Unlocking Profitability for Startups: How Repositioning a Startup Transformed its Customer Base

One thing that growth stops is profitability. You can’t make a profit because you are investing all your resources toward growth. Growth costs money. 

And generally, growth is good, but considering the investment market right now? Cash is king.

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Being profitable has its benefits

In the market today, getting an investment for any startup is challenging. However, clients I have been working with usually solve this by focusing on profitability. Here are the benefits:

  1. if you are profitable, you have a longer runway. Growth and profitability are almost mutually exclusive. You either focus on one or the other.
  2. You can fund other activities, such as growth if you have money. Money makes more money.

But how to make money, to begin with?

When startup founders want to make more money, they focus on marketing & sales. Hire a sales guy who will help us improve our bottom line or a head of growth who will take his magic wand and cast a spell that will attract the buyers. 

Both of these solutions are wrong.

In the last newsletter, we learned that marketing & sales are amplifiers. They help you spread your core – Your messaging, your positioning, your vision to the world.

But if your message, your position, and your differentiation are wrong, you are just amplifying poor results.

So, the first thing you need to do is to make sure your positioning is set to attract users. We need to have a value proposition that attracts users and unique selling points to show them why they should buy your solutions and not buy from a competitor.

The key to unlocking new sales is the message, not the messenger.

How we repositioned Elia

Elia had conversion and retention problems

I’ve been working with a SaaS startup that works in the educational space. It basically teaches users how to improve their English while they’re surfing the web.

When I came into the company, they had a conversion and retention problem. So they couldn’t convert enough users to turn a profit and they couldn’t retain them for long enough for it to matter. So basically they couldn’t, get enough lifetime value out of the users to be profitable.

As always, we started with the initial assessment of what’s going on and what went wrong. And we combined the product analytics with the qualitative, assessments. So checking the interviews that the team did, we quickly found the problem.

The Chrome extension was used by different customer segments who had different use cases, which meant that some of them were really happy with the product and they were converting quickly. They gave great reviews. Then, there was the other side.

The other side was, people just not happy with the product and people leaving bad reviews on chrome’s web store. And obviously there is a sea of people in between.

So, what you do?

Segmenting the users

In this case, we segmented the users by their use cases and by the way that they use the product. We tried to figure out:

  • Who are the users that convert really quickly are,
  • who are users who are using the product, but maybe they’re not willing to part with money for the product.
  • And then who are the users who definitely do not want to use the product.

And we want these people separate because we wanna focus on the best fit customers only, right?
Because if we can find a way to find these best fit customers and give them the same offer that we gave the users that converted really quickly, we’re gonna be converting people like crazy.

The team came up with different use case scenarios of how people used the product and we put that into ad testing. We created Google ads, came up with messages based on the use cases and pitted them one against another.

Improving elia's profitability

We quickly found that users who use the product for professional purposes, so at work are the best users. And users who do not use it at work, who use it for personal reasons, they are just not willing to pay for the solution.

And so the test results were really clear like the winner of this Google A B test brought in 12 times more customers than any of the other use cases.

A simple test to give direction

A simple test that maybe cost a thousand bucks gave us a clear direction of where the product should be headed because you now have user segments that have one specific use case to which you anchor your positioning.

And then based on that, you know who the users are, what problem they’re trying to solve and what features do they want, right?

You can now create the copy for the specific use case. You can create a development plan, a marketing strategy, everything you need is right there with one simple test.

So in this case, Elia, was positioned based on a use case. It was basically repositioned from a language tool into a productivity tool because we found that the customers who performed best were basically using it to improve their productivity. They were looking for words that they couldn’t find, and they were using Elia to find those words.

The product hasn’t changed

And keep in mind that the product is still the same. The product hasn’t changed, but the context that we give out to the users is completely different. Because we’re not presenting the product as a language tool anymore. We are presenting it as a productivity tool. And users immediately get it because they have a productivity problem, not a language problem.

So now it’s easier to attract the customers, it’s much easier to convert them, which does wonders to your bottom line and helps you turn a profit.

If you want to become profitable…

If you want to become profitable, if you want to extend your runway, you need to focus on your foundations, you need to focus on your positioning, your messaging, your offer. This core system that you have in the company, it has to work before you can amplify it with marketing campaigns and with sales campaigns, sales teams and everything else, because if this core is not working, everything you are doing is amplifying poor results.

So if you can’t attract or convert users focus on the message, focus on your position, focus on why should people buy from you, not your competitors. And once you figure that out, you can then spread that with additional marketing efforts and with sales teams, agencies, whatever you want to do. But you have to get your core in shape first.

Iā€™m here to help you out. Product-market fit checklist ā€“ a list of 86 questions to determine your product market fit, follow the link to the free download.

If you need help with repositioning, schedule a call with me.

If you want to DIY your positioning, here are the steps you need to take.

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