Vertical SaaS companies that listen closely to their users build stickier products. Here’s what co-creating software with customers actually looks like in practice.
For most of the last two decades, the default ambition in software was scale. Build a tool that works for everyone, market it to everyone, and let volume do the rest. Project management apps, CRMs and invoicing platforms competed to be as broadly useful as possible.
That playbook still works for some companies. But a growing share of the most resilient software businesses are taking the opposite route. They pick one industry, such as construction, veterinary care, logistics or legal services, and go as deep as they can. The strategy has a name, vertical SaaS. Its real advantage is less about the market it targets and more about how the product gets built.
The product roadmap lives with the users
A horizontal tool has to generalise. When thousands of different business types use the same software, the product team can only build for the average. Feature requests from a dental clinic and a marketing agency cancel each other out.
Vertical software works differently. Its users share the same workflows, the same regulations and often the same frustrations. When five customers independently ask for the same change, it usually signals something real about how the whole industry operates. That makes customer feedback far more actionable, and it turns users into something closer to co-designers.
The companies that do this well treat their customers as the most important source of product knowledge. This breakdown of how vertical SaaS wins by building a product hand in hand with its users explores the approach from the inside. The core idea is simple. Software for a specialised profession can only be as good as the builders’ understanding of that profession, and the fastest way to gain that understanding is to work alongside the people who do the job every day.
What co-creation looks like day to day
„Listening to customers” is a phrase every software company uses. In vertical SaaS it tends to mean something more concrete.
Sitting in on real work. Founders and product managers spend time watching users handle actual tasks rather than relying only on surveys. A deadline calculation that looks trivial in a spec document can turn out to involve three systems, a paper diary and a phone call.
Shipping small and often. Because the user base is focused, a new feature can be tested with a handful of customers, adjusted and released within weeks. Users see their suggestions turn into working software, which encourages them to keep giving feedback.
Encoding domain rules into the product. Regulations, filing formats, billing conventions and compliance checks become part of the software rather than something the user has to remember. Each of these features usually started as a customer complaint.
Keeping a direct line open. In many successful vertical companies, customers can reach someone who understands both the product and the profession. Support conversations double as research.
Why this creates a durable advantage
A product shaped by years of user input carries a lot of accumulated knowledge that is hard to copy. A competitor can replicate a feature list. It is much harder to replicate thousands of small decisions about how a specific task should flow, which fields matter and which edge cases need handling.
This is also why vertical software tends to be sticky. When a tool fits the way a firm actually works, switching away means relearning processes, not just migrating data. Retention follows from fit rather than from lock-in tactics.
There is a trust effect too. Professionals in regulated industries are cautious buyers. A product visibly built with input from their peers feels safer than a generic platform that has been lightly customised for their sector.
The risks of building too close to customers
Co-creation is not without pitfalls. The loudest customers are not always the most representative, and a roadmap driven by individual requests can turn into a pile of one-off features. The best vertical SaaS teams listen widely but decide carefully. They look for patterns across many users, say no to requests that only serve one firm, and keep the product coherent.
There is also a scaling question. Close relationships are easy with a few dozen customers and harder with a few thousand. Companies that keep the habit alive usually formalise it with user councils, beta groups and structured feedback reviews, while still leaving room for informal conversations.
Lessons for founders
For founders considering a vertical play, a few principles stand out:
- Choose an industry you can get physically and intellectually close to. Distance from users is the biggest threat to a vertical product.
- Treat early customers as partners, and be honest with them about what you can and cannot build yet.
- Measure how often user feedback turns into shipped improvements. If that loop slows down, the core advantage is fading.
- Resist the temptation to go horizontal too early. Depth is the moat.
The software industry spent years optimising for breadth. The next generation of durable companies may be the ones that spend more time in their customers’ offices than in their own boardrooms.