Horizontal products have expensive go-to-market strategies 😬

👇🏻

Just because your product CAN serve lots of different market segments doesn’t mean you’ll be able to go after them all at once.

Usually, the pattern for horizontal startups goes something like this…

1️⃣ The founder creates a product that solves a specific problem

2️⃣ The founder says “lots of people have this problem — the TAM is huge 🤩”

3️⃣ The founder gets people in different segments to try it, and they love it

4️⃣ The startup gets an influx of customers as word of mouth spreads

5️⃣ But eventually, this growth stalls… and eventually stops 🛑

6️⃣ The founder has likely raised money by this point and has investors to please

7️⃣ The scrappy GTM team tries to go after all the segments at once

8️⃣ The startup fails to penetrate any of the segments at a meaningful level

9️⃣ The startup dies 🪦

What SHOULD the founder have done?

→ Everything in stages 1-5 is normal and somewhat unavoidable, but…

✅ In step 6, the founder should realize the total cost of going after a market segment

✅ In step 7, the founder should dedicate the entire GTM team to one segment

✅ In step 8, the founder should use that success to hire the next GTM team

✅ Repeat this until all segments have been dominated

The cost of a segment

(and this assumes an incredibly lean team being paid venture-level salaries):

(1) Product Manager

→ This is the liaison to the target customer segment that is charged with making sure the product adequately serves their needs

Fully burdened cost including salary and benefits: $150,000

(2) Marketing

→ This person will be responsible for actually executing the strategy to build awareness and generate demand in the target segment.

Fully burdened cost including salary and benefits: $130,000

(3) Sales

→ If this strategy hinges on landing mid-market or enterprise customers (which it always does), then you need a sales person who understands the segment

Fully burdened cost including salary and benefits: $180,000

(4) Customer Success

→ Post-sale, someone needs to understand the segment-specific needs to help customers find the full value of the product and not churn

Fully-burdened cost including salary and benefits: $120,000

Total Cost per segment: ~$580,000 😬

See the example of Calendly below 

(and they FOR SURE have more people per segment than this by a factor of 10).