Startups April 05, 2022

B2X: A Synthetic Fuel for Your Startup's Growth Engine

B2X: A Synthetic Fuel for Your Startup's Growth Engine
Eugene van Ost
Eugene van Ost Code2 / IT Soothsayer
7 min read

B2X: A Synthetic Fuel for Your Startup's Growth Engine🔗

Building a B2C (Business-to-Consumer) marketing strategy for a startup is no easy task. At that point, you are at the very beginning of your journey with an unproven product that you hope will fill a need for a certain customer segment in the market. Within that segment, there are customer personas who will hopefully adopt your product. Identifying those personas is more of an art than science, though. You start with gender and age and then take into account other information like the level of education, job, and marital status. The more detailed and precise your descriptions are, the more successful your marketing offensive will be. Or so they say.

Chasing "phantom targets"🔗

By focusing on the customer personas, a startup aims not only to understand the needs and motives of its customers but also to get to know them well enough to establish an emotional bond with them. However, this is easier said than done. Most of the time, the startup founders have to rely on their gut feelings about who their customers are, and make decisions based on assumptions that are as yet not verified, adjusting as they go. As indicated by the traction problems most tech startups run into, this tactic does not bring guaranteed success.

Without any understanding of the market or quantitative data showing how demand for your product varies across different customer segments, picking a particular segment as yours is akin to putting your proverbial eggs in a make-believe basket. In his book Jobs to Be Done, Anthony Ulwick defines those customer personas built around psychographic and demographic data as "phantom targets" (Jobs to Be Done, p.52). According to Ulwick,

"[a] 28-year-old man from Montana with a college degree can have the same unmet needs as a 55-year-old woman from Florida who dropped out of high school. Both, for example, may be unhappy with their internet service."

Instead of pretending that we can determine what a customer wants by looking at demographic and psychographic data, business strategists like Ulwick and Clayton Christensen suggest we focus on jobs, that is, tasks people are trying to get done. Hence the expression, jobs-to-be-done. Ulwick goes one step further than Christensen in his book and dissects those customer jobs into their components, bringing a more quantitative approach to marketing strategy.

B2B: Impractical for startups?🔗

B2B (Business-to-Business) marketing is ruled out for most startups because there is a widespread belief that it is resource-intensive. Its successful implementation requires money, sales staff, connections, and brand recognition that most tech startups lack. B2B involves a top-down approach where a decision-maker at the management level and in control of a budget makes the purchase. Startups are usually discouraged from pitching their products to enterprises unless they have a product that fits an enterprise's well-defined needs like a glove.

However, this does not mean that tech startups can never tap into the corporate market. Although enterprises have their own cultures, established decision-making mechanisms, and rules independent of any particular individual, employees' habits still get to shape the way these organizations function. Employees will bring their favorite tools and platforms to the office and act as brand ambassadors for the products they like. Their recommendations to co-workers help trigger a bottom-up adoption process. Once the product proves its mettle in a project or within a team, an enterprise-level purchase becomes easier. This strategy of driving bottom-up adoption in enterprises is called B2X ('X' standing for 'everything' in this case). It is some kind of a crossover resulting from a synthesis of B2C and B2B strategies. It requires startups to connect with their most passionate customers and build communities around these people. While nurturing these communities, startups should ensure that they can deploy solutions capable of addressing enterprise-level problems when their number is called.

When in SaaS-land, do as the unicorns do🔗

Notion is a SaaS company that provides a case in point for the power of B2X. The company successfully hybridized B2B with B2C to build its growth engine. It leveraged an organic community of corporate Notion users as a bridgehead to drive its enterprise sales. The key to Notion's success was the flexibility of its product—it could be adapted to different use cases—and its ability to offer quick solutions to the problems of enterprises, as these organizations have to act quickly.

Notion's success is undoubtedly impressive; however, the company that wrote the book on bottom-up marketing is definitely Atlassian. For years, Atlassian prided itself on not employing a sales team. Instead, the company leveraged product-led growth before product-led growth became the marketing cult that it is today.

Atlassian's marketing effort was built on a freemium model that eliminated any risk for potential users, letting them see how the company's products would fit into their lives before paying any money. Founded in 2002 and unable to afford a sales team at the beginning, the company had achieved $50 million in ARR by 2010. Atlassian owed this growth to the popularity its products enjoyed among corporate employees.

Atlassian's project tracking software Jira, for example, became popular among developers and project teams thanks to its capabilities in tracking bugs, managing a product roadmap, and version control. Once Jira cornered the developer market, it single-handedly turned Atlassian into a household brand for enterprises, acting as a catalyst for enterprise sales.

Similarly, Atlassian's cloud-based collaboration platform Confluence made things easier for HR teams, marketing professionals, and content creators. Winning the hearts of individual employees turned Atlassian into the powerhouse software company we know today—enjoying $3 million in ARR and still growing its revenue at an astonishing 37 percent year-over-year rate.

The freemium model became the backbone of the B2X marketing strategy for tech startups. Slack took advantage of this strategy to get users hooked first and achieved a free-to-paid conversion ratio of 30 percent. Zoom employed a freemium model, which did not ask for any credit card information for the free-of-charge 40-minute phone calls it offered to users. When it reached $330 million in revenue in the fiscal year of 2019, 55 percent of the 344 customers paying Zoom more than $100,000 a year were former freemium users.

Conclusion🔗

B2X strategy has so far proved that it can help tech startups not only gain traction but also become unicorns in a short time. The catch here is to have a product that appeals to different use cases, has a short time-to-value so that the user can appreciate the value without hassle, and adapts to customers' needs in different environments.

The 1990s were characterized by Coca-Cola's "think global, act local" mantra: Companies needed to satisfy local needs and adapt to local conditions in order to achieve global success. Today, success in the enterprise segment for tech companies requires a similar approach: Conquer the hearts of the employees first, and you will conquer the minds of the managers. B2X is the strategy that makes this possible.

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