They might say they love it, but will they pay for it?
Need for Speed: In 2024, Proof-of-Monetization is the name of the game
Dear GTM Strategist!
You and I both know how very important it is to secure the traction for your innovation.
More so in 2024:
AI and low-code tools made entry barriers to new entrants to your industry lower than ever.
Investors are getting more demanding and usually require traction.
The buyers hold us against higher standards than ever before.
In my book GTM Strategist, I shared multiple examples of how you can start monetizing before the product is even built, which helps tremendously on our bootstrapping journey. It also prevents us from wasting time and money building products that the markets will not want 🦗 🦗 🦗.
And rest assured, I eat my own dog food, too (figuratively) 🐶
My partner Ognjen Bošković and I validated our cohort GTM Strategist Bootcamp using a Notion page - we are starting in February, 5 spots are still available. You are welcome to apply if you are into B2B GTM (more info below)
What is better is to hear it from you, the readers who translate the lessons from the book to your business success.
Semilla’s case: 60 days, 600 users, 30 paid subscribers
This week’s GTM Strategist Hero is Alexiomar Rodriguez, Founder and CEO of Semilla, which develops 2 products: Seed Academy (music business education for the Latin music industry) and Flou (SaaS solution for legal and music contract management).
I congratulated him on LinkedIn and he provided us with some more insights:
1. Who is the product for ICP?
“We started with music creators (artists and producers). Still, now we are using the Beachhead strategy to focus on the ICP that actually faces the pain: the music entrepreneur (managers, lawyers, labels, and publishers). Mind you, our software is in Spanish.”
2. How did you come up with the idea?
“I'm an entertainment lawyer and have seen both music creators and entrepreneurs struggle with their legal tasks, mainly with contracts.”
3. Which channels did you use?
“We have a music business community and online educational platform called Seed Academy. We used our community (email + IG + YouTube) to drive traffic to our new software.”
I was blown away by how many right decisions were made here.
Alexiomar has a lot of industry experience from his service business. He built something that solved the problem he had seen again and again.
They differentiated themselves from other players by localizing the product to Spanish.
The team leveraged an existing community and had access to the segment. Play on your strengths!
But here is my favorite part: They tested WTP (Willingness to Pay) at launch.
Instead of bragging about thousands of free users who may or not pay,
Alexiomar and his team now know what the current conversion rate to pay is.
This insight will help them tremendously with marketing and sales decisions and be more successful in raising funds if they decide to do so.
As the product will evolve and deliver more value to users, the pricing will change.
And the conversion rate at colder audiences than community will likely be lower from the get-go.
But it is so important they did it.
Bravo, Alexiomar! Here is a GTM Strategist Medal for you:
Let’s dive into why it is important and lucrative to get early signals that the market does the only way they would buy it but also swipes the credit card.
PMF is the king, WTP is the queen
Testing Willingness to Pay (WTP) in addition to Product-Market Fit (PMF) has become mission-critical as the competition is rising, entry barriers are lowering, investors are becoming more skeptical and consumers more demanding.
Product development is expensive.
It helps to get some money not only for the company's lifeline but also for team morale.
Fueled by customer insights, the product team has a much better fighting chance and motivation to conquer the market.
But should we do it for free?
I do not think so.
Coming from Europe, where access to seed capital is so-la-la, I was always in a position where we had to dance for our money before whoever took us seriously.
The better I can prove that the product not only has a Product-Market Fit, but also that its business model has sense (confirmed WTP), the better my chances of crossing the chasm are.
How can we test WTP?
Most product managers I know would say to send out a survey, and run customer interviews and focus groups.
Gabor-Granger and Van Westendorp pricing models to the rescue?
I have two concerns:
People may say a lot of things, but their actions don’t always follow.
Most GTM companies are still working on their ICP. The chances of testing on a wrong sample are high for pre-traction companies.
Here is a list of different validation methods that we curated with a product leader dr. Else van der Berg.
Some of you may wonder:
Are you saying we should not be doing interviews and launching crappy MVPs to presell?
Nope.
There is a spectrum and you can use multiple research methods to run these tests.
The more saturated the market is, the better your MVP has to be
The rule of thumb is that the more saturated the market you enter, the more developed your MVP has to be because people have expectations. If the market is very competitive, your product will have to be much more perfected and serve the market 10x better than existing alternatives.
Can you pull it off?
The other solution is to find a proportion of the market that is super unhappy with existing alternatives and build a perfect solution for that vertical.
You may learn that through the interviewing process.
In a recent study done by OpenView and sponsored by Paddle, they found that the best-in-class outlying companies focus on verticals - yes, riches are often in the niches and AI native is the cool new kid in town.
Your turn:
Learn more: If you want to dive deeper into this field, super-experienced product leader and founder Denny Klisch and I recorded this podcast episode that just aired this week. He talks about his experience in testing WTP as well: https://bit.ly/45ylQjC
Share your story: You know how much I love your stories and how proud I am that you are winning in business armed with the insights that we share here. DM me, send me an email, or better yet - tag me in a post like Alexiomar did so I can reshare it.
Stop hoping for traction and become a GTM-first builder instead with experts who worked with:
Let’s join forces: https://encouraging-booth-c0f.notion.site/GTM-Strategist-B2B-Bootcamp-1d0d2b52f91447cba4019e11a30af545. We are starting in February, 5 spots are still available. You are welcome to apply if you are into B2B GTM. Ognjen Bošković (3x Head of Growth - inc. CXL Institute) and I will guide you through your GTM journey - we will cover ICP, pricing and packaging, messaging and positioning, and how to create growth machines and loops. Current applicants are all from B2B - founders, product managers and growth experts. Ping me if you are interested. We will make a huge difference in February, which is also my B-day month 😇
Thanks for your time.
I very much appreciate you and wish you a happy go-to-market!
Talk soon,
Maja
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