Positioning science 2: Markets, diffusion, & brand

Summary: Learn how the science of diffusion (niche) and modern brand science (reach) influence positioning & GTM strategy.

How can you position to win in your segment or market?

The good news is that the behavior of markets — particularly when it comes to innovation — has been studied for decades, and while this research is science in the social science sense, it again gives us fundamentals that we can work with and apply as appropriate in your specific context.

Just like there are two broad approaches to prospect-facing positioning and narrative (going out for the big change story or down into the specific solution, or a combination of the two), there are two broad approaches to market science:

1. Diffusion science: In the red corner, we have the ‘diffusion’ school of research that’s existed since the 1950s and studies how innovations are introduced — or ‘diffused’ — into a community or market.

2. Brand science: In the blue corner, we have the modern brand school which studies how mass advertising works for established brands.

Let’s explore diffusion science first.

Diffusion science

In B2B tech, we’re often trying to reach early adopters with a novel innovation. That’s what startups are all about. Decades of diffusion research offers some helpful tips to that end. For example, Everett M. Rogers says in his famous book Diffusion of Innovations that there are specific “characteristics of innovations, as perceived by individuals, [that] help to explain their different rates of adoption." Here’s how he describes them:

1. Relative advantage is the degree to which an innovation is perceived as better than the idea it supersedes. […]
2. Compatibility is the degree to which an innovation is perceived as being consistent with the existing values, past experiences, and needs of potential adopters. […]
3. Complexity is the degree to which an innovation is perceived as difficult to understand and use. […]
4. Trialability is the degree to which an innovation may be experimented with on a limited basis. […]
5. Observability is the degree to which the results of an innovation are visible to others. The easier it is for individuals to see the results of an innovation, the more likely they are to adopt.

That’s a very helpful little framework for understanding how we can position an innovation to be adopted by, well, anyone.

That said, when you’ve got a genuinely new innovation, you’ve usually got to be very deliberate about who you introduce it to, because most people will think it’s too weird, too incomplete, too raw, and too unproven.

But those who get that relative advantage out of it will accept all of that, and as you tick more of those five boxes above, so will others.

Detour: Diffusion for PLG vs. Sales

Let’s take a little detour through product-led growth (PLG) as compared to doing sales when it comes to the diffusion of an innovation.

If you look over those five criteria for diffusion: relative advantage, compatibility, complexity, trialability, and observability, you can see criteria for PLG vs. traditional sales-led approaches.

Typically, PLG approaches have worked in SaaS, in particular, because they offer distinct advantages for diffusion. Consider how effective PLG can be for an innovative software product when we can meet Rogers’ criteria above. For example:

• Relative advantage can be made very clear in a new way/old way sense — consider Slack’s pitch of using chat over email, for example.
• Compatibility is easy when software runs in the browser and/or can be distributed online, and the behavior suggested — like chatting — is already highly familiar.
• Complexity is kept under control (to start, at least) with a simple offering and a killer UX. There’s almost nothing to learn — just dive in and get started.
• Trialability is intrinsic to PLG — think freemium tiers, free trials, reverse trials, and so on.
• Observability is also a given when you can sign up, get started, invite the team, and start demonstrating the relative advantage of this approach. This may kick off network effects (the experience gets better as more users join) or a degree of virality (people start sharing their creations online, per Notion, for example).

The momentum that PLG creates is a different beast compared to the traditional sales-driven approach. With sales:

• Compatibility may be more bespoke with custom integrations.
• Complexity may be high with a bigger, more advanced platform.
• Trialability still happens in the form of pilot programs, but there might be a lot of hands-on work from sales and success teams to make the pilot work.
• Observability may be limited because the benefit exists in the bowels of a massive organization.

These issues are, of course, simply solved with a higher price tag and more labor. That’s why sales — in some form — is forever. It existed before PLG, exists with it, and will continue to exist because the issues listed above require humans to talk to each other. That’s why enterprise deals might be $100,000 or $1,000,000+ a year vs. the $1000 an SMB deal might generate in the PLG world.

(And that 100-1000x+ difference in revenue is why PLG folks inevitably end up layering on sales. When Slack went public, 40% of its revenue came from just 0.65% of its paying customer base — 575 customers paying >$100,000/year.)

Product-led and sales-led approaches, along with all the hybrid permutations in-between, are all great — go with whatever works for you. But there are vast positioning and GTM differences that impact how you ‘diffuse’ your innovation in the market.

In the sales-led world, you can do that manually, customer by customer, hence all the focus on starting in a niche. And because that entails a much more specialized approach, you almost have to start in a niche.

In the product-led world, on the other hand, you need to have much more of an eye on reach; otherwise, the math won’t work.

I simplify these approaches as:

• Segment and sell: You follow the classic segment, target, and position playbook, where you’re more likely to go after the prospect.
• Cast and catch: You cast a wide net in the hopes of catching as many people as possible, where you hope the prospect comes to you via search, social, word of mouth, and/or mass advertising.

This represents a profound positioning choice, as these are two very different ways of building momentum. Your product positioning, roadmap, and GTM approach are all going to be heavily influenced by this choice. The trick is to know which game you’re playing.

Niche positioning works when it unlocks niche distribution. Broad positioning works when it unlocks broad distribution. But mismatches between niche (or broad) positioning and niche (or broad) distribution can be fatal.

The motion dictates the marketing

People get very confused by this. On the bootstrapping side, a lot of indie folks are told “focus on a niche!” but have no understanding of niche distribution, i.e., segmenting and selling, so they resort to cast-and-catch ads, get killed in cost per click, and/or discover there’s no volume there, and think, “Hey, this stuff is hard!”

It is hard, and it’s especially hard when your positioning and distribution don’t match up.

On the venture-backed side, especially in marketing, most orgs try and have it both ways  — we’ll pump out a lot of content for whoever finds us (cast and catch), and we’ll notionally go after customer type A (segment and sell), but because we’re also catching random prospects, let’s also go after customer type B, and sure, if customer type C wants to buy as well, why not?

This dilutes your positioning and risks landing you in no man’s land — neither focused and disciplined enough to build momentum in a niche with segment and sell, nor broad enough to generate enough reach with cast and catch.

Account-Based Marketing Advertising

Nowhere is this more true than in the muddled world of Account-Based Marketing (ABM) in modern startups. B2B sales and marketing teams know they need to target specific accounts — segment and sell — but marketers are often focused on advertising for reach, primarily through Google and Meta — cast and catch. To square this circle, ABM platform vendors have sprung up, offering marketers the holy grail — 1:1-style account targeting, but for advertising. This is perfect — marketers can stick to their knitting (advertising), and sellers don’t have to worry about going outbound — the ads will bring in leads, and if they don’t, hey, blame the marketers!

If only it was this simple! The reality is that this is, at best, account-based advertising, and B2B marketing is much more than advertising, especially when targeting a double-digit list of enterprise accounts. I know it’d be great if we could all indulge our inner introvert, cast a big net, and catch the folks that come to us, but if there are literally only a couple dozen key accounts you need to sell to, you actually have to get out and meet them — calls, dinners, parties, events, insight — you actually have to get out there and get creative!

Mass confusion

Ancient alchemists thought they could melt silver with mercury (or whatever it might be) and get gold; modern entrepreneurs think they can mix niche positioning and broad distribution (or vice versa) and get rivers of recurring revenue. But neither experiment makes sense. Positioning and distribution have to work hand-in-hand. One unlocks the other. You have to know which game you’re playing and what winning your segment or market looks like for you.

But why is this so confusing? The idea that positioning and distribution go hand-in-hand seems so logical, so why do we always forget it?

On the one hand, it takes a lot of discipline to say no to a sale. On the other hand, think about most marketing we’re exposed to — it is, by definition, the stuff that reaches us. And that’s usually, again by definition, the mass appeal, mass reach stuff — ads, PLG products, broad content, and so on. If that’s what we see, that’s what we’re inclined to imitate. That’s what ‘marketing’ comes to mean to us; that’s the position ‘marketing,’ as a concept, occupies in our minds.

But this obscures the fact that targeted B2B marketing to support sales in high-ticket, high-consideration purchases might look very different!

Now add to that the internet’s massive global reach, which, again, we’re all exposed to all of the time, and many founders and marketers think they just need to keep casting the net and somehow the world will come to them.

That can work — mass-market products exist! — and if it works for you, great. But it also creates positioning failure states where the marketing does not match the motion and positioning fails to unlock the corresponding distribution:

• Going too narrow with a PLG motion: If you go too narrow while doing cast-and-catch, the math won’t work because your broad distribution options won’t match your narrow use case. (Squarespace could use mass advertising, as we’ll touch on, for example, because their positioning wasn’t niche — websites for the masses, i.e., broad positioning for broad distribution.)
• Going too broad with a sales motion: If you go too broad with an inherently segment-and-sell motion, you’ll end up picking up randoms and being pulled in every direction, losing the ability to double down and build momentum in a niche. Loss aversion will kick in, and you’ll be too scared to risk the customers you do have for the customers you could have.

There’s obviously loads of nuance to this — yes, even PLG folks focus on a broad enough niche (a role, a use case, an industry), and sometimes the tighter the better; and yes, in sales, having more reps selling to more people eventually leads to a bigger business.

But the bottom line is that positioning can make or break distribution, and this has profound implications for how you ‘diffuse’ an innovation and generate momentum in the market. At the end of the day, it’s just math, and yours needs to add up.

Just do sales

If you’re unsure about your motion or you are pre-product/market fit, it’s better to roll up your sleeves, start doing sales, and prove out your innovation on an individual level first, because discovery in the sales process turns out to be more or less the same as customer development in the product/market fit process (as Segment founder Peter Reinhardt described on Logan Bartlett’s podcast).

If that’s the path you take, welcome to the world of sales! It’s a world most B2B folks take for granted — it’s just the way things are done for big businesses — but it’s a world that, especially at the enterprise end, is completely opaque to most people.

By definition, most folks — founders and marketers included — haven’t been exposed to enterprise sales and don’t understand that day-to-day marketing here is almost nothing like marketing for a PLG-focused mass-market tool, for example. In B2B, sales is the main game, and marketing exists to make sales easier (thanks, Dave Kellogg). And that’s fine — sales needs a lot of support! Segmentation, sales narratives, and, of course, positioning are all vital areas that need to be dialed in — along with complementary advertising, content, and field-marketing campaigns — so all that sales and marketing effort compounds.

What matters is that you know what game you’re playing — catch-and-cast or segment-and-sell, and diffusion (as we’ve been looking at) or, as we’ll see next, brand.

Your turn

• Which game are you playing — segment-and-sell or cast-and-catch?
• Do your GTM activities genuinely reflect your strategy? That is, does your marketing reflect your motion?
• Which segments of your customer base could you double-down on to build compounding growth?

Brand science

Ok, detour over. Let’s get back to the two sides of market science: diffusion and brand.

Whatever GTM approach you take, eventually you go from startup with an innovation to scale-up with a serious platform and perhaps become a mature, public company. By that stage, you’re often trying to reach the masses and hope they simply remember your brand when they decide to buy. You can now do mass advertising, and that often raises the question of how mass advertising for big brands actually works.

Here, the ‘marketing science’ of the B2C world comes in handy. The Ehrenberg-Bass Institute (EBI) is the go-to for modern marketers trying to understand how (big) brands grow and is headed up by Professor Byron Sharp, author of How Brands Grow, whom we met earlier.

The EBI has a fantastic right-brain ‘story 1’ narrative about their scientific approach to marketing vs. the old, unenlightened way, complete with an ‘old way/new way’ pitch. I won’t get into the details here (though I very much do get into the details in Positioning Playbook, and I may well have taken some inspiration from them for my own branding), but to paraphrase Sharp in HBG, brands need to:

• Make sure they look distinctively and only like themselves.
• Continuously reach large audiences (i.e., not using one-off campaigns).
• Go after light buyers (i.e., not the most loyal) cost-effectively.
• Understand how buyers buy their brand and how they shop (i.e., survey actual customers; don’t just assume).
• Understand that advertising works by building and maintaining memory structures (this is the key fundamental).
• Understand that those memory structures create mental availability that works hand-in-hand with physical availability.

Again, the motion dictates the marketing, and when you’re big enough and can reach enough people, there’s no point preaching to the proverbial choir — the niche — you’ve got to go for reach instead. The more folks remember you (mental availability) and the easier you are to buy (physical availability), the more people will buy from you, and the more you’ll grow.

That’s why Starbucks, with a store on every corner selling caffeinated novelty milkshakes to adults — and, occasionally, coffee — will always be a bigger brand than a niche coffee chain selling only the highest quality coffee made from the finest beans in the coolest neighborhood. The latter chain might be a much better brand in terms of quality in their niche, but the bigger brand will be the one serving more of the market because they make it easier for more folks to buy. (Or so the logic goes.)

Now, it’s worth putting up in flashing lights that this is derived largely from B2C mass market advertising research, and here we’re dealing more with B2B sales-driven innovative technology products.

Nevertheless, this gives us a nice sense of the spectrum from diffusion — trying to engage with people who will hopefully care about you a lot — to brand — trying to be remembered by people who may not really care at all.

And it gives us some more incredibly useful positioning fundamentals we can work with, like memory as the fundamental ingredient of brand, which we’ll explore more when we look at the four SBP strategies.

Thesis, antithesis, synthesis (again)

This progression from diffusion (startups and innovation) to brand (established players in the mass market) sounds pretty logical, right?

But because humans are going to human, people (ironically) stake out a position in one school or the other, and we get this weird situation where the loudest voices tend to get myopically caught in one mode — particularly the brand folks.

In the original book on positioning, Ries & Trout’s Positioning: The Battle for Your Mind, broad targeting for reach was a huge sin. That’s the whole reason you had to develop a “position,” after all. That was true for Geoffrey Moore in Crossing the Chasm, the tech industry’s original go-to guide for diffusing innovations in a market, too. You had to position as a big fish in a small pond.

In the modern brand world, particularly championed by Byron Sharp in How Brands Grow and beyond, positioning itself was the sin — Sharp would position himself (ahem) as the anti-Ries & Trout and the anti-Philip Kotler, for that matter, Kotler being the author of mainstream marketing textbooks that still cite Ries & Trout to this day.

But in science-based positioning, we just care about the science! We can happily take these two seemingly opposed schools of thought on positioning and markets and synthesize them, particularly because diffusion gives us different stages over time.

This helps us:

• Apply the right positioning at the right time: Diffusion usually requires focused positioning, while brand growth requires broad positioning. By sequencing these seemingly opposed positioning approaches (niche for innovation; reach for brand), we use the right approach at the right stage and lay the foundation for the next stage.
• Not waste time on the wrong approach: Conversely, it helps us not do the wrong thing. There’s not much point going all-in on brand before you have product/market fit (that includes you, pre-PMF startup dropping $100k on your homepage), and once you have traction, further momentum may well come from doing the opposite of what got you started — going for reach.

The upshot is that we have decades of research on the diffusion of innovations, and we have decades of research on how big brands grow. The point is to know which suits your stage and use the science accordingly. Not that hard!

New old playbooks

This is becoming increasingly relevant as the SaaS industry matures, too, and folks find the classic diffusion playbook — where simply telling early adopters about your new tech was the play — no longer cuts it. The grass then starts looking awfully green on the other side and folks start wondering, “Perhaps we should take a more brand-oriented approach instead?”

This transition to a more brand-oriented approach is inevitable as tech companies go from scrappy startups to mature public companies selling sprawling platforms, and that’s why Salesforce today, for example, has a very different playbook from Salesforce at the turn of the millennium. You better believe they care about their brand.

But a word of warning: “brand” campaigns are often huge, indulgent money pits in the B2C world, where there’s much weeping and gnashing of teeth over high-concept brand theories, as opposed to, you know, just making catchy ads. And even the biggest proponents of the distinctiveness school of brand advertising will tell you that brand advertising is only a relatively weak force that works over a long time horizon — it’s not a lever you can just yank when your sales pipeline starts to look a little thin. So if you’re on the hunt for a new marketing playbook, make sure you’re not jumping out of the frypan and into the sizzling brand fire.

Ultimately, we need both diffusion and brand. You might kickstart the diffusion of your innovation in a tight niche or market segment and then, over time, become famous for being the go-to solution for a particular type of tool, like Salesforce is for CRM now.

Just remember that it’s innovations that get diffused initially, not brands in and of themselves, which is one of the many reasons why you need to create a positioning experiment that matches your stage and ambition. Next, we’ll look at what it means to think in terms of N=1 company-level experiments.

First published: September 2024 · Last updated: November 11, 2024