Beneficiary/User/Purchaser Alignment

For founders, Product/Market Fit (PMF) is the holy grail**. Achieving PMF means you have developed a product that satisfies a strong market need. As Marc Andreessen once said, "the only thing that matters is getting to product/market fit."

While finding PMF is critical to a startup, there is one nuance that is often overlooked, which that even a great product that fulfills someone's needs can struggle if it fails to align with organizational incentives. Specifically, a typical product involves several major parties, including the user, the purchaser, and the beneficiary. The user is the person using the product day-to-day, the purchaser is the person who pays for the product, and the beneficiary is the person who benefits from product usage. When selling to large, complex organizations, it turns out that the user, the purchaser, and the beneficiary are rarely the same person.

Here are a few examples:

  • For CRM software, the main user is the sales rep, who needs to enter data into the system after each sales interaction. The main beneficiary is often the VP of Sales who wants better data about the sales pipeline. Sometimes the purchaser is the VP of Sales, but sometimes it's another department, like IT.
  • For an app that combines personal tracking (e.g. from a Fitbit) with Electronic Health Records, the main users are the patient and the doctor; the main beneficiaries are the patient, the hospital, and the insurance company; and the payers are likely the insurance company and/or the hospital.
  • For data analysis tools geared toward less technical business people, the main beneficiary is the business person but the main user is typically the data analyst or the IT person who sets up the tool. The purchaser could be any of those three.

The difficulty in each of these examples is that solving one party's problems might not matter if another party is footing the bill or forced to do all of the work. For example, CRM tools that are designed for VPs of Sales often have adoption problems because salespeople have little incentive to use them. On the other hand, CRM tools that are designed to make salespeople more productive are hard to sell because VPs of Sales are the ones who have to pay for them, but they don't get many direct benefits.

As you develop your product and find yourself reaching product/market fit, think about every part of an organization that your product will touch. If your users are not your purchasers, or your purchasers are not your beneficiaries, tweak your product to align with everyone's incentives. For example, if users are salespeople, beneficiaries are sales managers, and purchasers are IT, then you could focus on day-to-day enhancements for salespeople, great reporting and analytics for sales managers, and solid security and 1-click deployment for IT. Don't just focus on reporting for sales managers, because even though you'll be solving their problems in theory, you'll either have a hard time getting salesperson engagement, or you'll get pushback from IT because they don't want to manage yet another 3rd party service.

** In fact, if you search for "startup holy grail" on Google, three of the first four links are about product/market fit.