PMF & GTM: 2 sides of the same coin
Notes on building Enterprise SaaS
Most of what we discuss on the topic of PMF in SaaS, focuses on the ‘P’ aka product part. We discuss understanding the user, workflows, product management, product development, features vs use cases and more. But it’s not easy to know who is going to use your product and how it’s going to solve their problem or add value unless they use it for a while. I make an argument in this piece that you discover most of these, during your first few years of sales and go-to-market process.
Understanding the user and iterating on the initial prototype or MVP, almost always happens as you sell to the first few customers. User research and iteration happens outside of a sale, only in academic and research settings. ‘User research’ in a startup happens in production, in pre-sale, in QA, across post-sale integration and more. This is why carefully crafting an early go-to-market process can be the difference between getting to PMF and feeling like you’re constantly one quarter away from the product taking off. And there are many ways in which this is revealed.
One such way is that pilots and a growing ACV disguise themselves as PMF. Martin Casado’s writing on this topic is a #mustread course on SaaS 101 (and in particular Enterprise SaaS 101). In his piece — ‘Going to market when no market exists’, he warns on the dangers of getting stuck in the ‘innovation-friend zone’ and identifying when customers are ‘sold’ but still can’t buy from you. This is one of the most classic results of a mismatched go-to-market : product strategy.
To discover if you’ve reached real PMF — take a quick look at your LTV and churn. Customers whose problems you’re solving in production as opposed to ‘in experiments’ will renew contracts, upsell, grow with your product and business. Customers who are exploring an ‘interesting’ product, churn after free trial period or initial usage. Your sales and post-sale customer success are two key processes that reveal whether your startup has real PMF.
We need to start shifting the focus of product development as a process, from being viewed only through the lens of product management, technology features and moats, and product design to being the end result of your early go-to-market and sales process.
Rarely as founders, do we admit to the fact that the otherwise ‘sexy’ product process, is a messy one, the result of a lot of iterative sales, product positioning, re-positioning and ‘going-to-market’ driven back into what we build into our products.
For any SaaS product to reach PMF, it needs
- Users to employ a set of recurring activities in their daily work,
- The recurring set of workflows set at a preferrably high frequency,
- The potential of the SaaS tool to become a habit, by integrating into this recurring workflow in a meaningful manner solving needs of businesses vs. that of experiments.
- An understanding of the user base and all it’s segments
Will you start with anyone having the problem you’re targeting or will you begin with people in a specific segment, vertical or cohort? Does that constrain the signals you receive about PMF or sharpen it? PMF can be deceitful if you’re serving your product to multiple verticals across travel, retail, finance in early days. Looking for patterns in customers discussing the same problems, responding similarly to feature descriptions, converting and renewing is critical. The more the patterns in the buyers, the similarity in the demand, the better the signal of PMF.
- Knowing how and where to find them
Where will these users learn about you? Where do they hang out? What kind of sites, apps, content do they engage with? And why will they want to know about you in that space they’re in? Understanding the properties of each marketing and sales channel is extremely important. Identifying channel-segment mix, even more so. Is it ok to retarget a user with your brand logo or product information when they’re browsing through vacation ideas? Is it worth investing in expensive sales automation and email marketing software if the buyer and decision maker is more likely to be on Instagram?
- Getting their attention to engage with them
Why will users want to engage with your content or ad? Product Marketing is one of the most important investments you can make in the early PMF stages. Most of us, scoff at the idea. Learning how to talk about your product, deliberate on it in a way your customers understand it and more importantly, speak to them in a language they understand and relate to, is extremely critical. As a founder, I engaged in every new functional team or skill we built in the early stages. Learning what product marketing is, learning to write, iterate and engage your customers about the problems they face, showing them ways they can solve for them, is even more important, if I may say so, than simply building the product with an expectation that virality will happen magically.
- Understanding the workflows
Understanding what constitues the recurring part of their workflow where you fit in, the larger context of their workflows and the pain points across the system, is critical to two things: one, building and iterating on your product and two, convincing your customer about why they need to use your product.
- Understanding habit creation and where your product fits
If you haven’t picked up ‘Hooked’ by Nir Eyal, there’s never been a better time to start. SaaS products more than any other require a relentless focus on being embedded into the recurring workflows of customers. This means your product or solution either becomes part of their habit, or it doesn’t. So much of your renewal, LTV, churn metrics are a function of this ability to make your SaaS product a habit.
- Learning what works: Hunting flies and mice (low end SaaS), rabbits and deer (mid-market), and elephants (enterprise).
Ref — Christoph Janz’s 5 ways of building $100M companies
I routinely engage with fellow founders who are naturally aces at hunting flies and mice, wanting to hunt elephants. But does the solution lend itself to enterprise? How simple is it? What do customers pay for other services that offer value into adjacent use cases in other parts of the workflow? Do you sell top-down or bottoms-up in an organization? Who finds it the most valuable?
We’re used to framing some of these 6 questions as part of the typical ‘user’ research and product management process. But to acknowledge that a large part of it comes from a go-to-market thinking hat, is just as important. To find these 6 requirements, you have to start defining your go-to-market strategy very early on: who you plan to sell to, where you will find them and discover what they do through sales and marketing. Essentially, your ‘go to market’ phase is not after your product has been launched and developed fully, but it is a key process through which you get to PMF.
(This is the summary of a talk I recently gave at SaaStock)