Creating a new product category in a crowded market: Part 1

The HR tech market is extensive – with a lot of options to solve the big challenges. According to Sapient Insights, there are 7 established product categories in HR tech, with 55 application categories within the main product categories. But what do you do when your technology doesn’t fit clearly into an existing category? This is a question that a lot of marketers in this space grapple with. Some will tell you to build your own category and lead the way to domination. Others will tell you that trying to create a whole new category is a big mistake. 

So which answer is right? Listen in to this episode as we explore the topic with Sam Kuehnle, vice president of marketing at HR tech firm, Loxo – a company that decided to define and market a new product category within the market

(00:00:20) - The challenges and risks of creating a new product category

(00:02:00)  - Sam Kuehnle’s background: From traditional advertising to digital marketing and demand gen  

(00:04:53) - Exploring the crowded and complex HR tech market  

(00:06:36) - Loxo's decision to create a new product category and the rationale behind it 

(00:10:41) - The challenges of building awareness for a new product category

(00:13:34) - The need to win mindshare before market share – and educating the market 

(00:17:14)  - The struggle of balancing immediate leads with playing the long game to build trust, credibility and relationships 

(00:18:12)  - The reality of the slow initial growth and eventual rapid rise of a new product category 

The Demand Gen Fix is hosted by Deanna Shimota, CEO of GrowthMode Marketing. Listen to our team of marketing experts and featured guests drop knowledge on how HR tech companies can maximize the success of their marketing for today’s B2B prospects. Learn more at www.growthmodemarketing.com.

Transcript

(00:00:01) -  Hey, everybody, it's Jenni from GrowthMode Marketing. You're listening to Demand Gen Fix, the podcast where our team of GrowthModers and our guests discuss the ins and outs of demand generation, and why we believe it's the key to long term sustainable growth, especially in the HR tech industry.

(00:00:20) -  Hello, today we are going to talk about creating a new product category in a crowded market. As everyone listening probably knows, the HR tech market is extensive with a lot of options to solve the big challenges. According to Sapient Insights, there are actually seven established product categories in HR tech, with 55 application categories within the main product categories, so there's a lot out there, but what do you do when your technology doesn't fit clearly into an existing category? I think this happens a lot of time, and this is a question that a lot of marketers in this space grapple with. Some will tell you to build your own category and lead the way to domination. Others will tell you that trying to create a whole new category is a big mistake.

(00:01:08) -  So which answer is right? I've invited a guest, Sam Kuehnle, Vice President of Marketing at HR tech firm Loxo, on to the show to talk about this topic and share his experience. Welcome to The Demand Gen Fix, Sam.

(00:01:23) -  Thank you for having me. I love how you teed this up. Which one's right? Dun dun dun. Let's find out.

(00:01:27) -  Right, right. Depends on the company, right? But there really is that dueling feedback out there where some are like, go create a new category and win it, and others are like, that's the kiss of death. There are some risks involved with that, certainly. So, Sam, you know, I've been following you on LinkedIn for quite some time. I know you came from Refine Labs, which certainly is well known in the demand generation space for their marketing strategies and their voice out on LinkedIn and beyond. Tell us a little bit about your background in marketing.

(00:02:00) -  My background in marketing. I grew up with marketing, believe it or not. So, in our family we've had an ad agency for three generations, but it was like traditional ad agency; TV, print, radio, all the fun. So, as I was graduating college, I studied business marketing and Dad was like, hey, you want the the keys? I mean, it was a local Toledo, Ohio, like, you know, just a little, little advertising shop there, but he said do you want to take it over? And I saw just the changing tides that were coming in with the digital revolution at the time. And I was also like, I love you, but do I want to stay in Toledo, Ohio for the rest of my life, too? Because I knew it was going to be a combination of both. That's where all the clients were. And also, I would have to completely uproot what people were leaving from TV parent radio over to this entirely new digital era, so I took a different path. I took all those years of just growing up, being surrounded by the conversations, going to different shoots and everything with him to let's go, let's go see what this new world looks like.

(00:02:55) -  So, I started as the equivalent of a sales development representative at a big publicly traded company. Got to learn how tough of a job that is. Definitely appreciated all of that, but guided me to very much, I don't want to be in sales. I don't think I could handle this monthly, quarterly, all of that. So, from there went up the marketing route, started in like the marketing ops side of things, slowly expanding into digital marketing when I realized that we're a publicly traded company, international markets, and we have one digital marketing manager for the entire company. I was like, that department's going to grow soon. I can see the writing on the wall there, so let's go play; be an early one there. So, that's where I really got to just see everything, because that individual was doing everything across the board. So, I got (inaudible words) like how to display ads work, how to search ads work, how do webinars, email, the whole gamut, and really get an understanding of that and being earlier to that, so to speak.

(00:03:45) -  And so, after that, I was just joined the team, really test, play, iterate and spend about eight years doing that in-house before going over to Refine Labs to, I'll say, supercharge all of those learnings and really put a lot of the strategies under the pressure cooker to see if they hold up when you shift from that old school lead gen mindset to more of this long term demand gen play.

(00:04:05) -  Yeah, very cool, and obviously, once you left Refine Labs, I believe you landed over at Loxo and in the wonderful HR tech market where I think I have found, and I don't know if you found this, Sam, when I talk to a lot of people in this space who are coming from different areas, different industries, they're like, wow, I didn't know how hard it would be to market in the HR tech market, just because it is extremely crowded and there's lots of technology options out there, right? And so from a prospect's perspective, their choices seem endless. And I think HR tech stacks for a lot of organizations that are a little bit out of control because there are many, many solutions and they're trying to integrate them all together.

(00:04:53) -  And I have seen on Gartner, they've said, that the average HR team or organization has 75 pieces of technology in their HR tech stack, right? And I'm like, that's insane. I mean, could you imagine if marketers, if ours was that out of control? 

(00:05:09) - No. 

(00:05:10) - Right, and I have talked to some CEOs at HR tech companies who are going in and putting their solutions and clients, and they have more than once told me stories about clients they've had that had over 250 solutions in their HR tech stack. I can't even imagine trying to manage that, or how much ROI they're actually getting out of it, because you can't be an expert at 250 solutions, right?

(00:05:34) -  No, no. God, I have so many thoughts about that. That's insane. I didn't realize it was that big. And I mean, granted, we focus; we serve all different types of recruiters, but we focus usually more on the external agency recruiters; exact recruiters. So, it's a little bit more slimmed down because at the end of the day, they're not worried about some of the different ones an in-house HR team might use, but that's insane that nobody was really writing it. I mean, 75 on the small side, but up to 200 with some other ones, that is mind blowing.

(00:05:59) -  It is. Obviously organizations are investing a lot of money in this particular piece of running a company, because employees are so important. So, I know that at Loxo you guys are out there trying to be a holistic solution and not a point solution, so when we talk about 75 different technologies, obviously, your organization is looking at it and saying you shouldn't have to have 75. How do we replace this piece? Let's talk about Loxo’s story. You guys actually went out and sought to create a new product category. Tell us about that.

(00:06:36) -  Yeah, so the credit for that is fully with our CEO Matt Chambers and co-founder CTO Ilya. They've had this vision. The company's been around since 2012. It's bootstrapped, so they've taken their time to basically say; they've seen how crowded this entire space is, so props to them. They spent, I think it was about, nine years really just focusing on we need to build a phenomenal product first, really focusing on engineering customer success before saying, now let's really start going to market with it much more heavily.

(00:07:06) -  So, for the first nine years, growth was a couple sales reps. Matt, still one of our big (inaudible word), but a lot of it was word of mouth growth. There was no heavy prospecting; there were actually no marketing. I could tell you that because that started when I joined. But they had this vision when Matt came in from outside, and this was one of his superpowers that he said, is he likes to come in, and just with an outsider's perspective, if you understand, like, what's the overall job to be done of a recruiter or insert any other function, really, what do they need to accomplish at the end of the day? And then if you go look at the current landscape and how recruiters or any job function do that job, is it the most efficient, effective way to do it? And when he looked at this and knowing his background from other industries, he was just like, this is not the most efficient way by far. I mean, to your point of 75 plus, 200 plus different tech tools, he's like, that's madness.

(00:07:54) -  So we honed in on the recruiting side of things specifically, and from there it was understanding at the end of the day, like I use this analogy all the time where I say an ATS isn't going to help you make more hires. A better sourcing tool isn't going to make you place hires faster. A better outreach tool isn't going to get you more clients, like maybe nominally a little bit they'll increase, but if the root of all of that, no solution is going to be the product is going to really fix that. It's the workflow that you're using at the end of the day, which is what's going to speed things up and really make you more effective. So, when I finally joined the team, I just did a quick audit lay of the land because this is where it becomes tricky. Our product is selling an entirely new workflow on the existing (inaudible word), and that workflow encapsulates many other point solutions tools which are our features of a talent intelligence platform, so there are over 500 different ATS options that you can choose from out there.

(00:08:49) -  There are over 125 different recruitment CRMs. There are countless sourcing tools. There are God knows how many contact information finding tools. Like, it's one thing to say, okay, let's go up against 500 ATS tools, but then if you multiply that by each of those additional tools, like good luck, we would never be able to beat any of those. And so, that's where we said, okay, cool. Like, we're going to focus on the workflow and why we went with let's create a new category here instead of trying to penetrate one of these existing ones is that there was a huge opportunity for us, in this sense, that the market has been so trained to just search for better. What's a better ATS? What's a better sourcing tool? But not what's a different way to recruit that's going to make us fundamentally better and make us more effective at the end of the day. And that's what we're pioneering with this, because that's what this tool, the talent search platform and the workflow that we're really pushing to the market solves for.

(00:09:42) -  So, that doesn't fit cleanly in any of those existing categories. And so, that's why we decided we have to create something completely on our own, unique, because people are otherwise going to compare us to these other things, which it's not comparable to, like our feature is their full product. So, that's the beginning, so to speak, of what led us down this path.

(00:10:02) -  And that totally makes sense why Loxo went down that path. I think there's a lot of organizations out there, when you look at it, and they're saying, okay, there's seven categories and there's 55 applications. That's a lot to choose from, but like I see it in going out in the market and talking to different organizations and clients that we've worked with at GrowthMode Marketing, where they are doing something similar to look, so in that they're trying to solve for the problem of you've got too many tech solutions, and if you were to do an end to end solution, it technically fits into seven different buckets. 

(00:10:38) -  And so, they come to the same conclusion.They're like, we don't fit into that. We're not an ATS, we're not a recruitment platform. We're not this, we're not that. We're so much more than that. But I think when you're looking at it may seem like the easy answer is, let's go create a new category. And you've probably found, as you guys are going down that path, that you have to have a really smart marketing program that takes into account, right? Like you're not just trying to get your brand out there, you're trying to get people to think differently about it. Because quite frankly, I think one of the big risks of creating a new category, nobody's going into Google and entering that search term. And so, okay, now do we go if we're doing digital programs and go buy all these keywords related to searches for ATS, or do we really build up the awareness for this new category we're trying to create because people aren't thinking about it, so they're not looking for it, and that creates a whole new level of challenge for marketers as you're doing that.

(00:11:48) -  That's the fun part. I love challenges, that's why I was very much drawn to this. And it's for that exact reason, as I don't have Google as a crutch for this, especially when I started. If I were to go over to Google and type in talent intelligence platform, good luck getting ten searches a month on that. Like people aren't searching for it, they're searching for ATS, CRM, all of those other things like we were talking about. So, you have to play the long game with it and understand that you're not going to get people to adapt right away. I mean, think of the product marketing lifecycle curve or lifecycle curve, and we're not anywhere close to mass majority yet. We're still early adopter phase. And that's been after me here a year and a half pushing this. But really probably the company two and a half years, but ten years total, so to speak. So, it takes a lot of time to do this. And that's, I think, one of the things that holds many people back is especially if they're VCP back, like they've got 18 to 24 months of runway, you better hope that you nail that message on day one and month 17. You start closing those deals so you can get your next round of funding, but most can't afford that type of wait. So, to your point, earlier is like, you really do have to start at the beginning with awareness. And that's both at the brand level so people know who you are in the first place, but also like, what are you solving for or helping them at the end of the day? So, do you follow Devin Reid by chance?

(00:13:04) -  I don’t.

(00:13:05) -  Okay, definitely recommend following him. He's also got a great newsletter, but he shared this quote not long ago that I absolutely love. I have a reminder for myself that I come back to every quarter just to reset me on this, and I'm going to pull it up right here to read it, but it essentially comes back to the saying you need to win mindshare before you can win market share. So, to earn mindshare and you can change how people think, when you change how people think, you can influence how they act, and when you can influence how they act, then you can motivate how they buy.

(00:13:34) -  So he put that so simply and so eloquently, but to the exact point, you can't just skip those first two pages and motivate them to buy when they aren't thinking about you, when they aren't understanding what it is that you do, or anything in there. So, it's something that you really have to phase into. And that's the part where you do have to straddle that line of existing category and new category, because what do they already know? What do they currently do? They use an ATS, okay, let's talk about ATS a little bit. Let's manage your applicants. You can move them through Kanban style. And we'll very much use the language that they know, but then once they're in our ecosystem we'll also show. And here's so much more after that ATS that you didn't used to do, where you used to have someone in your ATS and you go jump out to your outreach tool and start sending them emails, and were just like, no, no, no, you're going to just drag them over to the next stage.

(00:14:22) -  We're automatically going to have an email sequence, a call sequence, and SMS sequence built into the platform, so you don't have to do all those extra clicks, which this blew my mind for recruiters. Like, if you can save me two clicks in a workflow, I will love you forever. And I'm, as a marketer, just like two clicks, that's it, but once I saw how many clicks are doing these workflows, it's like, oh, like, this really is a big thing. So, that's really some of the things we're like, you do have to play into what they know and what are some of the things that they want to do better, and use that as your foot in the door to start to educate them about the larger problem. At the end of the day, you think you need a better ATS, but what you really need is a talent intelligence platform, a better workflow, a better way of doing things. So, that's the give and take that you have to do in the beginning just to help them see there's a better way.

(00:15:05) -  I mean, from there it's how do you educate them on the problem. And also it's going to take time for them to be like, whoa, whoa, whoa whoa whoa. I know an ATS, but you're telling me I have to completely learn this new thing? I don't know, that's a lot of change management. That's a lot of people I need to convince. So, you have to give yourself time for all of that to happen. And that's where the building trust part comes in. So, if you're following up with, like, let's get on the call and talk, good luck. They're going to delete that email so fast or not join you, so you really do have to just understand that it's going to take you a lot of time to really do this properly. 

(00:15:37) -  Yeah, and I think you hit the nail on the head, which is a hard pill for a lot of CEOs and quite frankly, the investors behind them to swallow. That it takes time, and it doesn't matter if you're creating a new product category, or you're just new to the market and you're sliding into an existing product category, they're not going to buy from you if they don't know you exist.

(00:16:01) -  Everybody will be like, well, yeah, that's common sense, right? But yet I can tell you, talking to all these organizations out there because they do have a PE firm behind them who's like, you've got to perform in 18 months. We expect high growth. Oh, and we're not investing that much in marketing. It's not realistic to be able to go and hit your growth goals if they're aggressive, if you're not going out there and creating that brand awareness, and, I think, when you add the factor of, okay, we're also going to position ourselves as a completely new product category, that intensifies that even more. And I think that's why it can be risky to create a new product category, because if you're not willing to make the investment, to be able to go and create that brand awareness and that education out there for that category. Then yep, it's your Achilles heel. They’re not; the buyers out there aren't going to gravitate toward you. Also, if you're not willing to acknowledge this is going to take time. It's not a three month campaign and suddenly, boom, the revenue's just coming in.

(00:17:14) -  Maybe there are some unicorns out there that that is happening with, but it is very, very rare. And it gives CEOs heart palpitations to think, right, like that the revenue; nobody wants to say or hear, I should say, the revenue will start coming in in two years. As a business a lot of them don't have that luxury to wait that long. And I think as marketers, we struggle with that. The balance of I need leads now. In fact, I need them yesterday. And well, hey, marketing takes time. And if we're going to do this right and we're going to do this really well, we've got to play the long game.

(00:17:55) -  You have to. You don't have a choice. And that's especially with the new categories. They don't trust you; they're skeptical. I know this thing that I've been using forever. So, as the market they've all adopted it. That's why it's a thing, right? So, you're telling me I need to do something new and different? Like, you have to not only build trust, you have to build; establish your credibility on that to, like, prove it to me, show it to me.

(00:18:12) -  And then you have to create the relationships on top of that, because there still is very much, I won't call it a he said, she said market out there, but like, hey, it's Jenny. Has Jenny heard of Loxo before? Is she using them or anything else? No she hasn't. Who's using these people? No one, I don't know. This seems too good to be true. Why would I do it? So, you have to do all of that. And if you want to really build that trust or establish credibility and then, you know, three months in your PE firms like, hey, need more leads. And you say all of a sudden you're putting a lead gen form in front of them, you've just broken that trust. Start back at ground zero. So, that's the tough part is a lot of CEOs and PE firms, they operate just on this linear model, right? Dollar in; $3 back. Dollar in and $3 back. It's just a straight consistent line, but the reality of creating a new category is it's more like an exponential curve.

(00:18:53) -  You're going to be flat for a long time. Then you might up just a teeny, teeny, teeny, tiny bit. And then when it finally starts to take off, it's going up hard, but that takes a really long time to do. And before it starts to do that, people are like, oh, it's only like a 0.2% growth. You know, I'm used to my linear line, let’s keep following that. That's when a lot of companies are forced to revert, and then it just completely takes back all of the work they set themselves up to do. And it never takes off. And that's the hard part is you can't straddle that line. You have to go all in. And that's the really scary part, especially if you are switching strategies. It's easier if this is your new strategy. You run with it from day one. It's like, hey, it's going to work eventually. We're going from zero to something. But if you had a baseline before and you see that start dropping off, that's where you're going to start getting a lot of people like, whoa, whoa, whoa, what are you doing? What are you breaking? That's the tough part.

(00:19:36) -  Yeah, you have to really think about it before, as an organization, you declare we're creating a new product category because you have to go in with the mindset of we are going to get the market to start thinking differently, and that is never going to happen overnight. As we wrap up today's discussion on The Demand Gen Fix, evident that while carving out a new category in the crowded HR tech market poses its challenges, it also opens up unparalleled opportunities. Remember, the path to standing out might not always align with the conventional, but with strategic thinking and persistence, your unique offering can redefine the landscape. We've got so much more to talk about on this topic, so join us for the next episode of the podcast where we will continue the conversation with Sam Kuehnle, Vice President of Marketing at HR tech company Loxo. And until next time, keep pushing the boundaries of what's possible.

(00:20:34) -  Thanks for joining us on The Demand Gen Fix, a podcast for HR tech marketers brought to you by GrowthMode Marketing. I sure hope you enjoyed it. Don't forget to subscribe for more perspectives on demand generation and B2B Marketing strategies. Plus, give us a like, tell your friends. We'll see you next time.