SaaS companies are frequently being launched and even established brands will regularly be releasing new products. As of 2022, the SaaS space is worth over $170 billion and the SaaS industry has increased in size by around 500% over the past seven years. It’s no wonder that many companies out there are competing for market share and in a race to develop innovative new products.
With all the competition out there, it’s important for SaaS companies to be able track the business KPIs to predict the success or failure of their new products. In order to do so, you need to effectively forecast product adoption because that tells you how many customers are likely to be interested in what you have to offer.
What is Forecasting Product Adoption?
Forecasting product adoption means predicting the rate at which a new product will be adopted by the population. It helps SaaS businesses determine whether their new product is going to be a success or failure because they can anticipate the demand from potential customers.
Forecasting demand is a little easier for SaaS companies because they are not dealing with a physical product, so they don’t have to worry about things like inventory. However, they must invest in resources such as a customer support team, and if they are anticipating rapid growth they’ll want to hire more agents sooner rather than later.
It’s still difficult to forecast product adoption for a new product because there is a lack of historical data on which you can base your assumptions.
5 Tips for Forecasting Product Adoption
1. Analyze product market fit
You can use product market fit assessments to analyze how much demand there is in the market for a product such as yours. If there is no product market fit then your product is likely to fail because there are no potential customers out there to adopt your product.
SaaS companies need to have a deep understanding of the needs and wants of future customers in order to develop a product that somebody is actually likely to use. Product market fit provides the connection between the product’s value proposition and the underserved needs of target customers.
To assess product market fit, you can ask customers, “How would you feel if you could no longer use [this product]?” Customers can answer on a scale from “Very disappointed” to “Not at all disappointed”.
2. Conduct user testing
When you develop your product it’s important to conduct thorough user testing to identify how users will potentially interact with your product. If you design a product that hasn’t been tested then you have no idea whether your software will work as intended.
If testers are successful with using your product, even if it is a prototype or Minimum Viable Product (MVP), then you can use this as an accurate forecast of whether future users will adopt your product.
During testing, you might find areas where users feel your features are confusing or they might not even understand what your product is for. This is a big potential risk with innovative new products and you’ll want to design your onboarding process to account for this.
3. Utilize software analytics
You can take advantage of software usage data that tells you how current users are adopting your product, and use this as a way to forecast how future users are likely to interact. Analytics behind your SaaS will tell you exactly how users are behaving with your product and whether they are likely to churn.
Existing software use data is an accurate predictor of future product adoption. You’ll see where users get stuck and you’ll be able to improve the user experience of the product depending on where there are problems.
4. Segment your users
In order to fully understand how you can design a product that will fit user needs, it’s important to segment your users to find out what your users need and want. If you’ve conducted a product market fit assessment, you’ll know exactly who you’re targeting with your product and their basic demographics.
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No product is going to appeal to all types of people and there are likely to be specific segments of customers who your software will appeal to. If you know who your target customers are and successfully reach out to them, you’ll be able to forecast the rate of product adoption.
5. Survey your customers
Bill Cushard has proposed the foundation of a model for predicting the rate of product adoption, represented as a five-question assessment answered on a five-point Likert scale. He argues that you can use this assessment with customers to successfully forecast how likely customers are to adopt your new product.
The questions for the assessment are:
- Question 1: How much better do you think this product is than the alternative(s)?
- Question 2: How compatible is this product with my current / future needs compared to the alternative(s)?
- Question 3: How complex do you think this product is to understand and use compared to the alternative(s)?
- Question 4: How easy is this product for you to try out for yourself compared to the alternative(s)?
- Question 5: How easy is it to see or understand how this product might benefit you compared to the alternative(s)?
Depending on how your customers answer these five critical questions tells you how likely future users are to adopt your product.
