The SaaS GTM Mega Series: The Mysterious Loop of Market Growth

Selling ice to Eskimos might be an interesting idiom but it’s a bad business proposition.

A better approach would be to sell ice to someone actively looking for it — it’s an easy sell and creates a long-term win-win situation.

Creating a long-term win-win situation is not some moral fancy but a necessity for SaaS businesses because unlike fly-by-night business models, SaaS businesses rely on recurring revenue.

Selling to the right market is thus an essential pillar of SaaS success.

Today in this econd chapter of the SaaS GTM Mega series, I will discuss the strategic framework and associated tactics to successfully capture your market.

For your reference, here are the topics I am covering in this series:

1. Scoping the Field of Possibilities
2. The Mysterious Loop of Market Growth (this chapter)
3. Product ABC: Best Product Always Wins
4. A Gentleman's Evangelism: The Forced Multiplier
5. Man & Machine: The Design of Cohesive Weaponry
6. Economics: Maximizing the Value Creation
7. The SaaS Analytics Stack
8. Funnels: Empowering Prospects Fight the Confusion
9. The Lean Distribution
10. Experiments: Conquering Bewilderment
11. Cracking the Enigma of Leaky Bucket
12. The Alchemy of Stickiness
13. The Unfair Advantage of Competitive Moats

I am publishing this series over a period of 24 months, one post at a time.

Even though I have discussed the untenability of recurring revenue when you sell to the wrong audience, it is important to note that the dangers of selling to the wrong audience are many. For example:

• Waste of Resources: When you target the wrong audience, your messaging, landing page, onboarding, and product don’t resonate with them. It leads to low conversion at each stage — web traffic to signup, signup to onboarding, and onboarding to activation, wasting most of the efforts, time, and resources invested in the growth.
• High Noise, Low Signal: Even at low conversion, say a few misfit users got in and started actively using the product. They didn't understand its core features and realized that it lacks essentials for them, thus flooding you with support tickets and feature requests. You start finding it difficult to differentiate between ideal and misfit customers' demands. Product experts say roadmaps are not set in stone, and marketing expert says you should listen to your customers. Since misfit customers are usually louder, you decided to build features based on their feedback. Your product roadmap has now gone haywire. New features didn't resonate with ideal customers as these are not in sync with the core product offering, prompting them to churn. Misfit customers with low NPS and baggage from their initial product interaction churned too. All you now have is a confusing product.
• Anti Community: Unsatisfied customers wondering why they wasted their time and money on your product discussed their plight on Reddit, Twitter, Capterra, and G2. Some even went on to write Medium stories. A few others sensed camaraderie and joined the bandwagon. Sentiment analysts can now tell you that you are sailing upstream.

The ripple effects of targeting the wrong audience are huge.

The truth is, all your growth marketing activities will fall flat if you target and sell your product to the wrong audience.

When it comes to market acquisition, there are three thought patterns that often cost SaaS founders time and money without desired results:

1. The chutzpah of Uninitiated: "Everyone who uses Facebook/Uber/Zoom is my target audience. They all will benefit from my product, and once they know about it, they will come flocking."
2. Why is it a fallacy?
3. A highly heterogeneous group of people with different needs, aspirations, and emotional triggers uses products like Facebook/Uber/Zoom in their current avatar. It will require unparalleled market knowledge and exorbitant resources to target them all together. Even the likes of Facebook/Uber/Zoom didn't acquire their customers all at once. They targeted one market segment at a time.
4. Fear of Stagnation: "I think my product is best for small accounting firms, but it is a small market. I don't want to risk limiting the business only to this segment."
5. Why is it a fallacy?
6. Stagnation is a reality. A business can stagnate at $10K MRR, at $100K MRR, or even at $1 $1M+ ARR. Often, a key reason for such stagnation is high churn. Users churn when they can not extract value from your product. Thus churn represents a poor market understanding, leading to poor market-product fit. When understood and conquered, a market segment results in low churn and leads to the gates of another market segment. Fear of stagnation due to focus on a niche is unfounded till the business is agile.
7. Intuition Driven Panic: "I have selected a niche market segment, but it's not responding. It seems I have selected the wrong market segment."
8. Why is it a potential fallacy?
9. The selection of a market segment is a research-based process. Once you have selected a market, stick to it until you have evidence of it being a misfit to your business. Intuition-driven panic causing segment hopping often leads to bewilderment.
10. 
    
11. Reasons for your chosen market segment not responding could be many — right segment but wrong personas, messaging-market misfit, inappropriate funnel design, and so on. Only an approach similar to scientific experiments can uncover the issues. There are, of course, times when you have to pivot and change the segment, but that decision should be based on sound logic.

Ways of market acquisition may seem mysterious to those whose POVs get clouded with these fallacies.

Choose carefully, test thoroughly, pivot scientifically.

Introduction to the loop of the market growth

Say you have built an API for developers and have decided to target mid-level developers located in silicon valley based on your research.

As you penetrate this segment, more and more mid-level developers will start using your product. They will also refer to your product during their interaction with junior developers and senior developers, priming them for your product.

Mid-level developers are also more vocal and trusted in online communities by virtue of having the expertise to show off and years of engagement with the community. Good words for your product will travel to mid-level developers based in other parts of the world.

Thus, by the time you conquer your first market segment i.e., mid-level developers located in silicon valley, you would have built natural leverage to target at least three other market segments:

1. Mid-level developers based in other parts of the world
2. Senior developers
3. Junior developers

In general, when you capture and delight a market segment, it leads you to another segment, usually with more significant opportunities, much like a spiral.

At each stage of the business, you will find several potential market segments to choose the one you want to target.

The question is, which market segment should you select?

I would argue that at each stage of your business, out of all possible segments, you should always select the market segment at the intersection of ''easiest to capture'' and ''most profitable'', i.e., your lowest-hanging fruit.

Hence, the mysterious loop of market growth looks like an inverted asymmetric conical spiral.

Hence, the mysterious loop of market growth looks like an inverted asymmetric conical spiral.

1. Discovering a Segment
2. Vedette, Skirmishes, and Tactical Maneuvering
3. Siege and Conquer
4. Advancing inland

Discovering a Segment

Though selecting the best-fit market segment is important in each loop of the market growth, it is critical initially as your business has a highly feeble existence when you start. When working under the constraints of resources and the uncertainties of product validation, the last thing you want is to burden yourself with misfit users.

Thus comes the concept of the beachhead market segment.

In warfare, a beachhead is a position on a beach that the invading forces coming by sea capture and defend to advance inland when reinforcements arrive.

A beachhead in itself may not be a strategically lucrative territory to capture, but it paves the way for bigger and important territories. Without capturing a beachhead, it's extremely difficult for incoming forces to break through enemy lines.

Similarly, when you begin your market conquest with a beachhead segment, you open previously inaccessible opportunities for yourself. Your beachhead market won't give you a significant market share. Still, it will give you enough traction to improve the product, test messaging, build functions like customer support and build a real, sustainable business.

However, capturing your beachhead market will not be a cakewalk. There will be a fight to capture it, but it will be within your reach even if you are a new entrant with limited market insights and resources.

Your first ever market segment should be your beachhead market segment. The same is true even if you have an established business and want to enter a new geography, a new vertical or a new domain.

Defining a beachhead market segment

A Beachhead market segment is a group of 'good-fit' people for your business. Often you can find several potential beachhead segments, and out of all the options, you should select the one that exists at the intersection of:

1. Easiest to acquire: Go after the lowest-hanging fruits first, it builds the momentum, and it's a sound business tactic.
2. Small enough to target with limited resources: Don't burden your resources, especially when you have little market insights in the beginning.
3. Big enough to provide reliable evidence: So that you can make decisions with a high level of certainty and avoid bewilderment.
4. In sync with your current KPIs (Revenue, Users, etc.): So that you are sailing in the right direction and meeting your business goals.
5. Has high internal referencing: A group of people forms a segment from a marketing perspective when they have common wants and reference each other while making a buying decision. This provides leverage to marketing in the form of standard messaging and sales in references and influences. Geoffrey Moore, in his book, crossing the chasm, has discussed this concept in detail.
6. Paves a clear path to the next segments: A beachhead market segment should lead you to the next more extensive segment. Else, there are very few benefits in its capture.
7. Has associated empty space: This is to say that the segment should have needs that no one else is (or, only a few are) talking about in ways that you can.

Two actionable steps for discovering your beachhead segment:

• Research and create a list of all possible segments
• Rank them and select the best-fit one

Research

The market segment research aims to discover a few segments that fit your definition of the beachhead market. It is very specific research, and you should limit yourself to it. Don't waste resources moving ahead without this research, and don't waste time researching for months.

Before you begin market research, create a repository to capture market insights that will come across during your research. It is a simple excel sheet to add important insights that you can access anytime.

In the GTM Model available for download at the end of this chapter, you will find questions to help you understand and qualify a segment.

I am going to list out a few tested methods for this research. Depending on the stage of your business, you will find some of these methods more suitable than others:

1. Social Research:
2. Join the online communities and forums related to your domain and those of your perceived competitors and see if you can categorize people around a few significant challenges they are facing. You can use any social platform where people engage in honest conversations and not just promotions. I prefer Reddit, Discord, Hacker News, Twitter, and Facebook groups. Often, you will find little-known domain-specific platforms extremely useful too.
3. Ads Research:
4. Market research is one of the key success pillars of paid ads. Businesses carry out extensive research and invest vast sums of money in paid ads. It is possible to reverse research a market segment and understand its pain points if you look at the paid ads of your competitors from the eye of an advertiser. Check out the Facebook ads of your competitors, focus on its copy and images/video to discover insights about the segment that the ad is targeting. Repeat the process with other social platforms.
5. B2B Interviews:
6. If you are in the B2B SaaS space, interview potential clients to discover valuable insights. In this case, qualitative insights take precedence over quantitative data, and you will do well with 10-15 interviews. In the case of B2B, though the business is still people to people, there are two differences from the B2C space: 1) existence of a buying committee and 2) difference between users and buyers. For each interview, talk to as many buying committee members as possible. Organize these interviews as video or audio calls and record them. If you are wondering how to get people for interviews, here are a few ideas:

• Reach out to them for a state of the industry report and publish it as a blog post.
• If you find relevant people publicly talking about the challenge that your product solves, reach out, introduce your product and ask for a short call. Make it clear that it is not a sales call.
• Launch a podcast and invite them for an interview.

1. Keep your goal in mind — to categorize the market and discover segments based on their pains and needs.
2. Active Users Survey:
3. If you have been in business for a while and have active users, survey them. In the case of B2B, meet them in person if possible. Another method for this survey is to use micro-surveys within the app while they are using it.
4. Product Usage Data:
5. If you have been in business for a while and have active users, you can hit gold if you dig product usage data.
6. Churned Users Survey:
7. Select churned users who have actively used the product at one time, gift them a coupon or an ebook upfront and then ask them to get on a short call to understand their reasons for dropping out.
8. Reviews:
9. Read through reviews of your competitors on sites like G2 and Capterra. In the case of mobile apps, check reviews on app stores. Often it can lead you to discover segments that are deeply unsatisfied with current offerings.
10. Industry reports:
11. Though not as effective as primary research, industry reports are usually a good starting point to quickly understand a market.

During this research, you might encounter 'too much information that is difficult to string together. A time-tested strategy to sail through this difficulty is to focus on the context.

After discovering a few segments, the next step is to rank them and select your beachhead market.

A beachhead market segment makes it possible for you to enter a market with limited resources.

Rank

Enter all the segments you have identified in the 'Beachhead Selection' sheet in the GTM model. By now, you must have all the data points for each segment to rank them. The segment with rank one is your beachhead market.

Building Vedette, Skirmishes, and Tactical Maneuvering

A fundamental principle of the organic approach that I recommend you to remember is — "test at small scale, gain insights and build expertise, go big gradually."

The first step in conquering your beachhead market segment is to develop familiarity with it, make your presence felt, and gain deeper insights.

Thus the goals at this stage are:

1. Land on the beachhead and make your presence felt in the market
2. Improve the product roadmap
3. Discover the best-fit messaging and positioning

A word of caution — it will be a journey full of ambiguity, uncertainties, and setbacks. There is nothing wrong with you, your product, or the market segment you have selected; it is how things work when you land on your beachhead.

You may receive little response to your market outreach. Be agile and try again. You may discover new insights and needs on the way, indicating you to change course. Do not invest heavily in systems; remain ad-hoc.

Three words define the approach during this stage: Agile, frugal, ad-hoc.

Vedette

In warfare, a vedette is a sentry operating a listening post to bring information, give signals and warn of dangers. It helps the forces to plan and maneuver in the face of challenges.

Before you begin your market outreach, you also need to build a vedette, albeit keeping this stage's frugal and ad-hoc spirit in mind. The vedette will enable you to:

1. Understand which part of your outreach is working and which part is not:
2. You achieve this using analytics and tracking. For analytics, set up Google Analytics using tag manager and add relevant tags for social media (e.g., Facebook Pixel) and behavior analytics (e.g., Hotjar). Use Google sheets to record all your growth activities to have one place to review. At this stage, I recommend using free software as the volume of your requirement is low, and you possibly don't know your exact requirements. Do not think too much about systematizing at this stage.
3. Have two-way communication with your market:
4. You achieve this with a community forum and a dedicated place for feature requests. An active community forum is the most significant source of qualitative feedback, which is crucial during the early stage. A community forum also offers you a unique opportunity to cement your positioning within your market segment.

Skirmishes and Tactical Maneuvering

Here is the bird's eye view of the strategy:

1. Share your product with a subset of your beachhead market.
2. Engage in conversation with them.
3. Observe and analyze the market’s response.
4. Improvise and then reach out to the market again.

Keep at it with extreme focus and relentless persistence. Your market often won't respond to your outreach, and you might feel defeated. Embrace the discomfort; it's part of the journey. You need to discover the winning formula just once per market segment. It is a mindset game. I have found that sticking to your plan with ferocity and persistence works wonders. I use a simple tool called Affirmations Flow to nurture my mindset, and it can be extremely helpful for you.

Every time you go to the market, the vedette you have already built will help you see through the noise, improvise and understand the rhythm of the market.

To get you most out of your skirmishes with your market, here are a few strategies:

Distribution infrastructure: Owning vs Renting

A business that can not reach out to its market at will is doomed.

You will find many ways to reach out to your market. You should choose the one that serves your immediate needs and builds a foundation for your future growth.

Social platforms are helpful to get discovered by your market, but you do not have complete control over your audience's access. You can spend years building your Facebook page followers only to see Facebook tweaking its algorithm restricting your posts' access to only a handful of your followers. On the other hand, email is a very reliable channel that you have complete control over, but it is of little use without subscribers on your email list.

One way around this problem is to use social media for your outreach and then skim off the most engaged audience to your ecosystem. Social media outreach brings visitors to your website in the present, and a growing email list is an asset for future growth.

A community based approach to the market outreach

In a world of fading differentiation, a thriving community of admiring users is the fuel for growth.

A community built around the transformation that your product delivers has many benefits — highly engaged users, qualitative product feedback, and a market primed for sales.

The way to build a community is to provide exclusive benefits to its members — early access to the product, exclusive content, and priority support. In return, they will help you test product features, decide product roadmap, distribute content, and make in-roads to the management for enterprise sales.

If you are in a B2B space, identify the people within organizations using your product and bring them in your community. In time, these community members will be helpful when you decide to sell to their organizations. They might help you influence buying committee members and improve your product roadmap to suit the enterprise's needs.

However, be careful about the kind of members you are attracting to your community. Suppose you are building a community of developers. In that case, there is a difference between senior developers with expertise whom management listens to and junior developers fresh out of college who might be easier to attract but have limited say in the purchase decisions.

One problem SaaS founders sometimes share with me is the low engagement level in their communities. A solution to this problem is you being proactive in engagement. Imagine that you travel to a beach town for vacation and you happen to meet an interesting person who invites you to their evening party. When you arrive there, you see all the new faces and realize that you know no one except the host. Chances are, other guests are in the same situation. Now, who is the best person to get the party going and make it a place of fun? Yes, your guess is correct; it's the host. Similarly, it is your responsibility to get the conversation started when you start a community. It might be days, weeks, or even months before members feel confident enough to engage in conversations independently.

High-ticket Guerrilla warfare

If you are selling a high-ticket B2B product to a small and fragmented market or where you have no access to the actual users, you might feel that no GTM approach is effective other than spending huge dollars in traditional sales.

However, there is a way to acquire the first few users without heavy investments. You may not be able to scale this strategy after a point and have to support it with traditional approaches like sales, events, and conferences. Still, if executed right, it will give you a headstart and transform your fragile product into a real business.

The first part of this strategy relies on creating in-depth content.

Based on the research you had carried out in previous stages, create a few content assets that go deep into your target audience's specific challenges or desires, offer a new point-of-view around solutions, and then position your product as the best way to execute those solutions.

The second part of this strategy revolves around engaging the buying committee.

Within the buying committee, start with the person whose KPIs are concerned with your product. Discover a way to share the content with them and gradually engage with other members. One way to do it is to leverage the outreach done during the research phase. Another way is to first build acquaintances over social media around your content and cultivate the relationship. You will find some of them asking you for the demo.

Siege and Conquer

After gaining deep market insights, testing your messaging, and acquiring a few initial customers, it's time to go all out and conquer your beachhead.

The goals of this stage are:

1. Becoming the favorite software of your clients: they use it, love it, and advocate it.
2. Optimization of pricing and customer support
3. Becoming the default choice of this segment
4. Setting the wheel of referrals in motion

This is where most of the "visible" growth activities come into play. This is where you might appear on podcasts, launch on Product Hunt, hire a PR agency, and run Facebook ads.

As we progress in this series, I will come back to the strategies to conquer a segment and discuss it in the coming chapters.

Advancing Inland

Once you have captured a segment, you should target the next one. There are many ways to discover your next segment — a new use case, new geography, a new customer persona, and so on. However, there is one prerequisite — there should be leverage.

Advancing to the next segment should feel like a natural progression from the beachhead. You should be able to leverage the product, distribution, or market insights gained while capturing the beachhead.

There should be leverage.

That’s all I wanted to discuss today on mysterious loop of the market growth. I welcome your suggestions, questions and feedback. Leave a quick comment below.

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