The best investment you can get for your Product
Well, we have heard about venture funds making an investment in startups, and those investments are really important for the survival of those companies.
Similarly for a product, the most important Investment is what users can do in it. But many products are built with the assumption that the only investment from users they can ask for is the subscription fees. That's where products miss an opportunity to achieve sustainability. For SaaS products, this is the point that determines the success or failure of the product.
To unpack this, let's look at how SaaS businesses monetize their products. SaaS products mainly operate in the subscription model, and this model gives opportunity to users to switch to competition or discontinue the subscription without thinking much. This situation exposes SaaS business models to the uncertainty of revenue considering that users have very limited switching costs.
That is why it's important for SaaS products to engage users to invest in the product. The investment expected from users is in the form of the perceived value for users about their engagement with the product. This is known as Ikea Effect, which essentially means that the perceived value for the effort to assemble an Ikea product makes it much more valuable to users than the actual product.
This investment can be in form of profiles users create on the product, for example, the recommendations and skill badges received on LinkedIn or the customizations to the profile users have done on Twitter to receive specific Twitter feeds.
Another form of investment is the data users have started storing in a product, such investments we do see are in products like confluence, where lots of user-generated content is added and after some time organizations find it extremely difficult to migrate to another product. Similarly, Microsoft teams integrated with one drive and share points enable users to save data files and as more data is stored at the enterprise level the value of Microsoft teams multiplies for the organization.
This investment not only saves a product from the revenue uncertainty in the subscription economy it also engages users further and makes the product more useful for them. The impact of investment is directly reflected key metrics for Saas (we discussed in previous articles) which are churn rate and retention rate.
Thus to summarize, while it's important to grow and capture new customers the sustainable businesses are built on the investment a product can get from customers, and how that investment value multiplies for users.
