6 Product Positioning Strategy Misconceptions in a SaaS Business (and What You Can Do About Them)
When I started my first business 6 years ago (which has miraculously survived until this day) I didn’t even have a clue what “market or product positioning or product positioning strategies” were. I was a linguistics graduate who needed money, so I started a generic ‘translation services agency’ business.
If you’re wondering where’s SaaS? Hear me out first. You’ll see the dots connecting.
So back to the story, I checked my competitor’s websites for price lists and then decided to charge (quite) a bit less (I know, a great move) to get my first clients quick. And they did come quick, and then go equally quickly, because, well, there was always someone out there who was even more desperate than I was – and willing to undercut my prices.
Needless to say, within just two years I was completely burnt out. And it was completely self-inflicted: as a result of positioning myself as cheap, disposable, commodity service provider – I kept chasing new clients for my bottom-feeder business, doing everything myself, and basically let my clients run my business as I would do anything they wanted for fear of losing them.
Why am I telling you this story?
Fast-forward 6 years and I have worked on marketing strategy with several startups and small businesses, mostly SaaS businesses, and I have seen them make the same mistakes that had almost folded my business when I was a rookie 23 year-old.
They fail to position themselves on the market clearly and instead of creating their own ‘blue ocean’ (if you haven’t read ‘The Blue Ocean Strategy’ – you should!) – and, as a result – often fail to sell a great product. Not because of the product itself – but how it was positioned on the market.
“Lousy context can kill a great product”…What actually is product positioning?
Positioning is the context in which you present your product. It’s what you are for a particular customer. It starts with how you communicate what you are, and for whom. What they can expect, and how much it will cost them.
Seems so…obvious? It does…and yet it isn’t. And that’s probably why so many startups fail to do their marketing positioning right.
Let me give you an example of the power of product positioning:
sometimes just changing a word or two in your tagline can have a dramatic effect on your sales.
- A Social Media Scheduling Tool vs.
- A social Media Scheduling Tool for Startups vs.
- The Simplest Social Media Scheduling Tool for Virtual Assistants vs.
- The most Affordable Social Media Scheduling Tool for Marketing Agencies
Which one would you be most likely to buy?
It all depends on whom you are of course, but do you see what I’m getting at? Product market positioning in a sense defines your core benefit and competitive edge for a particular market sector.
Defining your target market well, defining your price range and your core benefit at a glance – means you set the expectations right from the start, so people have a clear idea who you are and what you do, and don’t get disappointed once they start using your product.
This will help you significantly reduce your churn – when your clients are not confused about what they can expect from the start, it’s much easier for you to deliver on your value promise.
#1 – Failing to position yourself from the beginning
As you can see from my example from the beginning – no positioning is also positioning. If you don’t decide clearly who your target audience is going to be (and I mean – *very* clearly – like doing the proper ‘ideal customer avatar’ – including very, very detailed demographics) you’re message will be vague at best and it will fail to communicate your value proposition and prompt comparisons to competitors at worst.
‘We need to cast a wide-eyed net at first’
A lot of early-stage startups make this mistake out of the belief that ‘we need to target a broad audience at first’ – to find out what kind of audience they will ultimately attract instead of actually making that decision.
But casting a wide-eyed net doesn’t work for a simple reason – people don’t buy unless they see clear value for themselves specifically before they buy. If you don’t define this value from the beginning for fear of putting another ‘potential customers’ off – you may end up putting everyone off.
As Steve Jobs used to say – if you want to make everyone happy, don’t be a leader – sell ice cream. You may end up attracting more leads on top of the funnel – but the leads will inevitably be of poor quality and your conversion rates will be dismal.
Don’t wait with choosing your product market positioning – nobody will do it for you. Decide on whom you want to target before designing your product, creating your website, and your communication strategy. In the worst-case you can reposition later.
#2 Failing to communicate your value promise in a way your customers understands
This is a classic case of what you think you are, vs. what you think you are for your customers.
Calling yourself ‘an uber for cats’ may sound exciting and sexy to you, but it may just perplex your audience.
Make sure your tagline communicates your core benefit to a specific target audience – choose a killer feature that will immediately hit their ‘sweet spot’, that most burning pain point.
If you don’t define your audience well – it’s simply impossible to do this in your tagline and your message becomes diluted.
How we failed to communicate our value promise
This is exactly what we experienced in Postfity – the social media scheduling startup I work with. As many bootstrapped startups – we initially didn’t have a clue what product positioning we want to have, and simply replicated what our competitors did in a slightly different way.
For lack of resources, we ended up with a product that was a lot simpler than our competitors. And while this simplicity made us more user-friendly, we at the same time lacked certain advanced features that an enterprise client might be looking for.
This wasn’t reflected in our communication or pricing though. Our pricing plans suggested we had enterprise packages, and the leads (or even customers) who chose the higher plans would often be disappointed by the lack of the more advanced features.
At the same time – we didn’t really communicate the benefits of our product (extremely intuitive interface, 24/7 support in all plans, better value for money and significantly cheaper than the alternatives) to the target user of our product- an SMB or a startup who looked for a simple, cheap and reliable tools and didn’t even need all the thrills. As a result – we missed out on the opportunity to attract more of our ideal customers, and still experienced high churn with corporate/ enterprise clients.
Don’t try to please everyone in your communication. Be specific rather than generic. Don’t be afraid to address your ideal client directly in your communication.
#3 We need to look at our competitors
The most obvious source of inspiration for a startup when it comes to product positioning strategies? The competitors.
We ‘borrow’ business models, pricing, value proposition, even marketing ideas.
And you know what happens when you try to compete with everyone in a *very* crowded market?
Just look at the Marketing Technology Landscape (Martech) in 2018:
The only way to gain visibility and survive in this crowded market is to set yourself apart from your competition, not imitate them.
Carve your own niche (the ‘blue ocean’) and don’t be shy to do things differently from your competitors.
#4 Asking customers what they want rather than observing what they do
No, you need to look at what your customers are doing. I like to use the example mentioned by Karen Peakock, COO of Intercom, on the SaaStr conference. When Karen joined Intuit as the product manager of Quickbooks Accounting, she tried to improve the product by running customer surveys. Several interviews later – since most of the customers asked for budgeting – they built a budgeting solution in an iterative way, based on customer feedback. They iterated until the customers absolutely loved it and then – shipped it. And guess what happened then?
Nothing happened. Nobody actually used it.
Budgeting wasn’t really the customer’s problem, it was one possible solution to their problem, but not the one they were actually using.
So Karen went back to the drawing board and simply watched the customers, instead of asking them. And it turned out that the real problem was the inability to pay the bills – and so they developed a cash management system, rather than a budgeting solution. When Quickbooks focused on their customers’ actual behaviour (the real problem) and provided a tool that provided an improvement to what they were actually doing, rather than trying to create a new habit on the basis of their self-reported ‘wants’, the sales of the new product went up instantly.
The same happened in Intercom. The platform started as a live chat for facilitating communication between the company and the clients. But intercom quickly spotted a lot of businesses used their product in a way it wasn’t originally intended to be used – to sell to prospects. That way intercom realised it had its new product right in front of them – and rebranded the ‘misused’ live chat as a sales solution called ‘Acquire’ – which became an overnight sensation.
The bottom line is: people may often not be really aware of their real problem or what they want when they are asked.
Don’t ask your customers what they want of your product and then base your positioning on that; instead, observe what your clients are actually doing with your product (you can use tools like Hotjar or User.com). Build killer features and base your positioning on what problems your product actually solves, not on what your users think it solves.
#5 – We need to have *all the features*
No, you don’t need to have what everyone has. Just because your competitor or even the market leader has a particular feature, does not mean you should have too. Positioning your product as mainstream through the features you are offering because of FOMO is another typical mistake a lot of early-stage startups make.
Actually – the less you specialise and the more you clutter your product with features that are not relevant to your ideal client, the less useful and more confusing it becomes. And – as you’re trying to catch up with the mainstream, generic competitors – you are meanwhile missing out on the opportunity to really zoom in on the few killer features that would make your product the best product in the given niche.
Let me give you an example: I once worked with an email marketing tool that wanted to be ‘the next Mailchimp’. But with a small team and limited resources, it was falling considerably behind in terms of functionality. And yet – it had almost 50K users and 5k paying customers who were raving fans of the tool.
The company had no clue why.
And instead of trying to find out, they simply decided to…launch several development projects to catch up with Mailchimp.
As you can imagine, chaos ensued.
I recommended the CEO of taking a closer look at who actually uses the tool – and why they love it. And then – reposition the tool as a tool *especially* for this niche, and work on providing the best possible customer experience for them rather than trying to please everyone.
Be less. Don’t try to offer all the possible As Justin Goodhew, founder and CEO of Trellis once said: ‘Do less. The single reason why so many SaaS businesses fail is that they try to do everything, and they don’t do anything well. The ones that solve one specific painpoint best in the world, always win.’ Specialisation is the best customer experience experiment, and the best way to go in product positioning strategies.
#6 – Promising things you can’t deliver
Failure to deliver upon the value promise is the most common reason why your customers leave you (and why they leave you bad reviews on Google and social media). This is also why you need to choose your product or market positioning & strategies carefully – once you’ve promised to be ‘the best social media scheduling tool for VAs’ you have to deliver. And if you focus on the (apparently more lucrative) enterprise client instead – that’s a betrayal.
Promise 30% less than you think you can actually deliver – it’s better to underpromise and overdeliver than the other way round.
In conclusion – product positioning & strategies related to it are an essential (if often underestimated) part of your marketing strategy and is communicated in a lot of ways – from how you talk about your product, through your pricing, to what features you give priority to in your product development runway.
Since poor positioning can sink a really good product, it’s crucial that you think about it before you launch. Falling into the pitfall of FOMO and just imitating competitors or trying to please everyone are the most common issues in product positioning & strategies. If you want to avoid the crowded ‘red ocean’ – make sure you stay true to your calling and communicate in a consistent way that your ideal customer really understands.
Resources Related SaaS Product Positioning Strategies:
- April Dunford’s Product Positioning Strategies Video
- April Dunford’s book on Product positioning strategies
- A SaaS that actually implemented her book and the case study
About the Guest Author :
Emilia’s passionate about content creation, traveling in South-East Asia and long-distance running.