subscription, and initiate personalized and automated nurturing campaigns. Finally, Chargebee Retention helps build a retention experiment system that routes customers to multiple test variants. Hence, you get real-time results to iterate your retention plan quickly.

If they still decide to leave, Chargebee Retention allows you to address their concerns at a granular level by showing tailored cancellation reasons and proposing offers to solve them. The solution also allows you to run multiple types of tests (rules-based, randomized, and ML-based). These tests can help you understand why your customers cancel their subscriptions and test and evaluate various retention strategies that will get them back.

Pricing experimentation

SaaS companies commonly make pricing mistakes like:

1. Setting prices by instinct and never revisiting them to explore how you can improve on them.
2. Setting the prices too low because they are worried about scaring away potential customers. As a result, they are struggling to scale as costs continue to increase.

While optimizing your pricing can give you a competitive edge in the market, finding a price your customers are willing to pay can make them feel you are providing them with actual value.

Pricing experimentation involves testing different pricing models and strategies to determine the most effective way to monetize your SaaS offering. Pricing experimentation can include A/B testing different pricing tiers or subscription plans or experimenting with different pricing strategies.

Some popular SaaS pricing strategies you can experiment with are:

• Cost-plus or markup pricing: adding a fixed percentage (markup) on top of product cost to arrive at the pricing.
• Competitor-based pricing: pricing your product based on your competitors’ pricing strategy.
• Value-based pricing: pricing the product based on the value your customers derive from your solution.

By engaging with your customers regularly and continuously, you can discover how valuable the product is to them and experiment with your pricing strategy.

Common SaaS pricing models to experiment with are:

Flat-rate pricing: Charging all your customers a flat fee, monthly or annually. For example, Basecamp uses a flat-rate pricing model.

Usage-based pricing: It is also known as pay-as-you-go, time-based pricing, unit-based pricing, metered billing, or pay-per-transaction. Here, you will track product/service usage, and the customer pays only for what they consume. Chargebee allows its customers to find a plan that’s right for them. 

Per-user pricing: Businesses are charged for the number of individuals using the product—for example, Canva.

Per active user pricing: Subscribers are charged only for active users — Slack charges its customers only for their active users.

Per feature pricing: The product is priced based on the number of features a customer opts for – the more they subscribe for, the more they pay. QuickBooks offers a per-feature pricing model.

Tiered pricing: Three or four versions of a product are created and priced differently. A tier could be set based on the number of users, usage, or features. Companies like Chargebee offer their customers tiered pricing.

An efficient billing platform will allow you to experiment with various pricing patterns. At Chargebee, we have created a revenue growth management platform that enables you to roll out various pricing plans rapidly and with different billing frequencies. 

Grandfathering plans can help you experiment with pricing models with new customers so existing customers aren’t affected by the changes. 

Evaluating the effects of your pricing model

With so many different pricing models, it can take time to understand which one has the highest impact on your business. To understand the impact of these pricing changes, you need to constantly monitor their effect on revenue expansion, churn, and customer acquisitions. Chargebee’s RevenueStory has more than 150+ ready-made reports that you can use to get actionable insights on new sales, payments collected, monthly recurring revenue (MRR), activations, churn, etc. 

It is designed to help you identify the key performance indicators that drive revenue, subscriptions, signups, activations, churn – and a host of other metrics you need to make informed and effective decisions.

Conclusion

So there you have it – the secret to creating a successful SaaS product and scaling quickly. The only way to do that is by not fearing failure, getting bold with experimentation, and having the patience to learn from your mistakes.

The faster you can get to market, the more you can learn, and the more scalable your business model becomes. The key to achieving this is to make product, pricing, and UX experimentation a crucial part of your company’s culture. Experimenting in these three areas can help you create a successful product fast and scale quickly through learning and improving.

A revenue growth management platform like Chargebee helps back up your experimentation engine, is critical to save money and resources, and helps mitigate risks. Chargebee enables you to conduct thousands of experiments – enter new markets, recognize new market opportunities, understand new geographies, offer your customers multiple products and features in numerous combinations, collect and analyze critical revenue data, and create reports – all the while managing your entire revenue lifecycle seamlessly in the background. Most importantly, Chargebee provides your customers with an unforgettable experience. 

Are you ready to build your experimentation engine with us?