Leslie’s Compass — Find your Path before you Burn your Cash
In today’s startup world it’s easy to argue that there’s less of a need to toil over the perfect go-to-market strategy, especially when you can easily pivot if it fails. Failure is inevitable, so why not experience it early and often goes the saying. Unfortunately, nothing could be further from the truth.
Ask anyone who’s had to shut down their business or sell prematurely, it’s fucking painful, made more difficult after the fact when you realize that you backed the wrong horse and pissed away your investor’s money.
So what can you do to improve your chances and focus on the right tactics. The first goal is to know your customer and have a strong understanding of your company’s value proposition. Once you understand who you’re selling to and what benefits your product provides, you’ll be in a better position to focus on how to reach them.
Finding focus
One of my favorite ways to gain more insight on where to focus budget is to understand the intersection between marketing and sales. A great tool to help answer this age old question is Leslie’s Compass.
Working with a group of fellow professors, Mark Leslie formulated a simple strategy to help founder’s position their startup to take a product to market and more importantly identify whether the startup’s product is marketing-intensive or sales-intensive.
In his own words, Leslie’s Compass “…is a simple test to bring a go-to-market strategy into focus — one that can help startups smartly deploy limited resources when a product is first launched and a company has one chance to make a strong first impression.”
Their framework shown below, showcases the interplay between sales to marketing in a go-to-market strategy.
As a startup you likely have a limited amount of money and resources available to apply to sales and marketing. Understanding where to focus is essential. If you think of marketing and sales as different levers, the ultimate goal for any founder is to understand which levers to pull and when. Ultimately, you need to find the right balance between these two levers. The less the focus on sales, the more marketing must lead the way and vice versa.
The beauty of Leslie’s Compass is that if you don’t already know where to start, the framework will shine light on whether sales or marketing will ultimately take the lead.
To help find the right focus Mark and the other Stanford professors looked at seven characteristics including:
1. Price — How much is the customer willing to pay? $250,000 a year or $99 per month?
2. Market size — Is the product suited for small to medium restaurants or fortune 100 companies.
3. Level of Complexity — How much effort is required to use the product once it’s in place?
4. Fit and Finish — Is the product ready to use or is it part of a much larger integration?
5. B2C or B2B — Are you selling directly to customers or companies?
6. Customer Lifetime — Is the sale a once off transaction or can you factor months and years into your revenue projections?
7. Touch — Are you done and dusted once the sale is final or is ongoing support required on top of the monthly licensing fee?
Applying Leslie’s Compass to your SaaS Product
To illustrate the framework, let’s look at two of my favorite SaaS solutions. The first is a marketing automation platform. In this example, the upfront commitment is $20,000 for integration and training with minimum monthly licensing of $7000-$10,000 a month (with a first year commitment over $100,000) making it a considerable proposition for many companies. For those in the target market, a purchase will likely involve a RFP, an extensive review of 3–4 different systems, numerous meetings with stakeholders and take months to decide on the final solution. While the marketing output may be low, the cost of resources to service the sales process on Looker’s end is extensive, involving multiple people at different levels throughout the company, meetings and trips.
When you consider the resources required to reach the target audience, it becomes pretty apparent that a soft touch with little or no contact with the buyer is not ideal.
As a rule a thumb, the more expensive the product and the smaller the market, the more important it is to focus on selling.
When the data points are graphed, the end result might look similar to the following:
But just because you have a SaaS solution, it doesn’t mean it’s all about sales. On the other side, let’s look at another example like Unbouce, one of the leaders in the landing page optimization market. With their market entry product starting at $99 a month after a 30 day trial, it’s relatively easy for someone to test the product and even easier to submit their credit card if they wish to proceed. Although, the product is still a B2B product, it sits on the cheaper side of a SaaS solution and has many more customers than our data visualization example. The product in this case, is easy to use, even for non technical marketers, has a high fit rate and requires a relatively low touch point.
When mapped against the seven characteristics, the end result would look similar to the following.
With a $500 per month price tag, even their enterprise product is still relatively cheap. In fact, few companies would need to go through an extensive process to vet and sign up for the product making it easy to sell and maintain.
Although there are few barriers for a customer to leave, the lifetime value of the product is still on the long side, especially if the product continues to meet their needs.
For Unbounce, marketing is the key lever with sales only playing a small role at conferences and for larger enterprise deals.
It’s not just for SaaS
Let’s have some fun and look at a more experiential (non SaaS) product a friend is in the process of bringing to market. His company, Reviver Sport Entertainment is pitching an extreme version of golf, RippedLinks, played in an urban environment. As entertainment, the final product is focused on someone interested in golf. However, they are not the customer but rather bundled as part of the entertainment to attract sponsors (the real paying customers required to produce the event). Like an enterprise SaaS solution, the number of real Customers is small and cannot be easily reached through typical channels. Although, a sales team may not be required, sales is still the main lever to lead the charge with the founders focused on selling at tradeshows, meetings and in any other venue where a potential sponsor might be interested.
Once again, like the data visualization company, Reviver needs to focus on selling the dream supported with specific marketing tactics to win over sponsors.
While this go-to-market framework works great for startups (both consumer and B2B) about to hit the market, I’ve also found it to be a valuable tool for an existing startup that needs to pivot or for an existing business about to launch a new product line, especially if it’s in a new market.
While there are no guarantees in startup land, Leslie’s Compass can be an effective way to focus your attention and limited resources for success.
Disclaimer: I have no investment and have not received financial compensation from any of the companies listed in this article.
