Is it possible to be successful with a horizontal product in a densely competitive & crowded market

Swimming in Red-Oceans

Last week, I had a young startup on my “Giving It Back” advisory calendar who wanted to discuss the following with me:

· International market penetration strategy

· Sharpen his communication

· Explore synergies

He had built a very decent ($200K ARR) business in a highly competitive market with 50+ customers and 1000+ users but at a fairly low per seat pricing. The business is bootstrapped and the founder had tremendous passion and energy to build his business. I was intrigued to learn how he was able to build his initial traction and share my insights to help and I accepted his meeting request.

In preparation for my meeting, I spent some time reviewing his website and discovered that they were positioning themselves bang in the middle of the business domain, the communication was extremely horizontal, very broad and generic / high-level. Specific pain points that customers face in specialised niches were missing. Actual RoI gains, any revenue acceleration, time savings, accepted industry validation metrics were missing. However, the site was content rich, simple and easy to understand.

Armed with this, I asked him at the start of the meeting how he was able to find his initial 50 customers in such a competitive market and if there was any distribution across his 7–8 vertical areas that he could share. I had a hunch that a dominant share of initial customers were from 1 or 2 vertical segments but the horizontal nature of his solution had diverted focus and led him to expand to 7–8 vertical segments. A bit too much imo for his stage of evolution.

And true enough, nearly 40% of his customers was from his top segment and another 24% from the next two business verticals with the others being in low single digits. The initial customers were mostly acquired thru participation in events, business exhibitions and following up on conversations, participant mailers & follow-ups. Also, the top segment has a large enough TAM — nearly 2000 users of same profile.

They have setup a small demand generation team and a small sales team to follow-up on incoming leads. The marketing engine is not yet fully operating at peak performance probably because the target prospects / customer profile is fairly broad across all the 7–8 verticals.

My recommendations?

i. Focus on the top 3 vertical segments with 70% of the lead-gen resources going into the top segment. Become a “mini-brand” for that vertical market and get up to 8–10% market share before looking out for new verticals. Modify the communication to highlight the key pain-points for the target user and how his solution provides relief and gains. Change website messaging to claim USP across top vertical segments (upgrade from pure play horizontal messaging)

ii. Create case study content by interviewing his top customers and use that to make the prospects aware of what his product / solution can do for them.

iii. Research other business apps used dominantly in his top customer environments and even lost customer environments and build integrations to them offering stronger reason for new customers to adopt his platform than “branded” MNC products that competes with him on horizontal level.

iv. Forget about international expansion for the moment unless there is a geography very similar to India with the same vertical market large enough to target. Some experiments can be run to see if he can make headway into this market.

What do you think? Would love to see the wisdom from the readers.

Ps — I am doing my “Giving it Back” sessions with B2B SaaS / Innovative Tech startup founders to listen to stories and share my insights , feedback and ideas to help as possible. If you would like to speak with me, book a session using this link.

Innovator. Entrepreneur. Mentor. Investor. Learner. Love technology, sports, arts and literature. Strive to be fair. http://t.co/UFEkCAnU