Good Positioning Makes Everything Easier

Here’s how to do it well

"A terrain map with a pin in it, digital art unreal engine"

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When I first  joined Substack back in 2018, it was kind of hard to explain what product category we were competing in.

The founders had originally conceived of it as an all-in-one publishing platform for independent writers who wanted to offer paid subscriptions. So the core product elements were: 1) website, 2) email newsletter, and 3) subscription payments. The thing was, there weren’t yet many writers who were ready to take the jump and build an independent subscription business—and the few that were already doing it didn’t want to go through the painful process of switching to a new platform. So that was a problem.

Thankfully, the founders figured out a subtle shift in positioning around the time I joined that made a big difference. They kept all three core elements in place, but started pitching it as a newsletter platform rather than a paid publishing platform.

It might not seem like it, but little language changes like this can have a large impact. I think it's easy to underestimate the effect this can have because very little about the product has to change—to many product-oriented founders it doesn't seem ”real.” Because of this, many founders choose by default the market framing (aka “positioning”) that popped in their heads when they initially conceptualized the product. They might not even understand that it is a choice.

But it is. And the choice you make makes a huge difference.

In Substack’s case, life in the “paid publishing platform” market was rough, because very few people thought they wanted it, and the people who did were locked up by switching costs from the complex systems they rigged together. But competing in the “newsletter platform” market was a dream in comparison. Hamish could email writers on Mailchimp and say, “Would you like to stop paying $60 a month to send to your list?” and it was a no-brainer. Or he could talk to a Tinyletter user and ask “How close are you to hitting the cap?” (Yes, Tinyletter actually caps writers at 5,000 subscribers.) Or he could ask Medium writers if they would like to own their own email list and brand, or ask Wordpress users if they’d like a built-in newsletter. Shoot, he could even nudge professional authors and journalists to start a newsletter as a sort of career insurance policy—and it would work!

Needless to say, competing in the “newsletter” category made life easier. It wasn't perfect: most of the writers we acquired this way did not start paid subscription newsletters, and we generated no revenue off them. But still, it was absolutely worth it. The “newsletter” positioning served as a wedge, and generated a viral distribution loop where more writers came on Substack, made their readers aware of it, some of whom would go on to join as writers. It created credibility and awareness that were the key to giving more people the confidence to start paid newsletters. And, most importantly, it laid the foundation for the network effect that today helps writers on Substack get more readers without having to do any extra work.

Bottom line: choosing the right market frame for your product is essential.

Traditionally, this is known as “positioning.” But most resources on positioning are too disconnected from strategy for my taste. They are useful, but only tell you how to execute on a position. They don't help you choose the right one.

The best thinking I’ve found on this is in the book Obviously Awesome by April Dunford, but I felt it could be even more useful if combined with strategy concepts like disruption, wedges, shifts in the the basis of competition, etc.

This post is a new way of thinking about positioning, informed more by strategy than marketing. If you’re building something new of any sort, I hope it helps make life easier for you, the same way the “newsletter” framing made life so much easier for us at Substack in the early days.

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The Startup Positioning Process

There are five steps:

  1. Start wide open
  2. Identify the bright spots
  3. Anticipate where they lead
  4. Choose a path
  5. Conform everything around that choice

Let’s dive in!

1. Start wide open

Be on the lookout for different types of people who like your product for different reasons. Don’t assume the default path is the right one.

This advice is dangerous so I’m going to start by saying what it doesn’t mean: “wide open” does not mean “unfocused.” It does not mean “a product that tries to be all things to all people.” Instead, it means “open to many possibilities, able to perceive reality as it is, without warping new evidence to make it fit your prior expectations.”

In this way, you can start narrow and wide at the same time. Your product and target customer should be narrow—just as all the classic advice says to—but your mind should be wide open.

This is important because the vast majority of founders simply stick with the default positioning that occured to them when they originally came up with their product idea. As they process new information, they fail to pick up on the little clues the universe gives them about better possibilities, because it does not occur to them to be on the lookout.

It’s also important not to be too narrow in who you get to try your product. Sure, focus on the people you think are most likely to enjoy it. But be curious about what happens when other types of people try it, too. Casting a somewhat wide net in the earliest days of a new startup is underrated, as long as you know what you’re doing and use it as a part of a deliberate process to find product-market fit.

For example, Figma started out knowing they wanted to build a web-based graphics editor using a new technology called WebGL, but they didn’t know exactly what type of use-case they wanted to focus on. Eventually after a period of experimentation they settled on UI design for web and mobile apps. Who knows what would have become of them if they tried to cling too tightly to an original market?

Of course, this is only good in an early, experimental phase. In order to scale you do need to pick a focus. And the next step in the process explains how to do that.

2. Identify the bright spots

Once you’ve got a beta version of the product out, gather feedback to understand what types of people are loving it, and why.

There is a pretty straightforward process for doing this that April Dunford talks about in her book Obviously Awesome, and the founder of Superhuman details in his essay for the First Round Review.

In short, it goes like this:

  1. Survey customers, asking how disappointed they would be if they could no longer use your product. This is the classic “product-market fit question”. In the survey you also want to ask what type of people they think would be most likely to get value out of this product, what they like most about the product, and what improvements they’d like to see.
  2. For people who said they would be “very disappointed” if they could no longer use the product, look at how they answered the second question asking them to describe what type of people they think would be most likely to get value out of the product. They are essentially describing themselves here.
  3. Use this information to identify common circumstances that people find themselves in that make your product useful. There may be a few different natural clusters—give each a segment a name.

For example, Superhuman used this process to realize their product was most valuable for founders, investors, managers, and business development executives. Substack didn’t formally run surveys, but through hundreds of conversations with writers discovered certain key phrases that helped certain types of people just “get it” and become active users without needing to explain much.

The important and counter-intuitive thing to do is to actually not act on the suggestions or ideas from people who don’t like your product at all. It’s tempting to try and convert them into believers, but be cautious before you proceed. There are a lot of types of people out there with many different preferences. You can’t make all of them happy. It’s much better to identify the bright spots and try to expand them than to worry too much about the people who don’t get it.

At this stage, it might be tempting to conclude the work is through and to get to work making the product and marketing better for the people who love it most. But it’s important to try and create a real set of options and anticipate where each path might lead. This is where knowledge of strategy comes in handy.

3. Anticipate where each bright spot leads

Look for easy-to-understand messages that lead to rapid adoption from some specific group of customers. You might have to make some sacrifices in order to do so, but this is usually a good idea.

You can imagine an alternate universe where Substack never went with the “newsletter platform” positioning and instead decided to cling to the original idea of a “paid publishing platform.” It seems obvious now that prioritizing the newsletter angle was the right call, but try to empty your mind and imagine how those conversations went at the time.

The entire premise of the company and business model was predicated around writers starting independent subscription businesses! What would it mean to de-emphasize that? This was the whole thing that made (and makes) Substack special!

This is where most positioning frameworks would have given Substack the wrong advice. They would say that Substack absolutely needed to stick to the thing that makes them most unique and was the most core to their identity. Surely it is better to be a one-of-a-kind “paid publishing platform” rather than yet-another newsletter platform! Isn’t it important to create a new category that you can totally dominate?

Yes, but it’s more complicated than that. Creating a new category is kind of like building a network effect—it’s a reward for growth, and helps growth in the long run, but it doesn’t help you start growing from zero.

When you try and pitch people on a new category, typically you are met with a blank stare. People won’t listen to your whole spiel about what it is that you do. Much better to anchor on an existing category that they already understand, that way they can infer all sorts of features they assume you probably have without you having to explain anything.

We completely screwed this one up at Every. When we launched, we tried to call ourselves a “writer collective” and had a long explanation of what that meant. The people who took the time to understand it thought it was cool, but if I’m being honest more people reacted like…

(The good news is we’re fixing this now and will have an announcement on that front soon 😅)

It’s much better to “anchor & twist”—start with something easily understandable, and have one big new thing that is different. Substack is a newsletter platform—with payments. Superhuman is an email client—that’s absurdly fast. Figma is a design tool—in a web browser. (You get the idea.)

This idea—that anchoring on an existing category is often good—is one way to anticipate where a bright spot might lead. But it’s far from the only one. There are a lot of concepts from the classic strategy literature that can help us pick a strong initial position, such as…

  • Disruptive technologies. You can start in one position for some subset of the market, knowing it’s a good place to get a toehold, while expanding to more demanding and difficult segments of the market later as your product performance improves.
  • Wedges. A related but distinct idea, that often the hardest part about growing a business is simply establishing a relationship with customers. So you can bias towards ideas that get a lot of people in the door quickly, then over time deepen the relationship in ways that make for a more durable business.
  • Switching costs. You can avoid a lot of competition in the early days by positioning yourself as a complement to a thing people already do, rather than try and replace a whole system head-on.
  • Network effects. If your product is positioned around single-player value to start, it is a good idea to anticipate what sort of multi-player value you can layer in as you get more adoption, so that your position can evolve over time towards network-value, rather than tool-value.

For instance, at Substack we always knew we wanted to eventually build some sort of network, but we couldn’t pitch that in the early days when it was a brand new platform. So we knew it was important to care about overall reader and writer growth, not just growth in payments, even though payments were the business model. Another great example is Figma: they knew they could expand from design tools to a broader market of web-based collaborative software, but found it easiest to start with UI design.

Traditionally most advice about positioning would have you go straight for the desired end-state, but the most sophisticated founders and early-stage operators understand the difference between positions that make sense in the early days, and where they can lead as they start to grow.

All else equal, you should pick the position that makes it easier to grow, even if you have to de-emphasize something that you assumed was “core” to do it. It’s much easier to introduce a new idea once you already have a large existing audience.

4. Choose a path

Once you’ve identified the bright spots and anticipated where each one leads, the most promising choice will become somewhat obvious. But choosing a path is not even half the battle. From there, you need to actually execute on your choice. And this is much easier said than done.

5. Conform everything around your choice

When choosing new positioning, the most common mistake is to do it half-heartedly. It is much better to create a new version and boldly re-orient everything around a new principle than to mildly tweak a few things while carrying a lot of baggage from previous versions of the strategy around with you.

This means revisiting everything, including:

  • What product features are missing?
  • Which features don’t matter as much anymore?
  • Does our pricing model still work?
  • Does our go-to-market strategy still work?
  • What channels should we use to find customers?
  • What should the onboarding experience feel like?

(The list could go on forever!)

It’s fine for some initial period of time to “dip your toe” and not spend too much energy reworking everything. But as you get more confident that the path is working, you’ll naturally start to conform more and more of your business to fit the new positioning.

One final note: it’s important to remember that no position lasts forever. Technology changes, as does markets. Value that matters today might be commoditized tomorrow. That’s why so few businesses thrive much longer than a few decades. Re-positioning is hard!

In Sum

If you remember just a few key ideas:

  1. Positioning is choosing the market context for your product that makes growth easiest
  2. Often the “default position” that came with the original idea isn’t the best one
  3. In the early days, keep an open mind and consider many alternatives
  4. Once you have some early usage and feedback, identify the circumstances that cause people to love the product. Try to create a few different segments.
  5. Anticipate where each bright spot could lead by bringing in ideas from strategy literature.

Reading recommendations


That’s it for this week!

If you made it this far, I’d love to hear what you think. Just click one of the feedback buttons below—it means a lot to me!

See ya next time!

Nathan

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Silka Sietsma over 1 year ago

Nathan, as I'm working through my new startup positioning strategy, your thoughts have been incredibly helpful and spot on! Thanks

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