Competitive differentiation is the key to standing out in a crowded category and separating your SaaS from seemingly similar options.
What makes your product the right choice for your target market? Why should customers adopt your SaaS instead of the competition?
In this guide to competitive differentiation for SaaS, we’ll cover how to identify, highlight, and leverage what makes your product unique—so you can attract and retain more customers and build a long-term competitive advantage.
Use Competitive Analysis to Find Gaps
To stand out in a crowded market, you have to know your competition inside and out. To find potential opportunities, start with an in-depth analysis.
Identify Your Real Competitors
Who are your competitors anyway? For many SaaS companies, the list of alternative options isn’t exactly short.
When conducting a competitor analysis, Massimo Chieruzzi recommends looking at four to seven companies or products. You can map out a list and narrow the options using the competitor quadrant below.
How should you prioritize these types of competitors? Massimo suggests: “Focus on direct competitors, know your indirect competitors, and keep an eye on your potential competitors.”
Analyze Competitors’ Strategies
Next, analyze the strategies these companies are using to carve out space in a competitive market. Look at these three areas:
- Marketing: How are they using their website, social media channels, and email marketing to communicate their unique selling proposition (USP)? How successful are their efforts?
- Advertising: Which channels are they using to run ads—pay-per-click (PPC) or paid social? What offers are they running? Which keywords are they targeting, and what’s the average cost per click (CPC)?
- SEO: How much organic search traffic do their websites attract each month? Which keywords are they ranking for, and what’s the difficulty rating? What’s their domain authority?
In some cases, you can use dedicated tools to do this research. For example, use Ahrefs for keyword research or SimilarWeb for domain research. For ads, use the Meta Ad Library (below) or check LinkedIn company pages directly.
As you navigate this process, avoid making one of the most common competitor analysis mistakes. Instead of reviewing the competitive landscape once, revisit and update your analysis regularly.
Talk to Customers
Another critical step is listening to customers. In many cases, that means reading the competition’s reviews and talking to their customers in communities and forums. But you shouldn’t stop there.
Tom Winter, Chief Growth Officer at SEOwind, finds that many SaaS companies “don’t talk to their customers enough, period. You’ll find your competitive edge lying bare in your customers’ feedback. Don’t shy away from tough questions that could reveal hard-to-swallow truths.”
Tom recommends: “Discard your ego, analyze which solutions are outshining yours, and, more importantly, understand why they are better. Listen to the underlying issues and pain points, not the apparent answers and solutions.”
Joshua Merryman, Head of Product at MessageDesk, explains that the messaging platform uses customer feedback to refine its strategy. He shares: “We think the team space in messaging is kind of forgotten about. There are thousands of other things you can do with messaging. If you look at a lot of our competitors, on paper, they may have many more features than we have.”
Yet Joshua elaborates: “The feedback we get from our customers on a daily basis is that the thing they need most—which just so happens to be that team inbox—we do better than everyone else. Because we’ve targeted the right audience and positioned that specific piece of our product to be just for them. We find great success with getting early adoption, which builds into customers achieving success and being retained over time.”
Define the Gaps
As you listen to customers and analyze the competition, look for opportunities to position your product. In some cases, you’ll have the greatest success by finding gaps your competitors can’t or don’t address. For example, Kyle Kucyznski, CMO and Cofounder at MessageDesk, references “Positioning: The Battle for Your Mind” by Al Ries and Jack Trout.
Kyle explains: “To paraphrase loosely from their book, ‘Positioning is all about understanding the entire competitive landscape and knowing exactly what unique hole your product or service fills in that space.’ In this sense, competitive differentiation isn’t so much about opposition, but filling unique spaces where your competition isn’t found.”
In other categories, your best bet might be building directly on the competition’s foundation. Drew Spencer Leahy, Director of Product Marketing at HockeyStack, suggests:
“An effective way to differentiate is to make your competition’s strength a weakness. Not easy to do, but if you can find their point of differentiation, figure out how it’s weak, then make it better, you have a compelling point of differentiation for buyers.”
Define Your Differentiation Strategy
What stands out most in your competitive map and gap analysis? Choose a defining factor to build your strategy.
Do your competitors have limited capabilities? Developing a stronger feature set that solves more customer problems can make your product stand out.
Blake Smith, Marketing Manager at ClockOn, shares that offering a comprehensive feature set and a done-for-you solution has been crucial for helping the company succeed in the competitive payroll software landscape.
Blake explains: “While our competitors provide rostering and time and attendance software modules, ClockOn takes it a step further. Our key differentiator lies in the fact that we take on the intricate tasks of payroll processing, award interpretation, and managing superannuation (retirement fund) obligations.”
For ClockOn, the benefits are clear. Blake elaborates: “By delivering a holistic solution that streamlines critical HR processes, ClockOn has positioned itself as more than just a software provider—we’re a strategic partner dedicated to enhancing efficiency and ensuring legal compliance for our clients.”
Feature-based differentiation makes sense in many cases. However, it’s not always the right solution.
Atul Jakhar, Growth Marketing Manager at Hopstack, cautions: “Many SaaS founders and marketers equate differentiation with feature overloading. In my experience, true differentiation isn’t just about offering more, but about deeply understanding and fulfilling the unique needs of our target audience.”
Atul explains: “For Hopstack, the most effective differentiators have been an obsessive focus on user experience, coupled with robust customer support. While features matter, it’s the intuitive interface and rapid, knowledgeable assistance that truly sets us apart.”
For enterprise companies, this kind of personalized experience can be especially useful. Atul elaborates: “Our product requires detailed onboarding. We prioritize solving real problems with an empathetic approach and understanding the core needs for our industry, rather than just adding more bells and whistles.”
Another alternative to focusing on features is zeroing in on solutions (or benefits). This approach typically requires a strong understanding of your target market and good product-market fit.
Kyle Kucyznski explains: “You can compete and differentiate on features, but the smarter way to think about this is around solutions. You don’t always have to be 1:1 on features with your competitors.”
Kyle recommends: “Go back to first principles and ask yourself, ‘What is the best way for my ideal customer to solve their problems and ultimately achieve a new, higher state of being?’ In the end, people don’t buy features, they buy solutions. Thinking in this way can sometimes be a differentiator in and of itself.”
One way to think beyond both features and benefits is by building your brand. With enough brand recognition, you can set your product apart in your category.
Drew Spencer Leahy explains: “Product differentiation is ephemeral. At some point, every brand in the category will have the same feature set as you. It pays to stay on the cusp of innovation, but even still, in every mature category, leaders compete on brand.”
Drew elaborates: “More specifically, a strong brand is known, trusted, and considered even before buyers move in-market for what it sells. Strong brand = more defensible against feature parity and fast followers. So start building a strong brand before it’s too late.”
For some SaaS products, delivering superior value is crucial for standing apart. At SEOwind, prioritizing value leads to greater loyalty and reduced churn.
Tom Winter explains: “My competitive edge lies in delivering exceptional value to the user. I follow this somewhat counterintuitive principle in my company—’encourage abuse instead of limiting the usage.’ If you create a product that will be sticky, where the pricing will let the users feel that it brings them more value the more they use it, they will become your raging fans.”
If you have a less established brand with a larger target market, you might find it tougher to differentiate. Zeroing in on a specific segment can set your product apart and help you deliver more value.
Eric Doty, Content Lead at Dock, recommends: “One strategy for competitive differentiation—especially in the early days of a startup—is to drill down on one or two customer segments that have the biggest pain that your solution can solve.” He explains that initially, the collaboration platform used overly broad messaging to reach a larger B2B market.
Eric shares: “What we came to realize is that folks in sales and onboarding had the toughest time collaborating with customers. There weren’t tools designed specifically for them to share content or manage projects with customers. So we drilled down our product’s focus and messaging specifically for sales and onboarding use cases.”
In a category where most companies operate in a similar way, your SaaS business model and go-to-market motion can set you apart. For MessageDesk, Kyle explains: “product-led growth used to be a big differentiator; now it’s table stakes. Our users expect crisp experiences and we have to deliver it to them to be competitive.”
Kyle elaborates: “Beyond that, we’re looking at building communities and network effects as part of a new differentiated go-to-market motion. An endeavor like this also touches all aspects of our business from product, marketing, sales, and customer success, and back again. It requires organizational alignment.”
Differentiating solely on pricing can quickly become a race to the bottom. Massimo Chieruzzi explains: “Pricing is the factor I like the least as it’s tough to defend unless it’s a completely different ICP. For example, AdEspresso disrupted an enterprise-oriented space by going after SMBs. We used lower pricing, but it was for a completely different and underserved market.”
At MessageDesk, pricing is a differentiating factor for a different reason. Kyle explains: “For us, the business text messaging space comes with fixed carrier text messaging costs that we have to adjust for in our COGs (cost of goods sold). Some of these costs also get passed down to our end users.”
He elaborates: “So a big way for us to differentiate from our competitors is simply by offering more innovative pricing structures. This can lead to pricing that shifts costs away from treating text messages as a commodity.”
Align Teams Around Your Core Differentiation Strategy
Once you’ve defined your differentiation strategy, make a point of aligning your teams. When product, marketing, and sales work together, you can drive messaging and product planning more effectively.
Develop a Strategic Narrative
To get everyone on the same page, begin with the founder. Drew Spencer Leahy explains: “Alignment starts with the strategic narrative, which starts with the founder(s). If there’s no clear destination that product, marketing, and sales can see the company and its founders building toward, things will unravel quickly.”
For Joshua Merryman, alignment from the founder is especially crucial as the business grows. He explains: “As you scale, you’re hiring more talent. It’s very easy for new talent not to have a clear idea of what exactly your product is doing and who it’s doing it for.”
Joshua suggests: “The primary goal for founders as leaders on that team needs to be getting new employees to align with your product’s vision. You want to have a very crisp vision statement for your company that talks about the why behind your product.”
Establish Objectives and Key Results
To break goals down into actionable tasks, use a framework like OKRs. Kyle Kucyznski explains that OKRs “give teams greater transparency around goal setting and KPIs. This can even afford people the opportunity to say no to tasks that fall outside of achieving key results. In this way, OKRs can be ruthlessly efficient.”
At MessageDesk, Kyle explains: “The OKR system has really rewired our organization in a great way. There’s now much more transparency. We’ve also got a more holistic view of how day-to-day tasks from individual contributors tie into one another and contribute to actually moving the needle and achieving the objective.”
Create Competitive Sales Battlecards
To get sales aligned, create competitive battlecards. These internal assets outline your differentiation strategy so sales teams can address objections efficiently while using consistent and accurate messaging.
Some of the top competitor analysis tools can create them using a mix of their own competitive intelligence plus your messaging. For example, Crayon generates dynamic sales battlecards using competitive intelligence and stores the battlecards you’ve already linked in platforms like HubSpot or Salesforce.
Integrate With the Product Roadmap
To get the product team on board, integrate customer feedback into the product roadmap. Eric Doty explains that at Dock, “Messaging has worked its way back into our product development. Now we’ve been building specific features for sales, like sending price quotes or signable order forms, and we’re seeing much better traction in the market.”
When your company’s vision is clear, you’ll have an easier time focusing on product development efforts. Joshua explains: “Your product team has to prioritize those solutions before every other product initiative. If two bugs get logged, and your product team has a decision to make, they should always cater to the bug that impacts your core solution more.”
Measure the Outcomes of Your Strategy
How do you know if your competitive differentiation strategy is working? Whether you use OKRs, KPIs, or another method, track the metrics that matter most to your business.
For Atul Jakhar, it’s easy to tell when his team’s strategy is succeeding. He explains: “Our customer acquisition cost (CAC) decreases, customer lifetime value (LTV) increases, and we see higher referral rates.”
Yet Hopstack also measures qualitative results. Atul shares: “Beyond the metrics, we listen. When our customers spontaneously tell us they chose us over competitors because of specific differences they value, that’s the most gratifying indicator that our differentiation strategy is on point.”
Kyle Kucyznski suggests “looking at your core business model numbers. If you’re talking go-to-market differentiation, what’s your CAC to LTV ratio? For MessageDesk, we have a high CAC to LTV because we rely heavily on inbound, organic content marketing to collect leads and convert customers. This acquisition strategy is quite cost-efficient.”
With another business model, things might look a little different. Kyle explains: “Competitively, we’re differentiated from more sales-led organizations. This is because they have higher CACs (they have more people to pay, etc.). If you compound this out over time, you come to realize that the core fundamentals of your business and the choices you make can have huge differentiation implications.”
Final Thoughts on Competitive Differentiation in SaaS
To stand out in the SaaS market, choosing a differentiation factor is just the first step. With alignment across teams, you can effectively leverage what makes your SaaS unique—so you can plan product development and communicate your unique value proposition successfully.