Strategies for Differentiating in the SaaS Market

"We need to verticalize." Every SaaS company says this around $10M ARR. Then they create "industry experts" who know nothing about the industries they're suddenly "experts" in. 6 months later, conversion rates are meh and reps are confused. Why? Well, because verticalization isn't about reorganizing your sales team in so much as it’s about speaking human. When you sell generically, you sound like every other vendor. When you sell vertically, you sound like you actually understand their world. The data backs this up, btw. Companies that verticalize correctly see 10-15x conversion rate improvements. Not 10-15%. Ten to fifteen TIMES. But most companies screw it up because they think verticalization means hiring new people. Wrong. It means speaking differently. Here's how to do it right: 1. Start with your data rather than your dreams. Don't pick verticals because they "feel big." Pick them because you're already winning there without trying. Look at your last 100 closed deals. What industries bubble up? Start there. One company I know found 40% of their wins came from SaaS companies and nonprofits. Different industries, but similar buying patterns. THAT became their first two verticals. 2. Start at the top of the funnel, not the bottom. Don't hire vertical AEs first. Start with SDRs and marketing. Change your messaging. Build vertical landing pages. Create industry-specific case studies. Test conversion rates before you restructure comp plans. 3. Make the same product sound different. Remember that you're not building different products. You're translating the same product into different languages. - Generic message: "Our platform improves efficiency." - Healthcare message: "Reduce patient wait times and streamline HIPAA compliance." - Manufacturing message: "Cut production delays and optimize supply chain visibility." Same platform. Different pain points. Different outcomes. 4. Don't verticalize everything at once. Pick your biggest opportunity first. Get gangster at speaking that language. Build the muscle memory. THEN add vertical #2. Not before. Most companies try to tackle 5 verticals simultaneously and end up pretty shitty at all of them. 5. Measure what matters: conversation conversion, not team structure. Track conversion rates by industry before and after verticalization. If your healthcare reps aren't converting better than your general reps were, you're doing it wrong. tl;dr = verticalization works when you commit to becoming fluent in your customer's world. It fails when you think putting "Healthcare AE" in someone's title makes them a healthcare expert. So before you reorganize your entire GTM team, ask yourself: Do we understand these industries well enough to sound like insiders? If the answer is no, it’s better to start learning before you start hiring.

Founders in Enterprise SaaS face a pivotal decision early: will you pave new paths as a category creator, or will you challenge established players with an innovative product? Category Creators are trailblazers developing new solutions for unaddressed problems or needs, thereby establishing a new market category. Category Challengers, on the other hand, enter a market with established players, aiming to offer superior products or value. Recognizing whether you're a category creator or a challenger is crucial, as it dictates very distinct go-to-market strategies. For category creators, early demand gen revolves around customer education. They must experiment to discover the best channels to connect with the target audience, and may find success with events, webinars, PR, and even analyst relations relatively early. Pricing requires careful iteration since there may not be established reference points. But the willingness to pay can be high if you solve a meaningful customer problem. With category creation, things can take a while to take off, and it’s crucial to stay lean and nimble in the early days. For category challengers, once a beachhead is established, speed becomes paramount. Category challengers can often see strong results early on from established channels such as SEO, paid search, outbound, and review sites. Innovative and efficient execution with these channels is key. Pricing structures may already be established, so the focus may be on providing better value or bundling. Sales dynamics for these modes can be very different. Category creators initially face longer sales cycles due to the lack of established budgets and prior purchase intent. Creating a wide top of the funnel, consultative selling, and broad evangelization within prospective organizations are paramount. For category creators, creating buyer urgency can be a major challenge. Qualification criteria may need to be adapted for the nuances of category creation. POCs and land-and-expand may be crucial, allowing customers to start small and see value before making a bigger investment. For category challengers, sales cycles can be shorter, thanks to established budgets and customer intent, but competition may lower win rates. Customers often have RFP processes. Lengthy POCs may not be needed. A clear understanding and articulation of differentiation, especially in unmet customer needs, is essential. Once traction is gained with a differentiated offering, incumbents will take note and may replicate your messaging, and eventually, features. Creating network and community effects, continuous innovation, and sharp execution can be key. Many startups find themselves on a spectrum between these two modes, requiring a blend of strategies. And after successful category creation, you may see more competition and formal buying processes as the market matures, necessitating a strategic pivot in product and GTM efforts. What are your experiences with this? #saas #gtm #startups

The most difficult lesson about differentiation is that it’s not called “betteration.” The root word is “different”, not “better.” I believe - and this is based on experience as an executive taking nine SaaS platforms to market, along with a smattering of hardware, information, and services - that technical differentiation erodes quickly. By “technical differentiation”, I mean “our product does a thing that competing products can’t do.” (And yes, AI will accelerate the rate at which technical differentiation erodes, but that’s a different post, and if you want to read about AI there are a ton of other posts on LinkedIn for you. Today’s topic is differentiation.) Because even pre-AI, software products are just code - easy to reverse engineer or create me-too features, even with strong intellectual property protections. So you’d like to be better, but it’s more productive to inventory the ways in which you’re different. (Obvious debt to Play Bigger, April Dunford, and more here). Sometimes it’s a feature, or the way that feature works. But step outside the product and walk around, too - take in everything you can about the business. You’re probably different in the types of customers you serve well. If you serve enterprise customers, you likely have a different process for serving customers than an SMB product. You may serve different regions, industries, sizes and types of customers. Inventory the ways in which you’re different. (And you can be different without being unique; if only you and one other competitor have enterprise-level security, you’re still narrowing your focus away from the other ten competitors in the space). Choose the most compelling or hard-to-imitate ones. And then choose a market space, whether vertical or horizontal, where those differences matter a lot to customers. And be noisy as hell about those differences and why they matter to customers.

Sometimes, a SaaS product can solve very different problems for very different target markets. But, if you're aiming to scale from early revenues to $1M, $3M, or $10M ARR... trying to capture every possible market at once can backfire. Here's why: - Your targeting will be muddled, unable to connect with any one market. - Your messaging will be diluted and your product's core value gets lost. - Your execution will be messy, straining your team, resources, and focus. The fastest way to achieve growth is to conquer one market at a time. Start by building a targeted GTM strategy for your most lucrative market. How? 1. Nail your Ideal Customer Profile. Define the market segment that brings you the highest returns and truly needs your solution. 2. Craft Differentiated Messaging and Strategic Narrative. Your value should speak directly to your ICP's needs and challenges. 3. Execute Consistently. Deliver your message to your ICP through consistent sales and marketing activities. Once you've established a strong foothold in your first market, then you can scale and explore the other opportunities. If you're a SaaS Founder and you'd like to build a GTM strategy for your SaaS product, grab a complimentary copy of my 5-Point SaaS Growth Strategy Guide. Just follow the link in the comments below. 👇