How do you prioritize your B2B marketing initiatives? First, do a gut check – what's the status of your current marketing function? Then, ask how to...
BSMS 5: When's the time to invest in marketing? Hint: at PMF
In this episode, we answer the questions:
- When is the right time to start investing in marketing?
- What is product-market fit?
- What is an engaged advocate and why are they important?
Welcome to episode five of B2B SaaS Marketing Snacks. Today, I wanted to talk a little bit about product-market fit and marketing and how the two go hand in hand or don't. At Kalungi, we talked to a lot of different companies. And many of them are at different stages of maturity in their Product Lifecycle stage, and in their company stage in general. Some are very small, some are larger, some are pre-revenue. Some are at a million, 2 million, 3 million ARR. And some have not even built a product yet or have just found MVP and are trying to find product-market fit. And one of the most common questions that we get asked in general from most CEOs or sales leaders or investors is, when's the right time to invest in marketing? At what point do you say, all right, well, we're going all in and we're going to build an internal marketing team and hire a person to focus full-time on marketing?
When is the right time to build that capability? And it's a hard question to answer because in true consultant fashion, I will say it depends. It depends on a lot of things. And I think one of the biggest indicators that we can use to make that judgment call is, do you have product market fit yet? And that's... I usually... When I get that question, I'll ask... I'll start asking questions that get at the core of what product market fit means, because I think you're always marketing. You have to do marketing to some extent in order to communicate what your product is, to connect with the right people. You have to find the right people understand what the challenges are, what the pains are, what solution you're providing.
That you're always doing marketing. Whether you're sending an email to somebody, you're onboarding a new customer. That journey that a customer experiences from realizing that they have a problem to then going and doing the research to figure out how to solve that problem to you showing up for them and meeting them where they are, and then taking them down the customer journey into a purchase decision.
Everything along that path is marketing, right? It touches so many different aspects of a company, but you may just not understand it as marketing. And so you're always doing marketing, but you may not have fully invested in marketing in the sense that you've hired somebody specifically to focus on it. To go focus on building your PPC campaigns. To go focus on building an inbound function. To go... Really dial in on building your first dashboard. What are the metrics that you're tracking, right? Someone that understands marketing and is applying a marketing lens to the work that they're doing on a day-to-day basis. So when we say investing in marketing, that's really what we're talking about. Is building your own marketing team or hiring an agency to get you to a foundational jumping off point. To then understand what your company needs, and then go hire the right person to fill those skill gaps for you.
When you're building a SaaS company, a lot of times the CEO kind of plays the marketing role or the Head of Product plays the marketing role. And they do it on the side of their desk a little bit. And at a certain point, those people need to go focus full-time on being the CEO or the Head of Product, whatever it is, right? The co-founder, whatever it is. And you have to build the capability for marketing in-house. And so at what point do you do that?
If you ask me, if I had to be really really split-like. I had to give you an answer. If you asked me to drop a pin on a timeline, at what point do you start building that? I would say, as soon as you think that you have product-market fit, it's time to hire marketing talent to go amplify the success that you've already had. To take your happy customers and go find more of them that look like them and have somebody optimize your pricing, optimize your product positioning. Go run the right campaigns and figure out the right channels and double down on the channels that have worked for you already. But I really think that that's at product-market fit.
So how do you define product-market fit is the next question. And I think there's a few different ways to think about it. I often like to ask, how many customers do you have that have come from referrals? If you have a good percentage of them, then that's a good indicator for product-market fit. Are you solving real problems? If you go talk to your customers right now, the ones that you think are happy. Like if I come in and ask your customer success team, and I say, "Give me a list of your happiest customers."
You give me that list. If I go call them up right now, and I asked them to go write us a review on Capterra, what do I think the result of that review is going to be? Is it going to be five stars? Is it going to be three? Are they willing to sing our praise to the rest of the world anonymously when they're not just talking to us? And there are some patterns between them, either firmographically or technographically. There's some kind of stamp that makes them all look similar. Whether they are within a certain headcount or a certain revenue band, or they use a certain technology, or you helped them replace a specific technology.
If there's some kind of pattern between those customers that are really happy. And they tell you that they're really happy. And they want to tell others about your product, because they're so excited about it, then I think you've found product-market fit. But those are just my thoughts. And Stijn I want to ask you the same thing, at what point do you think companies should start investing in marketing?
That's a great question, Mike. The definition of marketing being, you want people to believe something and you want to change their behavior. When you are ready to invest in marketing, you better know for sure that you're solving a problem that actually exists. And that there are more than a small group of people that probably benefit from what you have to offer. And that I think is the simplest definition of product-market fit. And an easy way to measure whether you've achieved product-market fit is if you have people who are now buying your product. And buying as in voting with either their wallet or maybe some with their time, right? If someone buys your product by spending a lot of time, giving you feedback, for example, instead of maybe paying for it, that could still count. But then most importantly, they stay, which I like to say, you have to have people who pay and stay to have product-market fit.
And then there are different ways to self-measure their scale, right? Product-market fit often is measured in how many of those customers you have that pay and stay. Used to be a large number. I think it was very common to say, "Hey, you need to have at least a thousand customers who have paid for your product before you can say that you've achieved product market fit." I think these days, because people can share their enthusiasm about a product with others. You can drive referrals, for example. There is a better way to measure it because I believe that the pure consumption of your product, “how many people used”, is not necessarily a great indicator for product-market fit, because the reason they bought your product... Even if that's a high volume of customers, might have been for other reasons than really appreciating what your product has to offer and whether it solved their challenge, their problem. I think a better way to measure product-market fit is by measuring what's called “engaged advocates”.
And an engaged advocate is someone who not only uses your product, they actually use it. So when you have a software solution, your SaaS company, they actually come back on a regular basis. And they log into your solution. And they actually use it. And then they not only use it, they like using it. Ideally, you get some kind of feedback that is positive. Through the product experience, or maybe by asking your customers or your users. But then thirdly, you also would like those users who like using your product to share that with others. So an engaged advocate is someone who uses your product, who likes using it, and then shares it with others.
And I think Mike, you don't actually need a lot of those. If you have 10 people in that bucket who have basically adopted your product after they bought it and are using it on a regular basis, they've told you they like using it and they've told others, maybe now each of them has to tell 10 other people. Then you definitely have achieved product-market fit worthy of investing in marketing. So that would be my definition of these days. Not just the volume of people who pay and stay, who use your product. But the ones who are actually considered engaged advocates.