4 Characteristics that Make SaaS Products Sticky

Written by Ricky Nave in Business tactics, strategy, and management,Software Engineering & Development

1. High-Stakes Applications

If a company uses a cybersecurity tool to protect itself from ransomware attacks, that company is very unlikely to ever switch unless the tool fails. That’s because the risk of switching is high.

Any SaaS product designed to solve high-stakes problems will be sticky due to the high risk of switching.

Examples of high-stakes applications:

  • Cybersecurity
  • Legal & regulatory compliance
  • Tax compliance
  • Medical diagnostics

2. Deep business integration

It’s relatively easy for a company to switch from one text-to-speech API to another because all text-to-speech APIs do the same well-defined task. On the other hand, it’s very difficult for a company to switch from one ERP to another. That’s because an ERP system handles inventory tracking and management, bookkeeping, billing, customer relationship management, human resource management, supply chain management, process modeling & management, process automation, and more. An ERP touches so many aspects of a business that to rip it out would be extremely costly, time-consuming, disruptive, and risky.

Examples of SaaS products with deep business integrations:

  • Practice management software (for medical offices, veterinarians, lawyers, CPAs, and other professionals)
  • ERP systems (e.g. Oracle NetSuite, SAP)
  • All-in-one CRM & marketing automation systems (e.g. Hubspot, Service Titan, Salesforce)

3. Network effects

I personally don’t like Snapchat, but I use it because I have a few friends that use Snapchat as their only social media. That makes Snapchat sticky.

A lot of CPAs don’t like Quickbooks, but since a lot of small businesses already use Quickbooks, the CPAs don’t have much of a choice but to work with Quickbooks. Since the CPAs already have to use Quickbooks for some of their clients, they just end up onboarding new clients into Quickbooks also. That makes Quickbooks sticky.

Examples of software categories that often have network effects:

  • Social media
  • B2B software that is designed to be accessed & used both by clients and providers (e.g. accounting software)

4. Habits

If someone uses a software every day as part of their routine, then it will be more disruptive for that person to move to a different software. In other words, if you can design a software that people use habitually, that software will tend to be stickier than infrequently used software.

However, this comes with a caveat. If a person uses a software daily and that software has some annoying features, then that person will be annoyed every single day. In the end, the annoyance may grow so high that the person leaves the software.

Lesson: Design software that can be used frequently as part of someone’s routine, but take the time to eliminate as many annoyances as possible from the user experience.

Ricky Nave

In college, Ricky studied physics & math, won a prestigious research competition hosted by Oak Ridge National Laboratory, started several small businesses including an energy chewing gum business and a computer repair business, and graduated with a thesis in algebraic topology. After graduating, Ricky attended grad school at Duke University in the mathematics PhD program where he worked on quantum algorithms & non-Euclidean geometry models for flexible proteins. He also worked in cybersecurity at Los Alamos during this time before eventually dropping out of grad school to join a startup working on formal semantic modeling for legal documents. Finally, he left that startup to start his own in the finance & crypto space. Now, he helps entrepreneurs pay less capital gains tax.

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