What is SaaS Product Management: An Overview of the Role 2023
Over 1,000 SaaS companies are created every year. And as these companies adopt product-led growth to escape the Mendoza line, demand for effective product managers has never been higher.
SaaS product management is a lucrative career, too. According to the Association of International Product Management and Marketing, the median salary for product managers in the U.S. is $113,000 annually.
But unlike “old-school” product management of on-premise software, the SaaS industry’s unique business models and customer behavior require an entirely different approach.
If you are interested in pursuing a career in SaaS product management, or if you are a new product manager looking to hone your skills, this ultimate guide will provide all the knowledge and tools you need to succeed.
Definition of Product Management
Product management, at its core, is being responsible of the entire product lifecycle — requirements defining, prototype developing, pricing and packaging, and product marketing.
These core principles of product management remain unchanged in any industry, including SaaS. The key differences lie in strategy, tactics, and approach. These would entail different tools, frameworks, and metrics, which we will go in-depth as you read on.
Product manager vs product owner vs product designer
Product manager, product owner, and product designer are three different roles that are often associated with product development. The distinction can get muddy because different companies have their own interpretations, and there is no full-market standard to adhere to.
That said, here is a general breakdown of the three roles:
Product manager: A product manager is responsible for the overall strategy and direction of the product. They define the product vision and roadmap, prioritize features and requirements, and work with cross-functional teams to ensure that the product meets business goals and customer needs.
Product owner: Only present in teams practising Agile development, and is mostly responsible for representing internal stakeholders’ interests, day-to-day fulfilment, and specific feature prioritization.
Product designer: A product designer is responsible for the product’s visual and user experience aspects. They create wireframes, prototypes, and user flows to ensure that the product is intuitive and easy to use.
In some organizations, these roles may be combined or may have different titles, but they all play a key role in the development and success of a product.
Product Management in SaaS: How Is It Different?
Like conventional product management, the role in SaaS context also involves overseeing the development, growth, and marketing of the product or service.
But product management in SaaS (Software as a Service) companies differ from traditional product management in terms of: business model, customer relationship management, product development, marketing, and metrics.
Business model and revenue considerations
A SaaS company delivers the product as a recurring online-based subscription rather than a physical product or one-time purchase. Thus, the overall business strategy focuses more on customer retention and upselling to existing customers.
Most SaaS companies also employ a ‘lean startup’ structure of iterative product experimentation rather than deliberate business planning. This involves constant feature prioritization, customer needs analysis, and customer feedback collection.
In a SaaS company, product managers often have a closer relationship with the customer, as the customer is using the product on a continuous basis. PMs must have a deep understanding of customer needs through constant customer surveys and feedback.
Product development process
Product development in SaaS focuses on building open and flexible products that are scalable. There is also a greater emphasis on speed and attaining the first-mover advantage rather than taking time to create the “perfect” product.
As such, constant experimentation and improvement are must-haves in SaaS. SaaS products have significantly shorter release cycles, and so they usually adopt Agile methodologies rather than the waterfall approach. Moreover, the product roadmap and vision must be flexible to accommodate constant requirement changes.
Pricing and packaging
The SaaS pricing strategy is flexible and commonly incorporates custom plans based on the specific features that customers need. Billing usually happens monthly or annually at a discount. SaaS companies also provide one-off lifetime deals (LTD) at significantly lower prices during product launches or special promotions.
As SaaS products are digital rather than physical, the product packaging takes into account user interface (UI) optimized for great user experience (UX). The dashboard is usually self-serve and thus is designed for ease of use.
Purchasing behavior and buying journey
Most of the purchasing journey happens online. This requires a greater emphasis on social proof, conversion rate optimization, inbound marketing, copywriting, and other digital marketing techniques.
The product distribution, lead acquisition, and marketing communication channels are also primarily online. However, offline marketing tactics such as event marketing have also reported positive results.
SaaS product managers benchmark KPIs focusing on customer retention and satisfaction. Some of these important metrics include:
- Lifetime value (LTV): The total revenue of a customer over their entire lifespan
- Churn rate: How often paying customers stop doing business with you.
- Monthly recurring revenue: The predictable monthly revenue based on all active subscriptions.
- Customer acquisition cost (CAC): The cost of obtaining a customer through the entire funnel.
- Average revenue per user (ARPU): Total revenue divided by total customers, usually calculated monthly for more granular analysis.
- Net promoter score: The likelihood of customers promoting your product, typically used to measure customer satisfaction and loyalty.
- Average contract value (ACV): Revenue you can expect to receive from a single customer every year.
- AARRR framework: A set of user-behavior metrics, which are acquisition, activation, retention, referral, and revenue.
Responsibilities of a SaaS Product Manager
Most SaaS companies have a smaller staff and thus delegate more primary responsibilities to the PM. However, larger businesses will have two separate roles for strategic and technical product management.
Product management is still a relatively new field, so there isn’t an industry standard that defines the job scope of practitioners. Each company has different interpretations and job titles for the role, which is further complicated by their unique needs and industry.
Generally, SaaS product managers are responsible for every step of the product management process:
- Defining the product vision: Assessing existing product-market opportunities and dictating the strategy (or potential features) to reach that end goal. For new products, identifying a market need and brainstorming potential products or solutions.
- Engaging stakeholders: Discussing the product strategy with engineering, marketing, and other relevant departments before proposing to C-suite.
- User requirement research: Conducting market research alongside internal stakeholder consultations to ascertain product-market fit, all while rigorously updating product requirement documentation (PRD).
- Prototype design and testing: Designing the actual feature or product, before conducting usability testing to identify areas of improvement based on the user stories.
- Launching the product or feature: Amping up marketing to get the word out about your new feature/product.
- Monitoring and improvements: Analyzing key metrics and making tweaks to move the needle, while immediately addressing any technical issues that arise.
Skills and Qualifications of SaaS Product Managers
As you can tell by now, a product manager (or any PM) wears many different hats, especially in the SaaS industry where there is a usually smaller workforce.
Thus, SaaS product managers should possess the following skills and qualifications to succeed in the role:
- Technical expertise: Product managers may not necessarily be responsible for day-to-day software development, but they must understand SaaS technical jargon and be readily available to provide guidance.
- Management skills: You must be able to ruthlessly prioritize feature deployment and coordinate cross-functional teams to meet deadlines.
- Communication skills: No matter the company size, all product managers liaise with multiple departments. Thus, they must be masters of influencing stakeholders and selling the product strategy, all while juggling their opinions and expectations.
- Marketing and finance know-how: While not strictly necessary, knowing the fundamentals of marketing a product and generating profits will greatly benefit a SaaS PM.
- Familiarity with Scrum, Kanban, and Agile methodologies: These popular project management frameworks are essential for delivering products efficiently, particularly in the fast-paced SaaS industry.
In addition to these skills, many SaaS companies also look for product managers with bachelor’s or master’s degrees in a related field, such as computer science, engineering, or business administration.
Moreover, reputed academies like Product School provide courses taught by product managers from Fortune 500 companies. You can learn more about these certifications in the “Helpful Resources” section below.
Tools Required in SaaS Product Management
As a software as a service (SaaS) product manager, you will likely use a variety of tools and technologies on a day-to-day basis to support your role.
Some of the most common tools and tech that SaaS product managers use include:
- Product management software: Tools like Jira, Trello, and Asana are specifically designed to help product managers plan, track, and manage their products. These tools may also include features such as roadmapping, stakeholder management, and project management.
- Data analysis and visualization tools: You will likely use tools such as Google Analytics or Amplitude to track and analyze product performance data, and visualize the results using tools such as Howuku, Tableau, Looker.
Common Mistakes that SaaS Product Managers Make
- Wrong product-solution fit: This refers to the misalignment between the product and the target market’s needs. It can happen if the product manager does not conduct sufficient market research or effectively prioritize and address customer needs.
- Adhering to bias: Product managers may make decisions based on their own biases or assumptions rather than objective data, leading to a product that does not meet the market’s needs.
- Mismanaging priorities: Product managers need to prioritize tasks and features based on business value and customer needs, but sometimes they may get sidetracked or become too focused on certain tasks, leading to an unbalanced product roadmap.
- Mismanaging stakeholder expectations: Product managers need to effectively communicate with and manage the expectations of stakeholders, including customers, investors, and team members. Failing to do so can lead to misunderstandings, conflicts, and a lack of buy-in for the product.
Current and Upcoming Trends of SaaS Product management
The field of SaaS product management is rapidly growing partly because of the equally rapidly advancing technology. Not being in the know will cause you to be outpaced by peers and competitors.
As such, here are the top SaaS product management trends that you should look out for in 2023:
- Multi-touch marketing: Customers no longer buy at first click and require extensive information before making a purchase decision.
- Usage-based pricing: Customers find more value in pay-per-use plans than lump sum packages, as they do not use all the features that come with a fixed plan.
- Conversational marketing: According to a study by Meta and BCG, consumers are increasingly using messaging apps to make enquiries and purchases, particularly in the APAC region.
- AI and machine learning (ML): Previously seen as good-to-haves, artificial intelligence is now an expected feature in SaaS products. AI and ML will vastly improve data visualization and generate meaningful insights at a scale never seen before.
- Vertical SaaS: SaaS solutions that satisfy industry-specific needs (e.g., banking) via specialized features are outgrowing horizontal SaaS that addresses broader business needs (e.g., accounting).
There are many resources available to help product managers in the software as a service (SaaS) industry upskill and learn more about their field. Some helpful resources include:
- Courses and certifications: Online courses and certifications are a good starting place for beginners. The most recognizable ones worldwide are ProductSchool and Certified Scrum Product Owner®.
- Conferences and events: Industry conferences such as Mind the Product and Product-Led Summit are perfect for learning from experts and networking with other product managers.
- Books: “The Lean Startup” by Eric Ries and “Crossing the Chasm” b Geoffrey A. Moore are must-reads because of the timeless product management principles that they impart.
- Product management communities and forums: The Product Management subreddit, Product School Slack community, and Product Coalition Medium blog are currently some of the most active product management communities.
- Influencers and thought leaders: Following influential product managers on social media or subscribing to their newsletters can be a helpful way to stay up-to-date on industry trends and best practices. Some popular product management influencers include Marty Cagan, John Cutler, and Julie Zhuo.
How do you become a SaaS product manager?
Many SaaS product managers start by gaining experience in a related field such as software development, project management, or sales. Formal education and training in business, computer science, or a related field can also be beneficial. Some SaaS companies offer internships or entry-level positions in product management, which can provide an opportunity to learn about the role and gain valuable experience.
What are the necessary skills to become a successful SaaS product manager?
A SaaS product manager needs strong problem-solving and decision-making skills, excellent communication and collaboration skills, a basic understanding of the technical aspects of the product, familiarity with agile development methodologies, and knowledge of data analysis and metrics.
Is product management in SaaS a high-paying position?
According to Glassdoor, the median salary for SaaS Product Managers is $163,272 per year. While factors such as location and years of experience affect average pay, it is still above-average compared to other careers.
How does the SaaS business model differ from other companies?
The SaaS (Software as a Service) business model involves selling online products as a subscription-based service via cloud-based delivery, with an emphasis on recurring revenue, flexible pricing and packaging, and customer relationship nurturing.
How long does it take to become a product manager in SaaS
Some entry-level product manager positions may be available to candidates with a few years of relevant experience, while more senior roles may require 5-10 years or more of experience. Ultimately, it depends on how fast you obtain the necessary experience, education, and training to meet the specific job requirements.
While traditional product management overlaps with product management in SaaS, there are key differences between the two. This requires an effective product manager to take unique approaches to pricing & packaging, customer relationship management, product development, and overall business strategy.
Overall, SaaS product management can be a rewarding career — only if you have the passion and drive to excel in the role.
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