In early 2013, Slack reached a critical turning point.
The company had just begun rolling out its young team-collaboration product to more and more customers when it started facing some unexpected turbulence. Initially, Slack had rolled out its product to relatively small teams, similar in size to Slack itself. But when the product started gaining traction with larger companies, such as Rdio, the results weren’t as heartening.
“Rdio, in particular, was much bigger than us,” Stewart Butterfield recently recounted to Fast Company. “They used it with a small group of front-end developers for a while but then it spread to the whole engineering group and then to all 120 people in the company.”
With this many users, Slack suddenly seemed less sleek and effective than it had when it was used by a much smaller team. Essential features no longer performed as envisioned, unforeseen problems arose, and the overall user experience seemed to take a hit.
“Suddenly we saw what the product looked like from the perspective of a much larger team, and it was pretty gnarly,” Butterfield told Fast Company.
This was no small problem. The company knew that if it was going to make it big, it was going to need to meet the needs of larger, higher-paying customers. So the company buckled down and started looking at their product from a new perspective: through the eyes of a much bigger company.
Slack quickly corrected course, went on to receive a valuation of nearly $3 billion, and the rest, as they say, is history. Except, of course, it’s not. Hidden inside this small hurdle on the path to Slack’s success is a very important lesson: SaaS companies must evolve their product to suit the needs of larger companies if they want to do something truly unique. Staying within your wheelhouse and selling only to customers like yourself ‒ especially in the SaaS landscape ‒ is a recipe for failure.
In fact, in all the research we’ve done about the best SaaS companies, we’ve found that one of the most effective things you can do is iterate your product to gain a foothold in a new target market. This is especially true if you’re trying to raise your average sales price (ASP) by selling to larger companies, just as Slack was. In this post, we look at the 3 questions you should ask before deciding to move upmarket.