The PLG Startup’s Practical Guide To Positioning

Product-led or not, companies that really nail their positioning will see better product-market fit and faster growth. For product-led companies, strong positioning—especially in the early days—helps skip years of experimentation and high user acquisition costs, giving you a shortcut to product-market fit and word-of-mouth acquisition.

Why? Because when you have strong positioning, you’ll talk about your product in a way that resonates with the users most likely to be successful. They’re compelled to try your product, and their experience reinforces what they had hoped and expected.

It’s a virtuous cycle of expanding usage, paid conversion, and word-of-mouth advocacy.

But creating great positioning can be a daunting, mysterious process. Where do you start?

First, let’s define positioning.

What is positioning?

Positioning is strategy. It’s identifying the right target audience, and articulating why your product is indispensable to them. I like to think of positioning as the intersection between what your product does really well, what your target audience needs and values, and what is competitively differentiated.

We can use this framework to guide our process for developing great positioning. We’ll start with what you know best—your product.

What does your product do really well?

To start, list the most compelling and valuable aspects of your product.

This phase is where product-led companies have a big advantage. When your prospective buyers are your end users, the same group of people can tell you what’s most valuable to them. They are users of your product and the ones making decisions about what products to try.

So even if you think you know what’s most valuable about your product, do at least some light customer research. Ask your best customers what they couldn’t live without, or how they would pitch your product to someone new. Use those insights to expand your list.

Note: Don’t ask all your customers, just your most successful ones. If you include everyone, including those who aren’t seeing value yet or aren’t the best fit, you’ll get too much noise.

As an example, back in 2017, Dropbox launched Dropbox Paper in general availability. Paper was the company’s first additional product line, evolved from its acquisition of Hackpad. We knew why Dropbox had acquired Hackpad—it was an impressive collaborative editor that advanced the company’s strategic vision of shifting from a solo-player productivity software to a multiplayer collaboration platform.

But that wasn’t why users would care.

When we asked Paper’s most active and loyal users what they loved about it, they cited things like:

• Fast and easy to use, with true real-time co-editing
• Supported and beautifully displayed pretty much any type of content (images, videos, sound, even social media posts)
• Powerful commenting functionality
• To-do list features, making it both a document editor and a project management tool

That was enough to bring us to the competitive research phase.

What is competitively differentiated?

Your competitive set is defined by your category and your positioning, so in this case you may need to go with your best guess now, and refine it at the end of the exercise.

Start by identifying how your best customers were solving their needs before they switched to your product. They may have been using a competitive product, using a workaround or repurposing other tools like spreadsheets, or not solving the problem at all. That’s your competitive set.

Now go back to your list of valuable features, and rate how well the competitive set solves them. Whittle down your list of uniquely valuable features to ones you do significantly better than most alternatives.

You’ll notice I emphasized “significantly.” A good rule of thumb is to look for features or functionality that are 10x better than the alternatives, not just slightly better. Especially in the world of product-led growth, where the product experience is your best salesperson, it takes an obvious improvement to the status quo to motivate users to switch.

With Dropbox Paper, we had clear incumbent competitors—Google Docs and Microsoft 365. Paper far outranked them in many of the features we identified, but for several of them—like the commenting experience and the fast, real-time editing—the difference was not significant enough to get users to switch. Those became nice-to-haves instead of differentiators.

What does your target audience want and need?

Now that you have your differentiators, it’s time to run them through the filter of what users actually care about.

There are several ways to do this, but one of the best I’ve found is to create a mock landing page and test it with your target audience (not existing customers).

Use your current definition of your target audience, or in the absence of that, model it after your best customers that you talked to in phase one. Skew toward the direction of a wider audience than a super narrow one, and get as many data points as you can.

Also important: Avoid using the actual name of your product in case someone has already heard of it; you want a blank slate in terms of prospect evaluation.

On the landing page, explain what your product does and why users should care, using the differentiators you identified.

In your testing, you’ll want to ask things like:

• Would you want to use this product? Why or why not? (You can also ask, “would you pay for this product?” to get even more intent signal.)
• What aspects of it are most exciting or intriguing to you? How come?
• Are there any aspects highlighted that aren’t very interesting, or that you don’t really care about? How come?
• If you did use this product, what would you stop using or doing instead?

When you do this research, a couple things can happen.

One is that you end up with a list of differentiators that your target audience is really excited about. Great! Now it’s time to turn that into positioning.

Another possibility is that most or all of the differentiators fell flat. Also great! You just identified, without spending years of investment and millions of dollars, that what you thought was your best target audience is not actually your best target audience (at least for your initial beachhead).

Refining your target audience

• If you’re in the second situation—which is common—you have an additional step. You have to identify a new target audience. Fortunately, you have a ton of great data already to help you do that.
• If you noticed that your customer research came back with spikes of high interest (across all or most of the differentiators) among certain customers but not others, see if you can use those patterns to identify a new target audience. Look for what those customers have in common with each other but not the broader group.
• If you didn’t have any pockets of high-intent prospects, you may have to look further outside your original assumed target audience. Pull up your list of differentiators and do a brainstorm—what type of user would find these most valuable? Who would think it sounds 10x better than the alternatives they’d use?

Once you have a working theory, you can test it by looking at product usage data and user growth for that segment of customers.

Going back to the Dropbox Paper example, we had several different user profiles that seemed like a good fit. But after our research, it became clear that one audience segment in particular loved the product enough to overcome the cost of switching.

That audience was design teams and agencies, especially those who worked remotely or were geographically distributed. For those teams, the differentiators were so significantly better than the alternatives that we saw significant word-of-mouth growth in that segment as they told their peers and took Paper with them to new companies.

Don’t forget—if you have a new target audience, you may have to revise your competitive set as well. But your differentiators will still hold, so you don’t have to do the whole exercise again.

However, for extra credit, you can go back and talk to a few customers who are in your new target audience. You may find new differentiators you can add to your list.

Now, bring it home

So now you have a target audience—at least for your initial beachhead—as well as a list of your most valuable differentiators.

There are a dozen ways to turn those into a positioning framework, but my favorite is from Geoffrey Moore in “Crossing the Chasm:”

For (target customer) who (statement of the need or opportunity), the (product name) is a (product category) that (statement of key benefit—that is, compelling reason to buy). Unlike (primary competitive alternative), our product (statement of primary differentiation).

This is where positioning is more art than science. You have the “for” and the “who” now, and you likely have the product category or descriptor.

But the key benefit statement needs to bring together all those differentiators into one compelling “reason to buy” that describes why the user should care.

One way to brainstorm the key benefit is by asking yourself: if someone finds all these differentiators really compelling and valuable, and finds huge success with our product, how will their life or business be significantly better?

For Dropbox Paper, the positioning statement looked something like this:

For design teams who need a flexible way to collaborate and manage projects, Dropbox Paper is a collaborative workspace that makes it fast and easy to move work forward, no matter where your team is located. Unlike traditional collaborative editors like Google Docs or Microsoft Office 365, Dropbox Paper natively displays any kind of file format, and looks client-ready-beautiful by default.

What’s next

Congratulations! You have your positioning, which should be your guiding force for how you talk about your product, what features you build, the customer segment(s) you target, and more.

But remember, positioning is not a one-and-done exercise.

As your product evolves, as the market changes, and as your target audience expands, you’ll need to revisit your positioning to make sure it still resonates. But now you’ll always have this exercise in your back pocket.