Positioning in a downturn
Do you think a downturn is coming?
If a downturn is coming, it means that having solid positioning is even more important than ever. Using resources efficiently, focusing on the places you’ll likely have the biggest impact and ensuring that you can clearly articulate your differentiating values are important in normal times, but they are even more important in a downturn, when everyone has fewer resources at their disposal.
Are you the “cheap OpenShift?”
Under most circumstances, I counsel founders to avoid positioning their product as a ‘cheaper’ version of something, and to avoid making their case for using an open source project by leaning heavily on the ‘free’ aspect of open source.
During a downturn, or when people are at least feeling anxious about the possibility of a downturn, positioning a product explicity as the cheaper option can be a good idea. Though even then, it should be done with care and without losing sight of the other differentiating values that go beyond saving a couple bucks on licenses. This is only a good strategy if you’re 100% sure that your target customers are in penny-pinching mode, however, and should be deployed cautiously, even during a confirmed downturn.
Fewer internal resources
Let’s talk about how positioning can be important if you find it’s harder to raise money and/or you are raising lower amounts than is currently the norm. Positioning is less important the more cash you have to throw at marketing and sales — by extension, the more constrained your internal resources are, the more important tight positioning is. Here’s why:
When you have clearly articulated a narrow niche of companies and individuals who are your ideal customers, you can make much more efficient use of your marketing and sales team. They will know exactly who to reach out to proactively, who to speak to in website copy, which conferences to go to, which publications to do contributed articles in… and more. When you’re able to directly target a very specific niche, you’ll end up having much more impact and drive more revenue even with a limited marketing budget.
You’ll also be able to focus your product development efforts through a positioning lense, which will help you avoid spending engineering time developing features that no one will use and that don’t contribute to your unique value.
Tight positioning helps your team focus and make the most out of limited budget and limited time. Here’s the rub: While solid positioning is that much more critical during a downturn, startups are generally operating in a relatively resource-constrained environment. So tight positioning is a good idea even if the downturn never comes.
Competing for your customers’ scarce dollars
On the flip side, during a downturn your customers are likely to hold on tighter to their dollars. This means you need to make sure you’re delivering really massive value.
The fact is that there will be some customers for whom you’ll deliver more value than others. To use a relatively classic example: If you sell scheduling software, you’ll provide more value for someone who schedules 10 appointments per day than you would for someone who schedules 10 appointments per year. As you compete for your customers’ scarce dollars, you need to make sure you’re focusing on the equivalent of someone scheduling 10 appointments per day — and only on them. If you focus only on people getting the max value out of your solution, you’ll have better conversion rates throughout the funnel, more engagement in your project, and more revenue growth, downturn or not.
Relatedly, you need to make sure you’re able to concretely communicate that value, and how it is differentiated from other options. If you can do this, it will also help you avoid competing on price, even in a downturn, which ultimately is the best long-term strategy.
The bottom line is that tight positioning is important, especially for startups, at any time, but it is even more important during a downturn. Tight positioning will get you more results from a lower marketing budget. You can’t control the larger market conditions, but ensuring that you have solid positioning is a way to prepare — and is a good practice, even if the downturn does not in fact materialize.