When it comes to owning a market, you have one option: build the best product in the category for a segment of the market.
Here’s the thing: you need to be the best solution to someone.
At the point where you can say, “sure, go ahead and try the competition. But our product is better. Give me a call when you want to talk after your trial.”
That’s when you’ve won.
You can’t be everything to everyone.
That’s a weak and watered-down product.
But you can be really, really good for a small subset of your total potential market cap.
The caveat is that it’s also really, really hard to stay focused with product development.
To truly go niche, you need to stop building other compelling areas of the product.
Scaling beyond product-market fit
People talk a lot about finding product-market fit. It’s analytical. You’re looking at customer base and/or the state of the market.
Scaling beyond product-market fit is about building into the value your perfect product offers 5 years down the line.
Pick a damn market segment, and make it happen!
It takes rational decision making based on a validation-backed hypothesis of product-market fit. You also need to take into consideration the competitive landscape.
Ideally, you have two-sided validation. Blue ocean competitive differentiation in an area untapped by the other market leaders, and traction within that area as-validated by your current customer base.
This strategy is the rocket fuel you can use to build escape velocity to break free of the “startup ramp of death”. In this way you can achieve compounding, rather than linear, growth.
When you build a product like this, you win marketing
Marketing is only as good as the product itself.
Yes, you can shape and tweak messaging to capture market share.
But in an ideal scenario, marketing is about applying techniques and tactics to simply communicate the value your product offers.
As marketers, we reach out through the ether of the digital landscape to educate ideal customers about your solution.
Then, in a niche-focused strategy, we leverage your customer base to “trade up” into bigger players in that space.
Marketing is a multiplier of the impact of your solution, expressed in terms of future impact potential.
Really good marketing can take a mediocre product and bring in 10x the revenue it would make on its own.
Really good marketing AND a killer product also bring in 10x the revenue of the product alone.
But, now we’re talking 10x on a much higher starting growth value. The difference is massive. And this is not even taking into consideration an exponential growth curve.
10x $100k revenue over 5 years is $1m in total revenue.
10x $500k revenue over 5 years is $5m in total revenue.
In absolute terms, the relative difference of both products is only $400k without the multiplier impact of marketing.
But with the 10x multiplier applied to both options, we see a $4m difference. Which is much more powerful.
Is it basic? Yes.
Is it true? Also yes.
Product marketing as a tool for scaling
The art and science of product marketing is about building a product that perfectly matches your target market.
Let me reiterate: you can’t be everything to everyone.
You need to solve the pain points and/or offer value to your niche market.
And customer-driven product development can only get you so far in a “me too” marketplace.
Differentiation, lead by blue ocean niche-focused marketing, is essential to owning the category.
At a high level, product marketing strategy does two things:
1. Steers the ship into a part of the market where no competitors have a strong feature set
2. Prioritizes features within this niche that have the greatest impact on revenue.
Here’s the bottom line: you need to lead product with marketing if you want to seriously prioritize the most valuable feature set for your niche.
Marketing can test things.
Run paid advertising campaigns to measure traction on messaging.
Split test headlines.
Evaluate niche market caps.
And beyond simply getting the product-market value creation right, there are more advanced strategic reasons why marketing should lead product.
For medium- to long-term marketing strategy horizons, product needs to align 6 months, 12 months down the line.
This is especially true for content marketing.
The intersection of marketing strategy and product development is a tightly twined sequence of strategic decisions around creating value at the right time for the right people, and maximizing revenue unit economics.
The unit economics of growth hacking
There is one exception to this process of prioritizing niche value features.
And that’s growth hacking your way into higher revenue based on the SaaS MRR equation:
MRR added + MRR expansion – MRR lost – MRR contracted = Net MRR
Revenue-driven growth strategy is about increase the “+” values and decreasing the “-” values.
Growth hacking this process is about building a product that increases upgrade incentive (MRR expansion) and average deal size (MRR added) on a per-customer basis.
If you want to scale, put in the work now to improve the unit economics of basic revenue metrics like ARPU and CLTV.
And align your pricing / business model to optimize for revenue utility.
It’s context-dependant: you will need to decide if it’s worth it to focus on these metrics now vs. later.
Strategically prioritizing revenue-driven growth hacking may have exponential growth implications on the unit economics of your business.
K-factor growth hacking
The other area of growth hacking, popularized by the likes of Sean Ellis and Ryan Holiday, is to increase your viral coefficient.
It makes sense in a B2C business model (especially freemium) where user growth leads to monetization.
It also makes sense in a B2B context where you can leverage end users as a lead generation source.
Call it B2B2C.
This is powerful because every additional customer you add has the potential to generate leads for your business.
I like to think of the K-factor as, “how many leads each customer, on average, creates”.
If let’s say you have one customer that that has 10,000 end users interacting with the product on a monthly basis.
If you introduce growth hacking devices to your product that capture 1% of those end users as leads, you will capture 100 leads per month.
And, of those leads, you convert 10% into customers.
That’s 10 new customers for a K-factor of 10, based on your one original customer.
Now, if every customer has 10,000 end users, that means your business will grow exponentially by a factor of 10.
In other words, you will add 10 more customers a month for every new customer you bring in.
That, my friend, is really fucking powerful.
tldr; be the best to win
Look – you can’t scale until you have a clearly defined growth strategy that aligns with all aspects of the business.
You’ll grow if you have traction, but not on the level of compounding, exponential returns.
Build the best product for a small group of people.
Then pour marketing and sales on the fire to achieve liftoff.
And while you’re at it – consider growth hacking to improve the unit economics of your business, and increase lead generation through end users.
You can branch out into other market segments from there.