Product positioning for early-stage startups: 7 key questions to ask
Learn how early-stage startups can craft a compelling product positioning strategy to stand out in their consumers’ minds.
Product positioning and market segmentation are two essential things that early-stage founders have to get right. Most founders understandably spend a lot of time building their products - which is a critical part of the business - but they often forget about the product positioning process because it doesn’t seem as glamorous as building a product.
Obtaining product-market fit can be challenging, especially when you don’t know how much better (or different) your product is from the competition. As such, crafting a compelling product positioning strategy is vital and should be done at the very beginning - with great care.
This article will explain how to position your product successfully by answering 7 key questions — but first:
What is product positioning and why is it important?
Product positioning is all about how people associate your product relative to competitors. Your positioning should capture the essence of why you built your product, why it matters to customers, its benefits, and how it differs from other products in your product category.
The earlier you define your product positioning strategy, the greater the impact it will have on your target audience. This is especially important when targeting a large market segment with lots of competition, like B2B SaaS.
13 benefits of product positioning
A good product positioning strategy is essential for early-stage startups to increase brand awareness, improve market share, and drive revenue growth. Here are 12 ways crafting a compelling product positioning strategy can help you:
#1 Attract the right buyers
Good positioning helps you attract customers who are more likely to buy your product. Crucially, good positioning also acts as a filter by repelling the wrong customers so you can focus your marketing efforts where they matter.
For example, if you sell a SaaS product for small businesses, small business owners everywhere will flock to you - and enterprise customers will (rightly) avoid you. This saves you time and effort chasing the wrong target audience.
#2 Penetrate the market
A well-positioned product gains a strong foothold in the market. This means it has a more powerful network effect - and if you get it right, you'll gain from virtuous cycles that accelerate your growth over time.
For example, if you sell cloud storage software to small businesses and focus on the "more storage" angle, you can create an incentive for customers to share your product with their friends by offering bonus storage space when they do so - like Dropbox does.
#3 Create awareness
With the right product positioning strategy, early-stage startups can create awareness for their products or services before establishing name recognition among potential customers.
Specifically, crafting a product positioning strategy will help you achieve "top of mind awareness" - the point where potential customers think of your brand name or solution without being prompted. This is easier to achieve if your target market is already familiar with your unique position in the market.
#4 Establish thought leadership
Strong product positioning can establish your brand as an industry thought leader and help you stand out from the crowd by giving you media coverage and exposure.
Let’s say you’ve developed a mobile app that helps small businesses with their marketing. In that case, you could establish yourself as a thought leader by publishing articles and podcast episodes on how to grow brand awareness.
#5 Figure out your pricing strategy
What is the target market willing to pay for your solution? What is the optimal price range? A good product positioning strategy will help you figure out the right pricing for your product.
Once you've identified your target customer's "pain point," you can then develop a pricing model based on the value that your product will bring to them.
#6 Nail your product marketing strategy
Strong product positioning can help you create a powerful product marketing strategy that cuts through to your customers across different channels.
For example, suppose you are selling a subscription SaaS product for small businesses. In that case, you could express your positioning as "We save small businesses 60 hours a week" and use it in every piece of marketing copy derived from the positioning statement.
#7 Reduce churn
Establishing a unique position reduces churn by guaranteeing that your customer's expectations will be met - which ultimately reduces sales objections and directs unhappy clients (who might otherwise have left) back towards your company. As a product manager or marketer, this is a key metric to work on.
#8 Gain a competitive advantage
A good product positioning strategy allows you to better compete with more prominent firms. For example, if you're a hotel-booking app going head-to-head against Airbnb in search marketing, it'll be hard for you to compete against them. The sharper your brand positioning, the greater your competitive advantage.
#9 Increase sales
Product positioning helps early-stage startups increase their overall sales by building customer loyalty and improving word-of-mouth marketing efforts. Early-stage startups can expect higher conversion rates when they use product positioning to:
Increase brand awareness
Differentiate their products from the competition
Communicate their position to potential buyers through multiple touchpoints.
#10 Create an enduring brand image
Product positioning isn't just about beating your competition and increasing short-term revenue — it's also an effective way to build a strong brand image that stands the test of time and maintains your competitive edge.
#11 Hire the right people and partners
Your product positioning can also help you attract the best employees and partners. Let’s say you’re selling a SaaS solution to help small businesses with their marketing. In that case, employees who understand your value proposition are more likely to join you — and partners who complement your brand will find it easier to sell your product, too.
#12 Attract funding
For early-stage startups, the ability to attract funding is often a make-or-break factor for growth. Good product positioning can help you pitch your business to investors clearly and compellingly, using messaging that resonates with their frame of mind.
#13 Adapt to market changes
Effective product positioning helps you adapt your offer to changing market conditions without losing sight of your strategic direction. For example, if you’re selling a cloud storage solution to small businesses, and a new competitor launches a similar storage solution with even more space, you can easily tweak your product positioning as "the simplest way to store and share your files" — without taking away from the core value of your solution or having to offer more space.
What is a product positioning statement and why is it essential?
A product positioning statement briefly defines how you plan to position your product in the consumer or buyer’s mind for a particular customer segment. When you know what you want people to think about your product, it’s easier to focus your marketing efforts on attracting customers, increasing awareness, and driving revenue growth.
A clear and focused product positioning statement will help you limit your target customer segment(s) by design. It will also help you clarify your value proposition and create a winning marketing plan.
👉 Get a free Product Positioning & Messaging template and nail how you communicate your product’s value to the market!
The product positioning process:
key questions to ask
When it comes to crafting your positioning statement, there are a few critical questions to ask:
1. Who are we designing this for?
If your early-stage startup is designing a product for the mass market, then you can skip ahead. However, if you are focused on a niche group or industry, you need to dive deeper and scrutinize your target customer profile.
As a founder or product marketer, this is probably the most critical aspect of this exercise. You can discover these insights by running a focus group to understand your target segment's demographics, psychographics, and customer needs. Learn more about how to build a buyer persona on our blog.
2. What problem does our product solve?
As an early-stage startup, understanding your value proposition — your unique blend of attributes — is paramount to success. Without clearly defining your value proposition early and often, you'll induce confusion in your buyers.
3. What's the most substantial benefit of our product?
This is a question founders need to get right. (By the way, the answer cannot be, "It's a great product.") During any conversation, you'll want to be able to list two or three key benefits of using your product.
4. Who's our most significant competitor?
Sometimes, we can't arrive at a precise positioning without first understanding who we are competing against. When answering this question, be aware that your answer might change as you develop your product, grow your market share, and get more customer feedback.
5. How do customers feel about our competitors?
Too many times, startups fail to understand the market's perception of their competition. Understanding how your buyer persona feels about the "other guys" is key to positioning yourself accurately in their minds.
6. How is our product different?
You already know the importance of product differentiation. If you're entering a crowded market like smartphones or social networking, then your product needs a way to stand out from the rest. You can do so by writing down all the unique attributes of your product and how they make it better than other products on the market. The stronger your product differentiation, the easier you can sway consumers' perceptions.
7. Where is the market headed?
Take a step back and think about the broader trends that will impact your business. Start with your industry and consider the broader macro trends that affect it. In many cases, understanding these trends helps you understand how your product fits into the bigger picture and how you’ll need to adapt and evolve.
Product positioning is crucial to achieving first-mover advantage in new markets, securing funding, attracting talent, and acquiring new customers. Your answer to most of the questions above will ultimately reflect in your target customer profile, messaging, segmentation, user experience design, pricing, etc.
Let’s now look at 18 ways to get that right:
18 ways to position your product
There are many ways to position your product for success. Here are 18 ways we’ve come across:
Price: A reasonably-priced product, like a smartphone that costs just $99.
Safety: A car that puts drivers at ease regarding its preparedness for any accident (ex. Volvo).
Culture: A product that connects with a specific culture or subculture, like Redbull for extreme sports.
Health: A product that speaks to a certain health benefit, like a pill for lowering cholesterol.
Personalization: A product that can be personalized, like an iPhone case.
Access: A product that customers can download for free, like a song or a movie.
Innovation: A product that is groundbreaking, like a tablet computer that anticipates your next click.
Quality: A product of quality and craftsmanship, like a designer outfit.
Multi-purpose: A product that serves more than one purpose, like a Swiss army knife.
Lifestyle: A product that is a part of the lifestyle your customer wants to lead, like a Prius representing eco-consciousness.
Status: A product that conveys the status your customer wants to achieve, like a Porsche representing wealth and success.
Variety: A product that appeals to a wide range of consumers, like a cereal brand that offers different flavors.
Privacy: A product that protects and hides you from the world, like a fully encrypted messaging app such as Telegram.
Reliability: A product that is dependable and trustworthy; like a lightbulb guaranteed to last at least five years.
Efficiency: A product that helps you save time, like a faster and more efficient to-do list app.
Speed/Performance: A product that is quicker and does more for you, like a laptop that boots up in seconds.
Sustainability: A product that promotes sustainable living, like a solar panel that produces more energy than it consumes.
Surprise/Novelty: A product that changes periodically, like a weekly seasonal produce box or a clothing subscription service like StitchFix.
If you can position your product in at least one way of the above, you’re set! Remember to keep your product positioning consistent throughout every aspect of your marketing effort.
Nail your product positioning
Product positioning is one of the core components of your marketing strategy. Although it's often overlooked, a carefully crafted value proposition is critical for early-stage startups with limited resources.
If you haven’t already defined your value proposition and aren’t sure what it is or should be, we’ve created a marketing playbook that helps founding teams nail their product positioning as they go to market.
In the sprint, you'll learn:
How to craft an effective positioning strategy for your target market
How to build your brand identity
The best marketing message for each touchpoint in your marketing mix from print to social media
How to align your product strategy with your customers’ needs
This sprint is meant to be completed with input from the core members of your team, and you can get 1-on-1 help from FMP in our Office Hours Slack channel. See how FMP works today.
