Winning Beyond the Product
[00:00:00] Peep Laja: To win. You need a great product, of course. However, I don't think it's enough anymore, at least not in the long run. Welcome to how to win with me, Pep Lam. Deep dive into studying winners in B2B SaaS to determine how much is strategy, how much is luck, and how do you win. There have never been as many brands As there are today, crazy amount of SaaS startups, millions, uh, new ones launching every day, every month, every year.
And furthermore, if [00:00:30] you look into any category, the stability of market positions is simply unimaginable. Astonishing. Whoever manages to get the biggest first in any category stays there for a long, long, long time. Heinz Ketchup became the category leader in the 70s. Still the category king. If we look at the CRM category market share numbers, then we see that Salesforce has been [00:01:00] the leader since the beginning.
Even the top 5 other players in there really have not changed. David Ocker has studied it and he has, uh, an interesting observation for when do market positions, uh, change dramatically. And he's, he's concluded that it mostly happens when new categories of subcategories emerge.
[00:01:23] David Aaker: I got the idea originally about six, seven years ago when I, I did a lot of work in Japan [00:01:30] and I had access to Japan beer data.
And I looked at 40 years of beer data and noticed. Only four times did the market share trajectory change. Despite the fact there was enormous advertising and new product vitality every single year. I mean, these guys would put out four new products a year. Four times. Forty years. There was any meaningful change.
I mean, it's all about growth, right? Everybody [00:02:00] through 70, uh, 25 years from 1979, everybody was trying to grow. That was the objective of their business. Didn't happen. Nothing, nothing. Um, And I can, I went in the car industry. I went in the water industry. I went in, in, uh, the banking industry. It's the same story.
Every time you see a computer industry, any time you see a spurt of growth And you look at it carefully, it's not because somebody did [00:02:30] better marketing or advertising or pricing. It was because there was a new subcategory form.
[00:02:36] Peep Laja: So, you cannot beat category kings. I'm not talking about exceptions where There's some sort of a technological disruption where Apple displaced Nokia or Kodak disappeared when digital cameras overtook film cameras.
That happens rarely. And small companies really are at a massive disadvantage here. Listen to this bit by the marketing legend, [00:03:00] Mark Ritson.
[00:03:00] Mark Ritson: You're very fucked if you're a small brand because capitalism isn't fair. And I, you know, American marketers have many great strengths, but one of their weaknesses is they have this fetish for David vs.
Goliath, and that small, agile, entrepreneurial brands will win, and it's just plainly not true. It's never been true. It does occasionally happen, but so rarely we shouldn't really talk about it. The story of David vs. Goliath is [00:03:30] Marketing is big brands getting there first, when categories are created, and then dominating from that point onwards.
Partly because they've got more money. But also because their dollars go further because they're already a big brand. And it's not fair.
[00:03:45] Peep Laja: Byron Sharpe, who wrote a massively prominent book, How Brands Grow. He also noticed this law of double jeopardy. What it says is that the larger the market share of a brand, the more users [00:04:00] and loyalty.
They have. And smaller brands have fewer users, fewer customers, who are also less loyal.
[00:04:08] Byron Sharp: Well, what's the difference between a big brand and a small brand? And prior to that, the theory was what, because there are really two things that make up your sales in any time period. It's how many customers you had.
And how much business they give you. It was always thought, well, you could either have a lot of customers who gave you a little bit of business each. We could have a few customers who gave you a lot of business [00:04:30] each. You know, or any other combination of these. And the double jeopardy law is like really mind blowing because it says, no, you always get the same.
You always get the same pattern and that is The bigger brands will have a lot more customers and they will also buy a little bit more often. But if two brands, that what that means is if two brands are the same size, they must have about the same number of customers and those customers must have about [00:05:00] the same amount of loyalty, right?
The two brands would be. And so that is a big surprise because You can't grow without increasing penetration. You cannot grow without increasing the size of your customer base. Although I've had, I've heard CEOs say this, like in fact, you know, speaking of Australian banks, there was a CEO of a very large Australian bank who said You don't need any more customers.
We can grow the business by getting more. And I know you can't. I'm sorry. If you stop trying to find customers, you're going to start [00:05:30] shrinking because you know, every day you're going to lose customers.
[00:05:32] Peep Laja: If you just look around on social media, like LinkedIn, Twitter, every day, there's somebody asking for tool recommendations.
95 percent plus of the replies to any such thread is they're naming category leaders. If they ask, what's your favorite CRM, you'll hear, Oh, Hotspot, Salesforce. It's rare when somebody or more than one person recommends a smaller startup. As a marketer, your number one [00:06:00] job is to get inside that very limited consideration set of a target buyer.
People recommend tools they have never used, but have heard of. Winter, my company, it's small enough where I know basically every single company that's our customer still. And I see sometimes people on LinkedIn or Twitter recommending with, Oh yes, use Winter for that. And of course, I'm very grateful for all that word of mouth.
[00:06:30] However, I know they've not used it. They have just heard of it, right? You want to get inside that. Consideration set. So when somebody, A, is in a purchasing situation, they're actually looking for a tool to buy, or somebody asks them for a recommendation. You want to be in those first five tools they think of.
I call that consideration set. Essentially, it's about mental availability. How do you get [00:07:00] The best way to get in there is innovation. This is where you are objectively better. Then any alternative massively better in real life. It is very difficult to build an objectively better product. So I like to ask people name an objectively better product beyond Google search.
It's very hard to come up with an example. When Tinder came about, the dating market was [00:07:30] already. Saturated, lots of players, lots of money, match. com, all that stuff. But Tinder came with the innovation of the swiping user experience that people loved and it took off. Later, of course, everybody copied it. Or Tesla laid cover to the car maker industry, created a new subcategory of electric cars that created an opening for them.
Through innovation, they managed to build their market share. There's an interesting idea about what innovation actually does. [00:08:00] Byron Sharp, for instance, says that innovation is all about. Mental availability. He says that innovation, when it works, does so by expanding mental and physical availability and rewards us by letting us earn returns even after competitors have nullified our product or price advantage.
Meaning that over time, whatever your Innovation is the competitors will copy you and catch up, but the benefits of [00:08:30] innovation, you might reap those rewards for years to come just because you have better mental availability. Think about large language models today. Jasper was the first. LLM tool to come out and they reach the unicorn status in record speed.
It's been insane how fast an innovative tool has been copied. For Jasper, there are now many tens of clones that are like this AI content writing tools. So many, but Jasper is still number one because they were the first and they're still [00:09:00] reaping the rewards, even though their technology is no better than anyone else's technology.
So innovation is a transient advantage, right? It's an advantage and you can milk it, but the effects, the benefits of that innovation over time, they just go away. You need to be a constant innovator to use this as your advantage. Very few companies can sustainably compete on innovation.
The [00:09:30] second way to get inside the consideration set. is money. Marketing more than other companies. A concept called excess share of voice. Here's Mark Ritson again to explain.
[00:09:42] Mark Ritson: If a brand underspent, so it had a much higher share of market and a lower share of voice, eventually, and perhaps inevitably, its market share would also fall to the levels of its share of voice.
But in contrast, if a brand overspent and had a higher share of voice versus share [00:10:00] of market, In many cases, indeed in most cases, market share would eventually increase. That difference, that positive difference, between share of voice and share of market is called excess share of voice. If I have a 20 percent share of voice, but only a 10 percent share of market, I have an excess share of voice.
We often abbreviate it to ESOV and it's one of the most important and least understood concepts in the world of [00:10:30] marketing effectiveness. And there was something else that Jones observed from his data. If you looked at small brands, let's say one in this case with a 5 or 6 percent market share, that brand had to overspend.
It had to have a positive ESOV in order to maintain. that level of market share, perhaps an eight or nine percent share of voice. In contrast, the big brands, let's say with 20 or 22 percent market share, could get away with a share of voice that was perhaps [00:11:00] 15 or 16 percent and still maintain their position.
[00:11:03] Peep Laja: As an example, let's take monday. com. Monday. com is a prime example of a company that does bought their way into our consideration set. Before Monday came, this task management category, your asanas and all those kind of tools. They were already massive, big. If we study their financial reports, it's very illuminating.
Starting with quarter two, 2019, [00:11:30] revenue was 17 million. What they spent on sales and marketing was 26 million. Next quarter revenue, 21 million. Sales and marketing, 33 million. They're always spending more money on sales and marketing than their actual revenue, taking massive losses. And so we fast forward in quarter one, 2021, uh, revenue, 58 million sales and marketing expense, 63 million.
So they're [00:12:00] keeping it going year after year. outspending the competition. At some point it looked like they bought up the whole YouTube inventory. You couldn't go to YouTube without seeing a monday. com ad.
[00:12:11] Andrew Chen: We're that efficient with monday. com.
[00:12:15] Peep Laja: Now it sits firmly at the top of the task management category leaders.
There's also solid data out there that 95 percent of category buyers are out of market at any given time. So you also need to [00:12:30] Market and advertise to these 95 percent of people. And advertising is one of the ways you do this. So you build mental availability. So when they do have the budget and the need and all those things later, then they'll think of you as one of the options to look into.
So you need to think of advertising as insurance.
Third way to get inside a consideration set is to win beyond the [00:13:00] product through narrative. Positioning, messaging, and content. Personally, I think that it consists of three phases. Number one is stand out. So what you do with your company has to be differentiated because there's this thing called the law of shitty click throughs, which essentially explains that every single marketing tactic over time Ineffective.
Here's Andrew Chen, the author of this term to Explain [00:13:30]
[00:13:30] Andrew Chen: The Law of shitty Clickthroughs is that every marketing channel degrades over time, and it's degrading over time primarily because of use, and followed by overuse within that. And so every marketer then needs to compete with each other to find new channels that they can use before each other.
Now, the interesting thing with the marketers finding new channels is they're constantly trying things and copying each other. And so if you have every channel in the world constantly degrading, then you have to know, first off, [00:14:00] where you are in, in the channel's kind of history as to whether or not it's going to work.
And by the way, this is one of the things that sucks is that by the time that you read about a marketing channel or a marketing tactic or whatever on Twitter, it's probably already been fully utilized. By the time that there are companies that are writing case studies, enabling marketers to use the channel.
Right. That's when you know, it's fully, fully utilized because there's even tools. So what is the antidote to
[00:14:25] Peep Laja: the law of shitty click throughs? It's a concept called fast marketing, [00:14:30] which means that you're always looking for that new channel that is under exploited. You're constantly refreshing your marketing playbooks.
You need new formants. You need pattern. Chris Walker called it Revenue R& D. You're doing R& D on marketing, you're doing R& D on your product. You're constantly experimenting and testing. In fact, marketing teams should be split into two different units. There's the [00:15:00] Explore unit,
which deals with uncertainty. It's searching for breakthroughs, it's taking risks. It finds a lot of things that don't work. And then there's a few things that work that bring outsized returns. It's all about iterative experimentation, a lot of build, measure, learn type of things. Then there's the other marketing team, which is the exploit team, which means we know what works, so let's do more [00:15:30] of it, let's do better of it.
So here the uncertainty is low and it's more about how can we improve our efficiency, can we do it faster and cheaper? Noah Kagan was the founder of AppSumo. They bootstrapped to 80 million. And he said, it's largely because they found two things that work. And they just went all in on those two things, which in their case were ads and affiliate marketing.
The Explore Exploit, how do you balance them? Typically [00:16:00] you want to do 80 20, meaning that 80 percent exploit, 20 percent explorer. The explorer is always finding something that works and, and then when it finds something that works, you pass it on to the exploit team who will exploit it to death. Another thing about standing out is that you don't want to play the same game as the category leader.
You don't want to overlap with some of the big companies. Let's imagine the smartphone market. There are all these people who buy smartphones and then there's [00:16:30] Apple selling, marketing their iPhone to a portion of the market. Then there's a Samsung marketing their phones to another portion of the market.
And there's some overlap between these two target markets, but there's also the big area of where they don't overlap at all. And once upon a time, there was also LG. was making smartphones and really competing directly with Samsung. And they got eviscerated. LG got beaten [00:17:00] so bad that they mostly became a subcontractor for other companies.
Here's an explanation by Andrew Edwards on how LG got beat by Samsung.
[00:17:08] Andru Edwards: LG was not short of creativity and innovation, but it was short of execution and marketing. LG's phones were often plagued by quality issues, software bugs, delayed updates, poor battery life, and mediocre cameras. LG phones were also often overpriced, under advertised.
and poorly distributed. They were overshadowed by Samsung's phones, which had better displays, cameras, performance, and [00:17:30] features. The company struggled to maintain a clear and consistent brand image when it came to its smartphone lineup. Unlike its competitors like Samsung and Apple, LG failed to create a distinct identity and reputation for its smartphones, leaving consumers confused and unsure about what the LG brand represented in the smartphone market.
In the end, despite its many successes and innovations, LG's smartphone business simply couldn't compete with the likes of Samsung, Apple, and Huawei. Apple and other smartphone manufacturers.
[00:17:58] Peep Laja: If you think about the software [00:18:00] market, there's Hotspot, CRM, and other stuff. And there's Salesforce. There is an overlap in terms of what kind of companies they're going after, but Hotspot is much more SMB than Salesforce.
Salesforce is much more enterprising, but there is some overlap there. Now, if I were to Start a new CRM startup today. I would never go after the exact same companies as HubSpot is going or Salesforce. One way to think about this consideration set. Why would somebody use [00:18:30] me over HubSpot if I'm a CRM? You invent a new job to be done.
When is this? The best use case, for instance, in the CRM market, there's Copper CRM, a reasonably successful company. The way they position themselves is that we're known for our Google Workspace integration. Meaning that if you use Google Workspace. In your everyday thing, that's your tech stack. You probably want to consider using copper.
[00:19:00] So it's a much more specific positioning versus, Hey, we're a CRM for small businesses, so it's a kind of a new job to be done. What I've done with winter is that I have invented a new job to be done, which is. You need to test your messaging or you need to do ICP research. It's not that those things didn't exist before me, but they were just pain in the ass to do.
Now it's like, Hey, if you want to do either message testing or ICP research with B2B people, that's winter. [00:19:30] Who else is in that consideration set? Who am I up against? And really that consideration set is largely empty. Your positioning needs to be crisp. It needs to answer. What is the category? Winter is a target market insights platform for B2B SaaS marketers.
Who is it for, for relevancy, ICP and the use cases. What problem do I solve for you? And if you are in a competitive space, also your ownliness, why are we providing the most value [00:20:00] over all these other. If you look at some successful companies around, you will notice that Chris positioning is usually successful companies.
So take Klaviyo started when, you know, MailChimp and all these other email marketing companies were already big and successful, and they decided to tackle the email marketing. Email marketing for e commerce as a subcategory. If you go to Klaviyo's website, you will see it. They say it's e commerce marketing automation platform.
What is it? They mention who they're [00:20:30] for and what are the use cases, why you want to use it. On the other hand, what's going to hurt your chances is fuzzy positioning. Fuzzy positioning is when it's not clear what it is and you're also not making clear There's this company called Range. And the way they describe themselves, they say that because team communication shouldn't be all over the place.
Okay, I get an understanding it's a team communication tool, which is of course extremely vague. And [00:21:00] then they say, share async updates, create agendas. Take meeting notes, track team goals, plan your work. Is it the Slack or a Google Docs alternative? Does it replace Notion, ClickUp, Asana? It's not clear. This is fuzzy, fuzzy positioning.
Another way to do a fuzzy positioning is It's a type of website where you go and the headline is always changing. If the headline does so much and you have [00:21:30] so many different use cases and you have so many different target customers that you can't decide what you are. So you want to be all things and you use the rotating headline to communicate this, which is just a horribly bad idea.
And it results in fuzzy positioning. The consequence of fuzzy positioning is that the target customer who somehow lands on your website, they're like, ah, it's too hard to figure out, and they just leave. It is your job to own your messaging and [00:22:00] to communicate who you're for and what is it for and all that stuff.
Don't make it your customer's problem to figure out.
The second thing in winning beyond product is staying top of mind. Somehow you stand out, they find out that you exist, which is half the battle. Now you need to stay top of mind. Mental availability here is the name of the game. Mental availability is being thought of by category buyers [00:22:30] in buying situations.
This is why this big advertisers like Procter and Gamble or Geico or whoever, just there's nonstop advertising to you. So when you're ready to buy one day, you think of them. In B2B, what do you do so that the customer would think about you as often as possible? So where are the customers? Where do they hang out?
How can we show up in those places where the customer's hanging out? If they're spending their day, doom scrolling on LinkedIn. That's [00:23:00] where you want to show up. You want to go all in with content marketing on LinkedIn. And of course, do it well. Remember ProfitWell before it got acquired by Paddle, they had all this different media shows, content marketing plays for various segments of their market, different shows in a podcast format, video format, of course, content repurposing all the time.
If you were interested in a particular topic, they want it to be your favorite destination for content on that topic. So how do I [00:23:30] do that at Wynter? We do a number of things. For our message testing product, I invented a show called, Do You Even Resonate? You might've seen me on LinkedIn, where I run a message test using Wynter on a website, and then I'll just narrate the results in a somewhat entertaining way.
As a small business like Wynter, what can you win on? The easiest thing in the world to do would be to spend money to get attention. But we cannot compete with money, with the big guys. So you have to play a game where you might have a chance of winning. [00:24:00] I believe that. Small companies can also win on content.
Virtual events basically cost nothing to put on. Let's do a virtual event. So for years, we've been now doing winter games, virtual event, while everybody else does their virtual conference once a year, we've been doing it monthly and sometimes quarterly. Sometimes we mix it up with other formats. We do winter workshops, essentially webinars, but it's the same idea that we have something to talk about with the market, something to email our newsletter [00:24:30] list.
And of course talking about newsletters, it's a must have to just send a weekly newsletter. You can send more often if you have interesting things to say, but that is permission marketing, essentially the best way to just stay top of mind. And of course, the prerequisite here is that you have something interesting to say.
They actually do want to hear from you that then they won't read every email, obviously, but Then you can do a podcast, just another way to stay top of mind. These are all just different hooks in the sea. [00:25:00] The way I think about content is that content is channel agnostic. You create a piece of content and now it can be a podcast episode.
It can be a LinkedIn post. It can be a newsletter. It can be all of those things. What we also know from marketing research is that the best way to advertise is advertise broad. All category buyers and you'll want to advertise consistently, not in terms of spikes, but consistent. So you take your annual budget, you [00:25:30] divide it by 12 months and you spend that money each month.
Each month you're doing consistent advertising. We've been doing this video as, and I think it's pretty funny.
[00:25:39] Wynter Ad: I, I knew. Jeff and Lisa were perfect for each other. The night of our first threesome.
Winter gives you feedback on your messaging from the people you're marketing to. This way, you can make sure your message resonates before it gets out there.
[00:25:59] Peep Laja: Producing [00:26:00] video ads with like real actors and so on can be very expensive. The way we minimize the cost, we got the cost only to 2, 000. Per 30 second ad is to just, um, not use a big ass agency producer ads because that's expensive.
So you use like freelancers. If you look for those people, you can dramatically cut your costs. Another thing we did to look bigger and to stay top of mind is throw conferences. So with winter, we're [00:26:30] throwing a conference called spring and it's a totally unique format because events are very competitive and we've not about PowerPoints, but it's about.
Connection, community, all that stuff. And the key reason we created this event was to have something to talk about with the target market. Obviously also to build relationships, our ICPs. So every attendee is an ICP. Every speaker is an ICP. In fact, we do the same with our virtual events where every presenter is an [00:27:00] ICP.
I build an actual relationship, get on your radar. You follow my content, all that stuff. So over time, it all. Starts to make sense. The final piece of this winning beyond the product is you need to out convert the competition. If you can acquire customers cheaper than others, that's how you dominate, right?
So conversion, then signing up for stuff. That is the effect. But what is the cause? Conversion [00:27:30] optimization, of course, is a big long science. The key thing to think about it is that it's mainly about motivation. Can we get them to want? to do it. If they want to sign up, they will sign up. And messaging is the major part of that cause.
So cause and effect is messaging equals they sign up for your stuff. And messaging is not just your homepage stuff. It's also the content that you put up on a regular basis, your newsletter, your LinkedIn, and so on and so [00:28:00] forth, because it all needs to be the same. Key ideas you want to communicate to the market.
Motivation is many times more important than friction. If the motivation is high enough, the people are ready to put up with all kinds of bullshit. So if I was selling a Tesla Model S cars for 10, 000 and it only had to fill out a Field form, millions of people would do it because it's such a good deal.
It's such a good value proposition, a value for money. The principle [00:28:30] applies. If the motivation is high enough, the friction is far less important. Not to say that you should ignore friction. Don't make anything harder than it needs to be. Focus on the motivation. Unbounce, the landing page company, their data science team had this interesting thing where they analyzed all of the landing pages, both the Using the Unbounce platform.
And they were looking into what factors predicted conversion. How much did this or that factor in to define a conversion? And [00:29:00] they discovered that copy was the most influential part on any landing page. And it was twice as influential as design in why visitors converted. The problem with all of this is that the symptoms of ineffective messaging aren't easy to spot.
It's cause and effect. If you want your messaging to convert better, you need to fix four things. One, clarity, make it as easy to understand as possible. Two, relevance, make it clear who this is for. Like [00:29:30] who's the ICP and what problem you solve for them. Three, most important part is the value. You make them want to.
The value offering, make them drool, tease the promise land. Knowing which messages your buyers need to hear will radically improve your entire marketing, which is why, of course, ICP research and message testing are so important. So you stand out, you stay top of mind and you out convert to competition.
David Kansal, the founder of Drift [00:30:00] said in 2017, product based differentiation is going away, act accordingly. And those words are truer today than they were back then. Thanks for tuning in to How to Win, where in each episode I unpack one aspect of winning in B2B SaaS. All your feedback is much appreciated.
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