Agencies, What's Your Service-Market-Fit?

We're familiar with product-market fit. American entrepreneur and investor Marc Andreessen, who coined the term in 2007, defines it as;

Finding a good market with a product capable of satisfying that market.

What is Product-Market Fit?

Product-market fit happens when you build the right product to solve customer needs. Discovering the perfect product-market fit often distinguishes market leaders and top brands. It’s a straightforward concept but difficult to achieve in practice. A large part of the difficulty comes from truly understanding your current and potential customers so you can accurately address their needs.

Six Steps to Achieve Product-Market Fit

1. Define your target customer
2. Understand your customer’s needs
3. Identify your value proposition
4. Outline and build your Minimum Viable Product (MVP)
5. Test the MVP with potential customers
6. Iterate and improve

Features Tell, Benefits Sell

Features are often technical, describing what the product or service does. Benefits, conversely, paint a picture of success in the prospect's mind and how it will change their life in some way. Both features and benefits are valuable information for prospects during their buyer's journey. But ultimately, most customers are swayed to purchase based on the benefits. Sell the solution, not the problem.

What About Agencies?

So what does this have to do with agencies, and where does Service-Market-Fit come in? Agencies spend a lot of time analysing target markets and segmenting their clients’ audiences but almost no time segmenting or defining their own.

Many agencies describe their businesses in terms of the services they offer. Describing your agency with a list of services is like a product company listing its features. A more focused market (client segments) with a more concentrated product offer (services) will yield better results.

Six Steps to Achieve Service-Market Fit

1. Define your service offering (people)
2. Identify customers (problems)
3. Identify your value proposition (solutions)
4. Outline and build your Minimum Viable Product (MVP)
5. Test the MVP with potential customers
6. Iterate and improve

Define Your Service Offering (People)

In this scenario, people are the most significant difference between a product company and a service agency. At an agency, the people who provide the service sell their time. In contrast, a SaaS-based product company sells features provided by technology. It's relatively easy to adapt features to the audience for a product business. However, it is difficult for a service agency to change its people.

Before you find your target customer, you'll need to look at what services your people and your agency offer. Plus, there will most likely be industry expertise in the people, so are you offering a full-service “We do everything for everybody” type of service or a niche and focus on a specific industry vertical like “Financial Services” or “Healthcare”? Or you could focus on a particular service line like “Strategy”, “User Experience”, or “Creative Design” services. Or you could combine these and be super niche and specialised and be a “Healthcare User Experience Agency.”

?? Agencies often get this wrong by chasing clients or projects that don't match their offering, which potential clients quickly identify and rule out. Don’t waste time prospecting for mismatched opportunities.

Identify Customers (Problems)

Next, identify the customers who would benefit from your services. Being an industry and service-line specialist makes this more straightforward, and having more niches in your offering makes it even easier. A “Healthcare User Experience Agency” will advertise and segment healthcare companies with design and user experience problems, so targeting and reaching out with a targeted solution to their problem makes prospecting and identifying customers much more straightforward but limits the market potential.

?? Agencies often choose the “We do everything for everybody” approach because they fear losing or missing opportunities. However, they are far better off sticking to what they know. There may be fewer opportunities, but they stand a better chance of winning.

Identify Your Value Proposition (Solutions)

Clearly define and offer your solutions, whether dedicated service lines like User Experience Design services, industry-specific offerings like Financial Services, or more generic full-service offerings. But what sets you apart from the competition? What's the value proposition that gets the customer's attention? What unique things do your people have to offer, and what unique ways of working or frameworks or processes do you use to make your solutions even better?

?? Agencies often get this wrong by failing to differentiate themselves. They might offer services that are too generic, making it difficult for potential clients to see the unique value they bring. Without a compelling value proposition, agencies can blend into the background, losing out to competitors who articulate their unique strengths and benefits more effectively.

Outline and Build Your Minimum Viable Product (MVP)

Depending on your service offering, your MVP might take various forms in an agency context. It could be a detailed case study that showcases how your team identified a client's problem and provided a solution that achieved significant results. This case study should align with your agency's focus, whether you’re a specialist or a generalist.

Alternatively, a more impactful approach is to develop a prototype or a proof of concept. This could be done in partnership with a client (acting as a sponsor) or as an internal project. Building a prototype demonstrates your agency's skills and expertise more effectively than any meeting or presentation. It’s a tangible representation of your capabilities—showing that you can walk the walk, not just talk the talk.

A prototype is worth a thousand meetings. If it's available online, potential clients can interact with it as a powerful marketing tool. It offers a “try before you buy” experience, which can be invaluable for business development. This approach showcases your expertise and helps capture and convert prospects by giving them a clear and interactive demonstration of your value proposition.

Test the MVP with Potential Customers

Once your MVP is ready, it’s time to test it with potential clients. This stage is crucial as it provides real-world feedback and helps you understand how well your services align with market needs. Use this feedback to refine your service offering and make necessary adjustments. This iterative process helps validate your approach and ensures that your agency’s services genuinely meet the needs of your target market.

Iterate and Improve

Continuously iterate and improve your service offering based on the feedback and insights gathered during the testing phase. This step involves tweaking your services, refining your processes, and re-evaluating your target market if needed. The objective is to evolve your services to align with market demands, ensuring your agency stays relevant and competitive.

Conclusion

Achieving service-market fit is a dynamic and ongoing process. Unlike product companies, agencies must continuously adapt their service offerings to the evolving needs of their clients. By defining a straightforward service offering, identifying the right customers, articulating a compelling value proposition, and iteratively testing and refining your services, you can position your agency for success.

In my journey from working within agencies to starting and growing my own, I’ve found that the principles of service-market fit are foundational. Understanding your team's unique strengths, clearly defining your niche, and continuously seeking feedback to improve are keys to building a resilient and thriving agency. Remember, the goal isn’t just to sell services but to solve problems and create value for your clients. Your agency will survive and thrive in the competitive landscape when you achieve this alignment.

In our next article, we’ll explore how to leverage your established service-market fit to create a robust sales and marketing strategy. We’ll provide detailed steps and a high-level example to help you effectively reach and convert your target customers. Stay tuned!