Get the move upmarket right and you can unlock new users, use cases, and revenue streams. But get it wrong, and you risk losing focus, increasing burn, and stifling product innovation. So how do you prepare? Understand the unique value-add of your product, define the customer who would benefit most from that value-add, then assess if you can service their needs.

When I joined Segment as CRO, the company was selling to a wide customer base, from early stage startups to some of the biggest enterprises in the world. As much as 20% of our ARR was coming from enterprise use cases that weren’t the best fit for our product, we were spending too much on sales and marketing chasing too broad an upmarket segment, and we had a glut of one-off feature requests that stymied engineering innovation. This problem wasn’t limited to Segment, though. In fact, the single biggest mistake I’ve seen companies make when moving upmarket is mistaking initial enterprise interest for product-market fit when, in actuality, your product usually needs to be much more robust to address the complexities of a large enterprise company. I learned a lot of lessons working with the Segment team to turn things around in two years—lessons that I’m excited to share here.

So how do you prepare to move upmarket? Get crisp on your product value framework, use that framework to define your enterprise ideal customer profile (ICP), then align your product roadmap and sales motion to make sure you can service that ICP’s needs.

TABLE OF CONTENTS

    Understand your product value framework

    Just because you have product-market fit for startups, SMBs, or mid-market customers does not mean you’ll automatically find product-market fit in the enterprise space—even if you’ve already closed enterprise deals. At Segment, one of the ways we knew we needed to revisit our product-market fit was when we were giving away services to enterprise customers in order to cover up gaps in our product. Implementing Segment was relatively straightforward for an early-stage startup, but much more difficult for enterprise customers. We often gave away free consulting to enterprise customers to help us close deals. Customers, however, wound up using this as free support, and we ended up carving this consulting out of our ACV. More importantly, this didn’t lead to customer success—so we had higher levels of churn in the enterprise space.

    Before you sign enterprise deals and even begin to consider enterprise product-market fit, you should clearly outline your product’s value framework. At Segment, we partnered with an external consultant to define this in two steps: 

    1. Interviewing both our own customers and target prospects to better understand their current and future pain points, and
    2. Combining this discovery with market research data to help us answer key questions about our customers’ pain points and how Segment solved them

    We emerged from the process with a crisp product value framework: we were the only customer data platform (CDP) built on data that you could trust—data that was clean, verified, de-duplicated, and continuously updated.

    It’s critical to align the entire organization on this product value framework because it lays the foundation for understanding your enterprise customer. At Segment, it was especially important to have full backing from both the CEO and the board for this initiative. With this support, we could bring everyone from the C-suite together to participate in this process, which created a shared language that the entire company could use, both internally and externally, to discuss how Segment uniquely addressed our most influential customers’ needs. 

    Define your enterprise ICP

    Once you’ve aligned on your product’s value proposition, you need to figure out the highest-value customer (or ICP), buyer, and use cases for your product. From those understandings, you can then estimate the total addressable market (TAM) for your product—and then make a strategic decision about which ICP you want to pursue. At Segment, we enlisted a consultant to conduct market research and extensive customer and prospect interviews, and we learned the following about our ICP, buyer, and TAM:

    ICP

    Your ICP represents the customer who will benefit the most from the unique, differentiated value-add of your product. Identify your highest-value customers by asking:

    • What are my target customers’ specific pain points?
    • What are their use cases, and how do those pain points map to them?
    • How do we address those pain points in a way that is uniquely and defensibly differentiated from the competition?
    • How do you improve the bottom line for this customer: through increased revenue, cost savings, risk mitigation, or accelerated time to market? 

    Through this research, we found that our ICP was larger enterprises that were B2C, multi-product, multi-brand, multi-subsidiary, and most importantly, data-literate. We also discovered that Segment’s enterprise ICP differed in four key ways from our initial startup ICP: 

    • Need for professional services: because of the complexities of the enterprise segment—companies that included massive numbers of brands and subsidiaries that had each collected data in a different way—our enterprise customers needed a professional services function to help them align around a new understanding of collecting and managing data with Segment.
    • Need for platform extensibility: our customers often needed to extend the functionality of our platform by asking our engineering team to build one-off connections for our customers, which taxed our engineering productivity and resulted in unsupportable custom builds. We needed to enable our professional services team to partner with our customers and give them the ability to build out their own integrations in a standard, supportable way.
    • Business ownership: our enterprise ICP was a business owner (often from digital transformation, growth, or marketing) interested in a product package that was distinct from our existing offering. 
    • Process emphasis: our enterprise ICP cared a lot more about reliability, security, and data privacy and less about the speed and agility that we had been accustomed to building for. 

    Buyer and use cases

    Your buyer persona represents the actual person who would be buying your product. Pay attention to their desired use cases for a product: this will help you understand how the unique value of your product will help your buyer solve their most pressing problems. To define your buyer, ask yourself:

    • Who owns the ultimate business problem that your product solves?
    • Who is the person who can assign a discretionary budget to solve this problem? What is their typical budget?
    • What are their priorities and what capabilities should a product have in order to solve their problems? 
    • Could there be other individuals involved in evaluating and deciding whether to buy our product? This was important to consider at Segment because our product was often purchased by a buying unit that included both marketing and data engineering leaders. 
    • How do they buy? What is the process they will use to evaluate how our product fits their decision criteria?
    • What is their expectation in terms of engagement and support?

    At Segment, our buyer in enterprise shifted from a technical buyer to a CMO—an interesting development I’ll circle back to below.

    TAM

    Once you’ve nailed down your ICP, buyer, and use cases, you can estimate your TAM. Estimating your TAM means understanding the universe of customers you can serve, the quantified business value you can deliver to that customer, and the amount of budget your buyer is willing to allocate to solve their problem. Ask yourself:

    • Who are the specific customers that represent the highest value?
    • What do we need from a product, sales, success, services and support perspective to win their dollars and make them successful?

    You can calculate your TAM by multiplying your target customers * percentage you can win * average spend, then triangulate this result with external market data, internal customer data, and analyst reports.

    At Segment, we found that our long-term TAM in the enterprise was significantly larger than the initial wedge where we found product-market fit with developers in high-growth tech. As I mentioned, our buyer also shifted to a CMO whose expectations for a CDP included journey orchestration, marketing automation, and machine learning. These weren’t features we had in the product and we knew we couldn’t build them quickly. Moreover, we knew we couldn’t win those customers unless we identified a strong data leader who could champion Segment’s value proposition to a marketer. 

    Pulling all of this work together, we then decided to target a narrower ICP within our TAM: large enterprise companies with forward-thinking data champion buyers who were either decision-makers or could partner with a CMO to shape the decision criteria in favor of what Segment brought to the table.

    Map your ICP to your product roadmap and sales motion

    Once you’ve defined your enterprise ICP, you then need to map their needs onto your product roadmap and sales motion to make sure that you can service them. Even if you don’t have a solution to every one of their problems on day 1, you should at least understand how your product roadmap and sales motion will iterate to tackle enterprise opportunities one bite at a time. Here’s what this looked like at Segment:

    Product roadmap

    When I first joined Segment, Tido Carriero, Segment’s CPO, was fielding dozens of product gap reports from enterprise customers per quarter, often doing north of 100 sales assists throughout a fiscal year. After clarifying our enterprise ICP, Carriero narrowed 27 different engineering priorities down to 3 major themes, which he turned into a product roadmap:  

    • Platform extensibility: Segment needed to support integrations that were not in our catalog (e.g., a data connection to an internal tool at the enterprise). In order to move away from building one-off connections, we needed to extend the platform so that it could be built by either Segment’s professional services team or the customer directly. 
    • Reliability: we had built a lot of new features too quickly and it was clear that one of our newer packages just wasn’t ready for enterprise scale. 
    • Data residency: with new data privacy laws affecting many countries, our enterprise customers needed to understand how we would handle their data to comply with these new regulations. 

    Enterprise sales motion

    Bringing clarity to our product roadmap made for a great selling point to our data-driven, organizationally-complex ICP. We also knew that we needed to revise our sales motion to service our enterprise buyer. Our existing sales motion was originally an inbound machine driven by high-velocity, marketing-qualified leads. These deals converted very quickly: often, our pipeline was created and closed within the quarter, and our buyer was a technical buyer who intuitively understood Segment’s value proposition. After aligning on our enterprise ICP, however, we realized that we needed to build out a go-to-market motion with a different kind of seller: one who was experienced in outbound pipeline generation, who could map out the political map of an organization and find and build data-driven champions, and who could run a sales cycle that could last as long as 9 or 12 months. 

    And because we knew our ICP needed a professional services function in order to get the most out of Segment, we built out this function to engage in presale discussions with our clients to help them be “participants in their own rescue”—meaning that we could align defined outcomes and statements of work with our enterprise sales motion. Customers could then be clear about what they could expect the product to do, what our consulting team would do, and what their own role in implementation was. 

    Hit enterprise product-market fit

    Thanks to this crisp alignment around our enterprise customer, we quickly addressed the most important product needs for our ICP. 1–2 years after launching Segment Functions—which enabled platform extensibility—we expanded the Segment integrations catalog from ~300 to ~3,000 integrations in production, many of which were enterprise customers. We buckled down and spent 6 months rebuilding the infrastructure of one of our newer packages, which solved dozens of smaller bugs. And we moved all of Segment’s systems to support multi-region, which delighted not only 100% of our enterprise customers, but also saved an at-risk EMEA business. 

    As a result, Segment’s revenue rose 150% over the course of two years, and our enterprise gross revenue retention (GRR) improved from 63% to 92%—a clear indicator of customer success. This was critical, of course, but one of the most dramatic impacts was the improvement in engineering productivity. No longer drowning in customer escalations and armed with a clear focus of what to build and what not to build, our engineering and product teams were free to advance our product roadmap in ways we previously felt impossible without resorting to acquisitions—which, in turn, gave the team the bandwidth to eventually build the features our original CMO buyer was looking for, expanding our TAM and accelerating our growth.

    Moving upmarket isn’t easy, but when you take the time to do it right, you can unlock significant revenue. “When we took a step back and took the time to really understand our enterprise ICP,” says Carriero, “we immediately found clarity and our aligned go-to-market motions and R&D worked better than anything we had seen before. Scaling the software to support eight-digit TCV contracts was the highlight of my career at Segment.” 

    Many thanks to Tido Carriero for his feedback and insights on this topic.

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