Ries and Trout are the Godfathers of positioning, and their 22 Immutable Laws of Marketing is a classic. I went through my copy again to apply the applicable laws to SaaS startups.
The Law of Category
Don't attempt to be number one in the category. As a startup SaaS in 2022, it's unlikely the top-level category doesn't exist, and the number one position has gone. Create a new category instead.
In 1999, Oracle was number one for sales CRM, with SAP number two. It was clunky software full of features, built for multinational firms.
Then Salesforce comes along. If Salesforce had pitched up as a sales CRM to displace Oracle as number one, they'd have fought a losing battle. Instead, they created a new category.
Users had to install and maintain Oracle on the local server, and feature-rich can also translate as 'complicated'. So, Salesforce created a new category - a simple CRM that you don't need to install. A new category that Salesforce could, and would, win.
The Law of the Mind
From a marketing perspective, first to market has no benefit other than a head start to reach the customer first.
What matters is that your SaaS is first in the customer's mind for your category. Once a SaaS product enters the customer's mind as the SaaS product for the category, competing SaaS businesses will not be able to displace the existing brand.
For example, Instagram wasn't the first filtered photo-sharing mobile app. Hipstamatic was, and it launched a year earlier. The difference between the two was that Instagram focused on the social network aspect, which meant they reached new users quickly, were first to mind for the majority, and subsequently won the battle to become the number one photo-sharing app.
Once Instagram has established itself as the photo-sharing app, the user won't consider any alternative for that category.
The Law of Perception
The best product doesn't win. 'Best' is not objective. It's subjective. When there's a battle to win a category, all that matters is the prospect's perception of their problem and your solution.
Positioning, copywriting, and persuasion all matter here. Your job isn't to be the best product to deliver a specific solution. It's to be perceived by the prospect as the best product to provide a particular solution.
Is Hootsuite the best social media management tool? Has it always been the best social media management tool on the market? I don't know the answer to that, and neither do you. What we know is that they are number one in the category because they won the battle to reach the largest number of customer minds first and persuaded those customers that their solution solved a problem.
The Law of Focus
You want to own the label associated with your subcategory. When identifying a new subcategory, it's up to you to create the label. Make it simple, easy to communicate and remember. Sales CRM, Marketing CRM, SEO Tool, etc.
Once you start to head down subcategories, you can add qualifiers. These could be qualifiers that specify the intended user (e.g. CMS for Newsletter Writers) or unique benefits. For example, Canva built a position as the 'free online design tool for anyone'. They used three qualifiers.
- Free - Fremium model
- Online - Access anywhere
- Anyone - Not for professional designers
You can't use qualifiers that have no viable opposite position. With the Canva example, the opposite of 'Anyone' isn't 'Nobody'. It's professionals designers. If you use a qualifier like 'the best', where, depending on the context, the only possible alternative is the worst, you don't have a viable position. When creating a new category, you need to identify the opposite category and the products you can position there.
The Law of Exclusivity
Only one brand can hold a position and product category. Larger categories may sustain two or three brands, but those will clearly have positions 1, 2, and 3 (and usually 1 will have double the revenue of 2, and 2 double the revenue of 3). For a startup SaaS, this is rarely viable.
Startups are encouraged to move fast, but it's wise to take as much time as you need to identify a subcategory that you can own with a market size that can sustain your commercial ambitions before you go all-in on building the product.
The alternative would be to act fast and quickly build a product in a subcategory that you ultimately had no chance of winning because existing brands were already firmly established as the number one provider.
Law of Division
As categories mature, they divide or 'unbundle' as known in the startup world. This is where opportunities exist for startup SasS companies.
A good yardstick of a category ripe for division is the annual revenue of the number one player in the category. For example, in 2021, Salesforces' annual revenue was $21.25 billion. Therefore, sales CRM is a market open to multiple subcategories, which has already started happening.
An obvious approach would be to look at the opportunities by dividing them by industry. Sales CRM for construction, pharmaceuticals, banking, etc. These could then divide further. Sales CRM for roofing companies, HVAC, etc. You could also split by the business size (e.g. Sales CRM for freelancers).
Law of Line Extension
Successful companies inevitably fall for this familiar trap. They gain success in a given category, and then leverage their brand to extend their line of products, moving outside their category.
This can deliver short term results, but ultimately it will weaken the brand's position in the original market and leave them vulnerable to new entrants attempting to dethrone them. We're seeing this play out now as SaaS is becoming a maturing market.
Moz.com is a good example of this. Moz was, and still is, a leading SEO tool. The success was built on early adoption of content marketing and their community, creating a leading media platform of SEO content, with both company and user-generated articles.
The company expanded its features into related fields like social media and content marketing. Whilst these appear to be natural fits for an SEO SaaS, and would have represented easy commercial wins to generate extra revenue, they diluted their brand position as an SEO SaaS. They also diluted their focus on SEO as an offer, which allowed competitors like Ahrefs, formed three years after Moz launched their software, to chip away at the market.
Ultimately, Moz started reversing costly decisions to expand into new areas, selling parts of the business to refocus on SEO. Yes, they successfully rewound the mistakes, but it was an expensive lesson.
Law of Acceleration
Fads are an explosion of rapid growth and interest in a product, market, or movement. That rapid growth brings media attention, which adds fuel to the flames. Then, interest drops away, as does growth.
Trends experience much more steady growth. Early on, they get less media attention than a fad. But they're here to stay.
Ries and Trout compare the fad to a wave in the ocean, whilst a trend is a tide. Some people and companies make a lot of money on fads, but most don't. As a SaaS startup, the only way you make money on a fad is through luck: right place, right time.
If you're creating a product having spotted a fad market, the opportunity has gone by the time you've geared your product up for release. The growth fades drastically, and your chance to sell your product goes with it.
Better to identify trends with slower growth and a constant upward trajectory. If you gain and hold market share, the natural development of the movement will pull your annual revenue up with it.
Join the newsletter to receive the latest updates in your inbox.