Stop Coding, Start Marketing! Getting Your Positioning Right.

After encouragement from many people, and in particular from Josh Kopelman (whom I have the utmost of respect for and who writes an awesome blog), I am finally blogging.  In my blog, I will express my “point of view” on starting and growing companies, technology, venture capital investing, and other areas of interest.

Lately, I have been exploring my potential personal transition from being a tech company entrepreneur to being a venture capitalist. Over the last few months I’ve had the wonderful experience of camping out at First Round Capital as well as meeting and working with many young companies. In my encounters I always try to add value by giving feedback and ideas on their go-to-market strategies, business plans, and differentiators while helping them critically think through their business strategy.

Over these last few months I have found that many companies I meet with really lack a clear, crisp positioning that exudes an extremely compelling value proposition (eCVP).   So, I thought I would start off my blogging adventures by talking about something that is critical to “get right” from the beginning (although it can certainly evolve), is pretty easy to do, but most companies seem to have trouble actually doing it (or doing it correctly).

For the many entrepreneurs I meet with and who will hopefully read my blog posts, I ask you to please stop thinking about code and start thinking about marketing.  Positioning is a great place to start.

So, how do you come up with great positioning?

Here is a very simple formula adopted from Crossing the Chasm, a must-read book written in 1991 (and revised in 1999) by Geoffrey Moore.  Here is an adaptation of a formula Geoffrey discusses in his book:

• For (target customer)
• Who (statement of need or opportunity)
• The (product / service name) is a (product / service category)
• That (statement of key benefit - that is, extremely compelling reason to buy or use)
• Unlike (primary competitive alternatives, including "doing nothing")
• Our product / service (statement of primary differentiation).

It looks simple, and it is.  But going through the steps of "filling in the blanks" is a very powerful, focusing process.  WARNING:  Going through this with a few people in a room (or at Starbucks) often takes an entire morning or afternoon of debating, brainstorming, and sharpening words to "get it right."

Let me talk about each one of these items and give you some tricks and traps that I have learned over the years.

Target Customer

• Answer the question:
  • Who is your target customer?

• Think about:
  • Are there multiple types of customers?  If so, you may need multiple iterations of this formula / positioning for each customer segment.
  • Think about dividing your customers into customer segments, and/or breaking them down by psychographic or demographic.

Statement of Need

• Answer the question:
  • What is your customer’s  “statement of need” or opportunity (what do they want)?
• Think about:
  • Be careful here!  Think about what they want, not what you think they need.
  • "Wants" are much stronger than "needs."
  • Try to be as simple and direct as possible.
  • Ask yourself the question "How do we KNOW what they want or need?  Is this what they want or need or what we THINK they want or need?"   How many potential customers have you talked to / interviewed / polled to try to verify what you think they want or need? Have really good answers here.  Trust me, VC's will really probe on this issue! :-)  On a side note, VCs will also ask (and you should also be asking yourself) "What will they pay, and how are you sure?"
  • Look at it from the customer’s view, NOT yours.  You need to stand in your customers' shoes.
  • People and businesses will spend money on what they really want, but not necessarily what they need.
  • Be careful of thinking that you are smarter than your customers.  I've heard more than one engineer say things along the lines of "I know what they need and what's best for them, who cares what they want!"

Product Service or Name

• Answer the question:
  • What is the product / service name, and what category does the product / service fit into?
• Think about:
  • This one is pretty easy.
  • If you are starting a Web 2.0 company you could use one of several free company name generators such at this one or this one ;-).

Key Benefits

• Answer the question:
  • What are the key benefits -- the extremely compelling reasons to buy or use the product / service?
• Think about:
  • Put these in a priority order with your best at the top.
  • This is where you want to kick into coming up with your eCVP (extremely compelling value proposition).
  • Think about if / how these benefits are extremely relevant to your target customer.
  • What problem are you solving?
  • How are you making things "better / faster / cheaper?"
  • Make sure these are being stated as benefits, and not "features" (more on this later).
  • Make sure that the benefits are aligned with what’s relevant to the target customer.
  • Make sure to tie back to the wants and needs you came up with earlier.
  • If you have more than one customer type, you could have multiple sets of answers aligned with each customer type.

Competitive Alternatives

• Answer the question:
  • What are the primary competitive alternatives, including "doing nothing?"
• Think about:
  • As you probably already know, never say "I have no competition."  It's just not true.
  • Really think hard about all of the different types of competitors you have.
  • One of the biggest competitors I find most people forget about is the incredible inertia for your target customer to DO NOTHING!  How are you going to overcome the their inertia to do nothing?

Primary Differentiators

• Answer the question:
  • What are the primary extremely compelling differentiators that make this unique? 
• Think
  • Try to think "outside the box" and use strategies like ideation and Blue Ocean.
  • Think about -- does your target customer perceive your differentiators as relevant to them?  I have seen a lot of “alignment” problems  where the entrepreneur lists differentiators that really are not relevant  to their target customer.
  • Think about how your differentiators are defensible.
  • Make sure your differentiators are being listed as benefits, and not features.  For more reading on coming up with benefits instead of features see here and here.

So, plug your answers into the formula first listed above, smooth over the text, and you should hopefully come away with a very tight, coherent, well-focused, targeted, differentiated, extremely compelling value proposition.

As a side benefit you should end up with a great "elevator pitch."

In a future blog post, I’ll share a very quick, cheap and easy way to test your positioning in the real world to see how your positioning appeals to your market (the world will be happy to tell you if your baby is cute or ugly!).  Stay tuned...