Product-Market fit, it is surprising how many startups fail to grasp its importance. This even includes startups that have managed to get millions in VC backing. Why does this happen? For starters, many founders assume that their solution is the one that millions of customers want. While this might be true, would you be willing to risk everything you own just on a hunch?
Even if your idea is new, it does not mean that you must spend years and millions of dollars finding the right customers. Instead, there is a straightforward thing that you can do at the beginning of your startup journey (and ideally at regular intervals as your company matures), and this is research. This is the secret to finding your target market, and if you are not sure where to begin, here are some ideas.
Properly Define Your Market and Your Customers
Too many startups claim that they are the only ones with the solution they are pitching and no competitors. Sadly, both claims are delusional. Even if your approach is novel, the odds are that someone has thought of something similar. As such, you probably need to expand your definition of the industry and who your competitors are.
Former GE CEO, Jack Welch, wrote about this in his 2009 book Winning. Even though the book is more than a decade old, it remains a must-read for anyone seeking to develop their strategic thinking. It does not matter if you are the CEO of one of the largest corporations in the world or a struggling founder seeking seed capital – you should reach this book.
In the book, Mr. Welch gives an example of the importance of defining your market.
“On the road in Q & A sessions, this is how I talk about the market definition dynamic: Since I am usually sitting in a chair, I ask audience members to imagine that they are a chair manufacturer. They can define their market as the kind of chair I am usually in—with curved metal arms, blue fabric, and wheels. Or they can define it as all chairs. Best yet, they can define their market as all furniture. Imagine the share differences and the implications for strategy!”
If the definition of your market is too narrow, you will probably miss out on competitors and customers. If your definition is too broad, then you might end up overstating the size of the market to disastrous effect.
The key is to find a balance by defining your industry not only as how you see it but also how your customers see it. An excellent place to start is to research your market. If you are not sure where to begin, you might want to look at third-party macroeconomic research as this will help you better define your market and your strategy to breakthrough.
Know Your Audience
If you do not connect with your customers, your startup will never get off the ground. It does not matter if what you have will genuinely help your customers. You need to present your solution in terms they will understand and appreciate if you want your potential customers ever to take an interest in what you are offering.
Gone are the days of selling by features and benefits alone. Instead, you need to focus on the value you are creating for your customers – this is usually in the form of solving a problem they face.
For starters, you want to look at your market from the top-down. From there, you want to take a deep dive into what motivates your audience.
Keep in mind, what is defined as “your audience” will change over time. This happens as your product or service pivots (as all startups do) and as your reach moves from early adopters to mass appeal. As such, knowing your audience is not a one-off exercise. Instead, it is an ongoing conversation with your just about anyone that can be a customer.
By the way, you will also want to understand your competitor’s audience, as this will allow you to win them over to your solution. This is how you can grow over time and eventually come to dominate your market – at least until the next disrupter comes on the scene.
Sadly, too many startups fail to understand their market. This can lead to disaster. Do not fall into this trap. Research will help you to properly define your market, your competitors, and how to connect with your customers. There are no shortcuts when it comes to success, and if you want your startup to change the world, then you better do your homework.