Every entrepreneur is convinced they have the greatest product that is going to revolutionalize the world, worth business capitalists bathing them in piles of cash to accomplish their dream. But, business capitalists don’t back products, they back again winning business models. And, winning business models are anchored by companies that have the potential to create lots of revenues with easily scalable, repeatable and profitable marketing and sales strategies.
And, nothing of that will be truly motivated, until you effectively test and optimize your product-market match potential customers. This post can help you learn how to do that exactly. WHAT’S PRODUCT-MARKET FIT? Product-market-fit is the true point at which you have determined the best target industries, use and buyers cases for your product, to the point sales become repeatable and scalable and your product is flying from the racks. It’s the holy grail for most startups, that dictates if they are on the road to being the next one-in-ten “10x” investment return companies for his or her investors, or the next three-in-ten flameouts that crashes and burns out of business.
HOW TO RECOGNIZE PRODUCT-MARKET FIT? The best way of doing general market trends is actually talking to your customers, a large number of them. And, no, not in a few online survey; in an face-to-face or phone ending up in them actually, that is more interactive, and you will see how the discussion evolves in real time. Inquire further what their current painpoints are around your industry, competition or products, or how much they would be willing to pay for that solution, you’d be surprised what great insights emerge from their mouths.
They’ll tell you exactly what you need to construct to make their lives materially better. In addition, seek insights from your employees, especially your sales and functions team. Your sales people are in the market everyday talking to customers, you must have a process to get those insights in to the comparative mind of mature management. And, your procedures team is typically seeing all the nagging problems with the product and hearing the complaints from your customers. Any customer facing complaints need to bubble up to management and the product team, so they can fix them quickly. But, worth mentioning, make sure you have a large enough data sample here-the opinion of one person, is just that, an impression.
But, hearing the same factors over and over again from multiple stakeholders, is something you almost certainly need to join fixing. There is not only one appropriate answer for identifying product-market fit. You need to be tinkering and testing with all the current inputs on the way. For example, try three different price points, and observe how you can push it far, before the customers start complaining or your conversion rates fall.
Or, as another example, A/B test various sales pitches, emphasizing different aspects of your product, to figure out which specific feature is the one which gets your visitors the most thrilled. Then increase down on the winners after each iteration on the way. It is very easy to state your product attracts many different industries and many different use cases, let’s venture out and sell our products to all of them. That is clearly a recipe for disaster.
When startup finances are limited, it is always better to have a much more slim focus, to start, and go deep in that one narrow vertical really. That will make you the clear industry expert in that domain, which will help spread the viral word-of-mouth and stimulate growth materially faster. In this case, it is way better being the master of one domain, than being a Jack of most trades. After you have built your profitability and level in your first vertical, you take those “bullets” and flames them away in the next and third tangential verticals to your first.
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But, before doing do, make sure you have recorded your process, learnings and platform from the first vertical, which means you can apply to the next verticals, and that means you don’t double make the same mistakes. And, at all times, make sure you stay centered on the long-term vision. Don’t get embroiled in the whims of the market that can having you going after rabbits into unprofitable rabbit openings. As become familiar with, the behaviors of 1 industry, buyer role or use case, may have a materially different “rhythm” that another.
So, you can suppose what worked in one vertical, will work exactly the same way within the next vertical. Everything could vary. From your own go-to-market strategy, to your sales routine to your sales funnel metrics. For example, let’s say you are available marketing technology. Of all First, you need to compute your total addressable market size, to be sure you have a realistic chance of scaling your revenues materially. Second, you will need to be sure you have a product that can withstand the onslaught of competition that will observe you into this market, if you are successful.
That typically means having some clear competitive moat or customers who are not delicate to price. For example, products related to “wisdom” typically come at high quality and defensible pricing to “widgets”. And, third, consider your lifetime value of your revenue stream. You want products that frequently are consumed, to operate a vehicle high repeat purchases, and solve major pain points for your visitors.