Having been in this profession for 30+ years now, I’m often asked to look at new products in the customer experience technology arena (trust me, it runs the gamut) to get my thoughts on the products (and, hopefully, to recommend them to my clients). I don’t take all of those calls, but occasionally curiosity gets me.
I’ve seen some great products that elicited the reaction, “Where has this been all of my life?” But I’ve also seen plenty that are just me-toos, aren’t well thought out, or just don’t have a real purpose.
In those conversations, one of my first questions after seeing a demo is: what problem are you solving for the customer. Oftentimes, I just get shrugs or, “Oh, that’s a good question.” I’ll ask if they’ve talked to customers or potential customers, and they haven’t.
More on that in a minute.
Recently, I stumbled across an article by CB Insights about the top reasons that startups fail (see below). Take a look through the list of reasons. They match up pretty much with what I’ve seen and experienced, too.
Of course, you know my interests lie in the reasons that relate to customers and potential customers. Here are the ones that I believe are attributed to not doing your homework.
- Ran out of cash/failed to raise new capital: investors weren’t interested because they did their homework.’
- No market need: A lack of market fit means that the product or service being offered does not meet the needs or wants of the target market.
- Got outcompeted: I would argue this is the same thing. Your competitors did their homework and do a better job of meeting the needs of the market/customers. You didn’t study your competitors to raise awareness of their offerings and identify your points of differentiation.
- Pricing/cost issues: If you’re truly meeting customer needs, value shines and price becomes less of an issue. Also, you’ve got to do the research to understand what the market will bear, what customers will pay for your product. (Have you heard of the Van Westendorp Pricing Meter?)
- Product mistimed: Again, you didn’t do your homework. Now isn’t the time, or you’re too late.
- Poor product: Your product doesn’t solve problems for anyone. Quality, features, functionality, and more tanked the product. You spent so much time rushing to get it done that it’s flawed. In many ways. It doesn’t solve problems for anyone; instead, it creates problems and more work.
I could probably argue that “pivot gone bad” and “burned out/lacked passion” can also be attributed to not doing your homework with regards to customer needs, pain points, and jobs to be done. Too much time is spent finding customers for products, not products for customers.
CNBC conducted a poll of 492 founders in November 2022 and asked about the top three reasons their startups failed. More importantly, they asked them for some advice on how to build a successful startup. “When asked what they wished they’d done differently when starting their own businesses, 58% of the founders polled said they would have done more market research prior to launching.”
Don’t underestimate the work that needs to be done to get the right product out into the marketplace – at the right time. And to build a company around that. If you don’t thoroughly research your target market and customer needs, pain points, and jobs to be done, you’re more likely to end up with a product or service that, obviously, doesn’t meet those needs. And if your value proposition doesn’t align or resonate with your target market, the product or service will probably not be successful.
When I say, “Do the work,” what do I mean? Here are some of the things you’ll need to do.
- Primary research: Talk and listen to customers through surveys, focus groups, and in-person interviews. This helps in understanding the needs, preferences, and behaviors of the target audience.
- Secondary research: Gather data from existing sources such as industry reports, government data, and online sources to better understand market size, competitors, and trends.
- Competitor analysis: Don’t forget to identify your competitors (you might have to look beyond the immediate or direct ones that come to mind) and then analyze their strengths, weaknesses, opportunities, and threats. This helps you understand both the market position of your product and the competition.
- Customer segmentation: Divide your target market into groups based on their needs, behaviors, and characteristics, providing you with a cursory, high-level view of the market you’re designing for.
- Customer personas: Segments get you some high-level data at first, but what you’ll really need to do is talk to customers and potential customers to identify the various personas within your target market. This takes you deeper than needs into the customers’ heads and hearts, to discover who they are, their pain points, and jobs to be done.
- Product testing: Test the product with a small group of target customers (and, ultimately, customers who represent your various personas) to get feedback on features, usability, and overall satisfaction. This helps you understand the market fit of the product and allows you to make necessary improvements before launching the product.
- Market sizing: This involves estimating the size of the target market and the potential revenue that can be generated to help you understand the potential demand for the product.
- Pricing research: I mentioned the Van Westendorp Model earlier. Doing this pricing exercise helps you understand the value customers see in your product and what they’ll potentially pay for it.
Don’t skip that part. Don’t take it lightly. Do the work. Find out what problems your customers are trying to solve and what jobs they are trying to do. Set your startup up for success from the outset!
By the way, this post is focused on the customer/product aspect of why startups fail, but don’t forget that the culture needs to be deliberately designed from the start, too. Is your culture designed in such a way that your company is built to win?
Don’t find customers for your products; find products for your customers. ~ Seth Godin
Image courtesy of Pixabay.