How sales innovation can drive product-market fit
Sales model innovation is the most underrated challenge in conversations about product-market fit. Failing to experiment and innovate on the sales layer causes many startups to lose hope in markets, problems, and solutions with huge potential. Founders assume that because their solution isn’t selling, it must be an inadequate solution, or the market and problem they’ve identified are not big enough. Many teams expect product innovation to solve the product-market fit problem single-handedly, so they abandon anything that isn’t easy to sell, and burn their early-stage runway on product iterations. Often, some discipline and experimentation in the sales process could’ve successfully brought their early solutions to market. The problem with the typical framing of the product-market fit mental model is that it suggests that a startup will succeed so long as it finds a big problem and solves it. Unfortunately, it is rarely this simple. I encourage startups to adopt a disciplined, data-driven approach to marketing and sales to expand their criteria for product-market fit to consider the suitability of the sales model to the market and the product.
Each stage of the sales funnel validates something different about your product and market, so gathering feedback from the sales process is the most critical research a startup can conduct. Below is an example of how I look at early-stage sales funnels:
- Market-qualified leads. These are leads confirmed to be from the market you are targeting.
- Problem-qualified leads. These leads are confirmed to be experiencing the problem you’re trying to solve and are willing to pay for a solution.
- Solution-qualified leads. These are leads that, based on sales conversations, are well-suited to the solution you’re building.
- Converted leads. These are leads that you have successfully converted into customers.
These criteria for these funnel stages should be easy to map onto all sales funnels, from traditional SaaS to enterprise and product-led growth (using data collection).
As measured by the funnel above, outcomes tell teams how suitable their market, product, and sales model are, enabling product and sales model innovation. For example:
- A lack of market-qualified leads suggests that there is no market, or you need to find a better way to reach it. If external information strongly suggests a market exists, but you’re failing at this stage of the funnel, you need to try new ways to reach your market, and it is probably too early to invalidate your product approach.
- A sufficient number of market-qualified leads and a lack of problem-qualified leads suggests that while you’ve identified a market, the problem you’re trying to solve isn’t common or significant enough. Alternatively, this could mean that your sales approach is not targeted enough. Try to learn from the problem-qualified leads that you have — are there things they have in common that might make it easier for you to target others with this problem at the top of the funnel? Otherwise, you may need to look for a new problem to solve for this market.
- A good number of market-qualified and problem-qualified leads, coupled with a lack of solution-qualified leads, suggests that your product is not solving the problem you’ve identified. Sometimes, this means you need to try a new approach. Alternatively, it could mean that you need to be more targeted in your sales approach to target leads that you have a better chance of being satisfied with your product. Being more targeted in the short term can allow you build a solid business to later expand your focus towards other niches with the same problem, but that requires a slightly different solution.
- The gap between solution-qualified and converted leads is probably your product roadmap — the things you need to change and improve to better cater to your target customer. This is also where the hands-on approach of account executives has a significant impact, so failure at this stage sometimes means the sales approach needs to improve.
What is notable about the advice above is that there are often sales and marketing solutions to these adoption roadblocks. By focusing too much on the product side of product-market fit, sales problems start to look like product problems.
The case against sales innovation
The flip side of this argument is the idea that great companies address severe problems with groundbreaking products, to the point that the acquisition model doesn’t require any innovation because the need for the product is so great. Based on this, the most ambitious founders should focus purely on product innovation and abandon any ideas that require experimentation to find an adequate sales model. This mindset is fair if your goal is to create the next Tesla, AWS, or Facebook. But, it also leaves a lot of complicated, niche, and highly-valuable problems unsolved. Every problem too small for the most ambitious entrepreneurs is an opportunity for others to create some serious value. For these opportunities, sales model innovation is one of the key reasons why it often takes multiple attempts from different parties to solve old complicated problems.
11 July, 2022
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