SaaS Positioning Guide
How to Define and communicate your customer success narrative
1. What is positioning?
One of the great mysteries in business strategy. A household name for a SaaS CEO, founder or marketer. You know it’s important. Like really, really important. But do you really know why? Do you really know how it’s done? Market positioning or product positioning? What is the ‘right’ positioning? Who is responsible for?
Positioning is raising more questions than answering it. That’s the most important conclusion i’ve made from talking to and working with SaaS business executives and founders. So this guide is dedicated to give you the answers you may have been searching for a long time.
So the first question that needs an answer suited for practical use is: What is positioning? I’ve spent quite some time working through the definitions available but found none satisfying at all. As a consquence, i’ve created my own:
Positioning is the process to define and communicate the most valuable outcome your customers can get out of your product.
Yes, positioning is a process, not a task. For two simple reasons:
- As your product (hopefully) evolves and becomes better your customers will generate more valuable outcomes over time.
- The longer your business operates the more feedback and knowledge you will gain about customer value.
And as for the second part of the definition: There is no product or market positioning. Positioning is about the only thing your customers care: Their outcomes and the value associated.
Not without a good reason the godfathers of positioning, Al Ries and Jack Trout named their famous book: Positioning – The battle for your mind.
2. How positioning affects your SaaS business
The second most frequent experience i make when talking to SaaS founders and executives is that positioning is perceived as something intangible. Ok, everybody knows that positioning is what makes you stand out of the competition.
But that’s not for vanity. It has a real and measurable impact on your business. So while they are busy with hunting for the most scalable marketing channel they are missing out working on the mother of all scalability.
Injecting positioning into your business works like steroids – at any given stage of your business. Whether you are a small startup or an enterprise.
The presence or absence of a powerful positioning can be seen and felt everywhere in your daily business and your beloved KPIs.
Let’s check out how positioning expert April Dunford explains the difference of having or not having a powerful positioning
“Marketing with weak positioning is like making an omelet with rotten eggs. Your cooking technique might be perfect but nobody wants to eat what you’re serving. Weak positioning will drag down the performance of everything marketing and sales are trying to accomplish. Strong positioning, on the other hand, is like running with the wind at your back. Everything is easier and your results in sales and marketing will show it.”
And marketing is only one part of the game. So far i’ve identified 9 major benefits how positionining gives you a major boost on growth and, very important, long-term profitability.
3. Positioning analytics
Every strategic initiative that deserves its name starts with having a clear picture of the status quo. As i’ve been doing analytics and research since many years the most important advice i can give you is this: Make it actionable.
Because that’s something a lot of SaaS businesses struggle with. They are performing industry analytics, benchmarks etc. in book-size. But does that tell you what you need to do next? What price you should set for your product, other than setting the most sucky ones on earth – the “competitive” ones?
So let’s focus on what you really need to take action instead of getting lost.
3.1 Market analytics
First you need to know what’s going on in your market. No matter what you are selling you need to understand your customers businesses. If you are selling a CRM you need to know how they are selling. If you are selling a PM software you need to know how their projects are done.
And specifically you want to know:
- What are the problems your customers face?
- Where do they come from?
Because if there is no problem to solve you can’t create value. More accurately, what you really solve are the roots of the problem.
Do they naturally appear in your customers business? Are they the result of internal struggles? And last but not least: Does the problem occur due to outside shifts and trends?
That’s really important because if you don’t have them on your radar you might end up fixing an outdated problem or fix it in an outdated way.
So the first step is to create a list of all relevant problems in your market and where they come from (if possible to determine).
3.2 Competitor analytics
In the next step you connect the results of your market analysis with your competition. That means you need to identify:
What problems do your competitors solve exceptionally well?
But before you can to that you need to be clear about who your competitors are. And for some SaaS business part of that answer are things like spreadsheets.
Sorry, if you are missing comparing features and prices. But they are simply irrelevant. It’s funny. I bet if i would ask 100 SaaS what’s most important 100 would say customer value. But how exactly are your competitors features and prices relevant to that?
However, with the results of your competitor analysis you can subtract the problems that are particularly well solved from the equation. The only remaining problems in the ‘pool’ are those who are solved or not good enough.
Doing this requires being honest with yourself. If you go in with a “all-competition-sucks”- attitude it won’t work.
3.3 Product analytics
After you’ve identified the problems your competitors have solved you are now comparing what’s left and what you think your product does exceptionally well.
I prefer to do the product- after the competitor analysis but feel free to go the other way round.
So now it’s time to ask yourself and also with being honest with yourself:
What problems does my product solve exceptionally well?
So by now you should have a list consisting of:
- Customer problems that exist in your market and their causes
- Minus problems that your competitors solved exceptionally well
- Minus problems that your product does not solve exceptionally well
And the finaly step of the product analysis: Rank the problems that your product solves exceptionally well by the supposed value of their outcomes.
Please not that this is not about tearing down your product in every feature. It’s about the value a single feature, a combination of some or your software as a whole delivers.
The results of your product analysis will serve as your zero hypothesis.
3.4 Customer analytics
Now comes the juicy part. Finding out if your zero hypothesis was right. That means you will gather customer feedback to see if your product excelled where you’ve thought it would do.
But before you can do that you need to classify your customers. While everybody is of equal value as a human being it’s different for your business.
So you have to evaluate and rank your customers by their value for your business. The easiest way to do is to create a P&L for all your accounts.
If you don’t track the specific acquisition and service costs at account level, and most SaaS don’t do it, you need to work with qualified estimates. Boldly speaking – who pays little but is a pain in the a** and who is the customer everybody wants to have.
Why do you do that? Because it’s simple. Your most profitable customers are who they are because they get a lot of value out of your product. And in the end positioning is about getting more of these customers. So you need to solve their problems exceptionally well.
The main obstacle with customer feedback is that most you are getting is generic and of no value for your positioning at all. As you need specific answers, you need to ask specific questions. Here’s my proposal:
- How did your results change since using our product?
- How did your work change since using our product?
- How do you feel now?
I’ll explain why you need to ask questions like this later. If you track the user behaviour inside your app it’s great plus. Because you can also see how your best customers are succeeding with. If you don’t have any customers you will go with the zero hypothesis.
4. Market segmentation
“One of the biggest mistakes a SaaS company can make is thinking they can sell to everyone, which ultimately means you sell to no one. At the cornerstone of your go-to-market strategy is the important decision of who you are going to sell to and how.” Edward Ford
Saying no to potential customers is hard, really really hard. Because it’s perfectly logical to target everyone – the more customers you are targetting, the more opportunities to close deals. But unfortunately it does not work this way.
The truth is that not everybody really needs your product. But if you target everyone your product and your business model will align a maximum of heterogenity. A mile wide and an inch deep.
In the end you are offering low value to all instead of high value to those who would benefit greatly from your product. What would be your most valuable customers can’t see what’s in for them through the fog of arbitrariness.
If you have a ton of cash to burn it might be able to turn it around. With a salesforce that succeeds where positioning and marketing failed – showing the customers how they will benefit from the solution.
But even when you are lucky enough to get through you will waste a lot of resources in the process and slow down your growth.
The key build a long term profitable SaaS business is to maximize the value per customer, not the number of customers. That can’t be emphasized enough.
Did you know that the fastest growing SaaS businesses realize up to 40% growth from expansions?
Guess who expands (and retains)? The customers who get a lot of value from your product. Market segmentation is the mission to find them.
4.1 The ideal customer
At this point you need to inject the results of your product and customer analysis. Let’s straight jump into defining the characteristics of the ideal customer:
- The ideal customer has a problem of great urgency whose solving is highly valuable
- At which your product excels so that the customer gets a lot of value and rewards you with profitability and loyalty
Obviously it’s very hard to work with a definition like that. That’s why you need to add characteristics and traits to create applicable profiles. Here are a few suggestions:
This is one of the few occasions where more is better. The more you know about your ideal customer the “leaner” you can acquire them. In a perfect world all your CAC would run into acquiring nothing but ideal customers.
It’s obviously impossible to acquire with “zero waste” but that does not mean you should not try. If you find out what all your ideal customers have in common beyond the problem then you will win big time.
It may be as easy as the combination of a specific size and industry but it can be much more complex. So this is where i’d like to remind you that everything is a process of continuous improvement.
Every new (potential) customer interaction will help you to refine your ideal customer profile. And with every step forward you will acquire more lean and maximize the value per acquisition in terms of ACV and LTV.
I’ll leave it up to you how many traits and characteristics you want to use. Feel free to create avatars with names, age, gender etc. if it works for you.
5. Product Differentiation
How are you different from the competition? When i’m asking SaaS founders and executives the question of the questions this is what i mostly get:
- Affordable price
- More features
- Better Design
- Great Customer Service
If you take a look on the pricing pages of the leaders in any given market what do you see? Do they sell the cheapest solution or at the upper end of the price range? Exactly, it looks like the price is not the most important thing for the customer.
Interestingly more than a few startups try a frontal assault on the market leaders. They are selling a better alternative to Salesforce, Hubspot or Slack etc.
So they force the issue and put up these unholy neverending feature comparison pages. And surprisingly they always win the comparison. The lucky customer gets more features and also has to pay less.
As a logical consequence legions of customers are switching to the challenger. The only problem – it does not happen. So it looks like more features ain’t do the job either.
The single most important reason why SaaS businesses fail to differentiate from the competition is because they focus on things that are irrelevant, marginal or mandatory to the customer.
5.1 Focus Strategies
Fortunately there are alternatives to hopeless frontal assaults marginal points of differentiation. They are called focus strategies. You may also know them as niche strategies.
But i’m not the biggest fan of that term because it implies “small” when in fact some niches are quite huge. What focus really means is to solve a specific customer problem in a specific way.
Maybe you’ve heard of the “golden” rule to make a product 10x better than existing ones. How can you do that? The answer is focus.
The success of introducing a new software product within your customers company rises and falls with the user adoption. It’s not a big secret that people like it easy. The ease of use is definitely an important part of the user experience.
There is no point in deploying features that most people won’t use. What’s the point of using technology when people spend mor time handling software than doing their actual job? Simplifying does not necessarily mean to create a “small” product. It means to eliminate unnecessary work and automate what can be automated
According to studies sales reps spend a lot of their time with non-selling activities. So what is the easiest way to improve a companies sales? Increase the time sales reps spend with sales.
Fitting examples for a simple “lean” approach are Pipedrive and Freshsales. Pipedrive follows a minimalistic design approach – as they say “maximum output with minimum input. Freshsales takes another way and automates otherwise manual inputs like customer profile enrichment.
Focusing on solving the problems of an industry or business type offers a lot of opportunities today. According to research the market growth for the so-called vertical SaaS already outgrows the overall market growth of SaaS already and will continue to do so.
And it’s only logical because one size does not fit all. So while the big solutions in CRM, ERP etc. might be applicable for many businesses but not for all.
The SaaS industry itself is a good example for and there are already plenty of specific solutions for from customer feedback to churn analytics.
The most prominent example here is most likely Veeva who serves the pharmaceutical industry. They did not build only one product but an entire industry solution. If you are still afraid that going niche would kill revenues you can check out their revenue figures.
The vertical SaaS can be applied to any industry with specific needs and processes.
The standard product model of SaaS. Software that covers a whole category like Accounting or Marketing. Naturally each of these categories is huge combining several subcategories, processes and activities. And every single one is an opportunity to focus.
How do you do that? Put simply by reducing width and increasing depth. The disadvantage of such a focus is the likely fragmentation of the customers software landscapes. But on the other hand nothin that can’t be overcome. Who builds software without APIs today anyways?
A great example for is Funnel.io, a tool for collecting marketing data and building reports. So what they did is purely focusing on the reporting part of marketing.
An extension of the horizontal focus approach is to build a technology that entirely adds more depth to an existing technology. Like Apps and Add-ons for G-Mail, Facebook or Salesforce. The obvious advantage is that there is already a huge number of users for the “basic” product.
The on-top-approach is not restricted on one technology. You could also create add-ons for a certain kind of category (e.g. reporting tools for existing PM software products)
And the ultimate example for the on-top-approach is Zapier who are connecting all kinds of existing technologies to cross-app workflows.
While the previous strategies were based on differentiation repurposing changes the context and how a product is used.
The best examples are Slack and Drift. Technically Slack is just another business messenger tool. But what makes them different is the intended use. While their competitors sell yet another communication channel they propose to use Slack instead of sending internal E-Mails. And it looks like a lot of people hate them.
Likewise Drift reinvented the website chat. Similarly, they did not promote another communication channel but the new way of how marketers and sales reps communicate with buyers – in real time. They declared the old sales processes with filling out forms, e-mails and calls as no longer viable for the customer of today.
5.2 Creating a new market
Drift went even further and gave their approach its own name – Conversational Marketing. And that’s a great move because it immediately makes them stand out. Their competitors sell website chats, they sell conversational marketing software.
People think in categories and if you want to break out of the old category you have to create a new one. Or how Andy Raskin likes to call it – name the new game. The new game will not be about a product but a new method.
That mean’s naming the new game is not about how creative you can be. If your customers can’t at least anticipate what it’s all about they won’t care.
So it’s a key to use familiar words and combine them in a unique way. People know marketing, people know conversations.
Another high growth example for creating a new market based on a method is Gong with “Revenue Intelligence”.
Creating new markets is applicable for all 5 differentiation strategies. It also works for the vertical. Even better in some cases because you can use industry specific terms – like retention or churn.
However, finding your new game and create your market category ain’t easy. In fact, it’s the hardest part in all my customer projects. So don’t panic if you can’t find one right away. Remember, it’s an ongoing process.
6. Customer Value Messaging
Business is pretty simple. We get paid to move people from a “Before” state to a desired “After” state. In the “Before” state, the customer is discontent in some way. They might be in pain, bored, frightened, or unhappy for any number of other reasons. In the “After” state — life is better. They are free of pain, entertained, or unafraid of what previously plagued them.
People don’t buy products or services… They buy outcomes. They buy access to the “After” state. A great offer will genuinely move a customer to a desired “After” state. What is the distance between the “Before” and desired “After” state? That distance is called VALUE.
Let’s follow this great summary about what business is all about and see what we’ve done so far:
- Ran analytics to find the most valuable customer problems your software solves better than any alternative – the “Before”
- Used market segmentation to find the ideal customer aka the problem owner.
- “Built” a focused solution and determined how it solves the customer problem in a different and better way.
And now it’s time for the most important part: Tell (and show) your customers where you are going to take them.
6.1 The dimensions of customer value
Most SaaS businesses are trapped in a state of arbitrariness because they fail to communicate specific outcomes for their customers. They put up blunt headlines like “the ultimate … ” or point of the most superficial customer benefit like “get more leads and customers” which is the purpose of basically every marketing or outreach tool.
Ok, i get it. Science says customers spend only 8 seconds on a website to decide if its worth digging into deeper. But It’s not only possible to explain what you are selling but also to show why you are different.
And honestly, how many people are coming to your websited by accident? More likely they know in advance what you are selling. So why would you even talk about your product/category?
If you are serious about standing out of the competition you simply have to deliver more. You need to communicate value and in order to do so you need to specify the customer outcome.
In the end all benefits are emotional and so is the perception of value. More than 90% of people’s decisions are driven by emotions and buying decisions in B2B are no different. Furthermore 90% of these decisions are even made subconsciously.
Ryan Deiss uses a more refined concept to distinguish between different levels of value. But the move from functional to emotional outcome is the most important one.
6.2 Message Crafting
Sales reps don’t want to sell more – they want how it feels like. Software developers do not want a bug-free product. They want to shower in praise for delivering an exceptional customer experience. The functional value is merely the source for what really matters.
But let’s go slow and focus on understanding the underlying mechanics. The starting point, as determined, is the customer problem – the “Before”. If you are selling a project management software – what is the customers state?
Customers today want everything in an instant. So your customers might suffer from missing deadlines causing their customers to be unhappy. But the real pain comes when they, yet again, have a meeting with their customers explaining why there are (further) delays.
Put yourself in the shoes of your customer. How would you feel? But now, thanks to your product, they are (frequently) meeting their deadlines and their customer meetings are about proudly presenting fast progress.
So what would be the more powerful message? What would resonate with the bigger pain? “Keep your project deadlines” or something like “Never be embarassed by missed deadlines again”.
That’s why you need specific customer feedback about previous pain points and how their life has changed now. In a best-case scenario you may use their exact words right away. If you don’t have customers/feedback then you need to anticipate and experiment.
6.3 The value journey
And this is only the beginning. Because as your customers continue to use your product their performance (hopefully) continues to improve. Plus your fruitful efforts to improve your products capabilities.
So any sudden day in the future your customers will barely remember the struggles of the past. Because now they not only meet their deadlines but they offer significantly shorter ones. They move from sufficient to excellent.
As a result they get access to the land of milk and honey – the most prestigious and profitable jobs. How will they feel now? How much value lies between the struggle and excellency?
And when your customers get more value you will want to communicate it. The customer value journey follows a “stairway” approach. With every increase of the functional value the emotional value increases as well.
It’s important to prevent overselling and rise the level with care. That means you only promise as much as a reasonable amount of customers achieved or, in case of a new product, what is highly likely they achieve.
But that does not mean to fall back to generic messaging. Being specific matters at any stage. Because the message powers the story you are telling everywhere. The story people connect with.
I’ve poured a lot of time and energy into writing and updating this guide. But i don’t pretend to have a claim on the sole wisdom of SaaS positioning.
This guide is the result of extensive research, experience from customer projects and the conclusions of.
Even though i put a focus on keeping it as short as possible i’m aware that it’s too much to digest at once.
So my idea for how you can best work with would be to read it 2 times. Let it sink in for a few days and then work through the tasks step by step.
I wholeheartedly hope it will light your way to build a unique SaaS business and would be delighted to discuss things with you and getting your feedback.