Building a Successful SaaS with Paywall Solutions

Credit card first putting up a paywall to get the right SaaS customers
This post has been updated on July 25th 2023

A user signs up for your SaaS platform and is immediately prompted to enter their credit card details — even before they’ve had the chance to explore. While this approach might seem harsh to some, implementing a paywall solution can be a pivotal move in securing the right customer base for your business.

Let’s consider the typical user reactions to this scenario:

“This is crazy, I am never going to put in my credit card just to look. Goodbye!”

“Now that I am looking at this thing, it really does solve my problem, and this is a big problem for me. Alright, I’ll bite. Here’s my credit card info.”

What’s the value difference between these two groups for a new SaaS?

We will now explore the answers to this question, but note that they are not equally applicable to all SaaS systems. The more the system is a platform, not just a single tool, the more this article will apply in our experience.

The Power of Paywalls: Moving from Intuition to Strategic Understanding

As a fledgling SaaS provider, the thought of imposing a paywall initially seemed counterintuitive to me — how could we expect users to pay without exploring our services first?

However, as we navigated the complex realm of running a SaaS business — not just developing software — we came to appreciate the wisdom behind this advice.

Customers who are willing to input their credit card information up front are not just buying software; they’re buying a solution to their problem. If your product offers a compelling solution, they’re more likely to invest, both financially and in terms of engagement. These early adopters can significantly shape your product’s evolution, and this is what you need when you are building a SaaS.

Learning from Paying Customers

A key realization we had was that paying customers usually provided the most valuable feedback. They were not just users; they were invested stakeholders, keen on aiding the evolution of a product they found useful. This differs significantly from non-paying users, who, due to their lack of investment, often provide less constructive feedback.

Over the years, we’ve seen a clear difference in the quality of interactions with paying customers versus non-paying users. The following examples illustrate this stark contrast:

A paying customer who had a login issue said: “Thanks for fixing my login issue! Here are my environment variables and the steps I took to get to this point if you need them to solve this issue!”

In contrast, a non-paying user who encountered the same issue retorted: “Why can’t I log in? Your product is terrible!” – that’s actually what they said before they could even log in to look at the system.

A paying customer who didn’t understand why the product was loading slowly stated: “Hey Team! I am seeing that you guys are using Angular 1 on this system and have… [list of issues with that system]… I know that refactoring from Angular 1 to Angular.io is a big project, and you guys are probably thinking about doing that already. Here is a good resource for doing this upgrade [linked]. Your tool is great, and I look forward to seeing it be a bit faster!”

In contrast, a non-paying user who had the same issue complained: “This is SO SLOW. Why can’t it be faster?”

A paying customer who had issues with the UX provided constructive feedback: “I am seeing some issues on the UX on the editor pages of this system. I see what you are trying to do, but I think there may be some better ways to do it. I am a UX designer and drew up some ideas for you guys. Please let me know if you need any help understanding this.” (set of XD files attached) – we actually used a number of this user’s suggestions.

Meanwhile, a non-paying user who didn’t like the design simply said: “This thing sucks. I can’t figure it out at all.”

The examples above show that paying customers are often more patient, understanding, and willing to participate in problem-solving. Their feedback is usually more detailed, helpful, and solution-oriented. In contrast, non-paying users may have more reactive and less constructive feedback, which can pose challenges for your support team.

The Clock is Ticking

Time is of the essence in a startup environment. Spending precious hours placating non-paying users who have no intention of investing can be a drain on resources and morale. After all, launching a successful SaaS requires selling a substantial number of licenses just to break even. Hence, time spent on non-paying users is often wasted time.

Non-paying customers, often drawn in by the allure of a free service, can cause considerable stress for the team. Their complaints, whether constructive or not, require time and resources to address. Their negative feedback, driven by dissatisfaction without financial loss, can be demoralizing, fostering a negative environment within the team and decreasing motivation to engage with customers.

Conversely, dealing with paying customers, even if they encounter problems, can be more straightforward. These customers initially showed faith in your platform, and if their issues are addressed effectively and responsively, they’re likely to remain supportive, even when immediate solutions aren’t available.

A small startup, with limited support staff, can find it difficult to manage an influx of emails, especially in the early days without established standard operating procedures (SOPs) and pre-written replies to common questions. Creating these processes from scratch is laborious and time-consuming — and therefore costly. However, once you’re sure that your solution is resolving users’ problems correctly, you can expand your reach to less savvy, less informed, or more challenging users. By then, your system and team will be ready for this influx.

SaaS Paywall Solutions: The Built-in Friction

In recent years, paywall solutions have become more advanced and flexible, ranging from the traditional hard paywall services to more dynamic models like metered or freemium paywalls, and even hybrid models. These varying approaches allow SaaS businesses to better match their paywall strategy to their target audience, product type, and overall business goals.

Paywalls act as a ‘built-in friction,’ ensuring that only users who see the real value in your product take the step to sign up. SaaS businesses now recognize the benefits that the right kind of friction brings — improved customer engagement, constructive feedback, and predictable revenue.

If a user isn’t ready to commit their credit card details right off the bat, it might indicate that they are not the ideal customer for your business. Alternatively, it could mean that your product’s value proposition hasn’t been effectively communicated.

Conclusion

The strategic value of a paywall service isn’t just about restricting access to your product — it’s about curating the right customers, particularly for startups. The right customers understand the potential in your product, are willing to invest, and are patient as your product evolves. By focusing on these valuable interactions, your SaaS business can thrive, and your team’s morale can remain high.

Need some advice on building or running a SaaS business? We can help!

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Jason Long‍
Owner, Founder

As owner and founder of JHMG, Jason has worn many hats over the years. Looking back even to his high-school years, Jason has always been a passionate entrepreneur at heart and a strong leader. Jason’s background in UX design, his history of starting new businesses from the ground up, and his unwavering dedication to excellence in every project he is a part of have earned him a reputation for high-quality work in all that he does. ‍

In his free time Jason enjoys traveling, swing dancing, crossfit, and hiking. ‍

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