The Costly Mistake of Building Before Knowing Your Market
Dear Founder,
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Are you a founder about to engage your software development team or an external software developer to build your product?
If so, read on. I’m going to talk about a common and expensive mistake I want to help you avoid.
The mistake?
Building a product first and then figuring out your market.
This approach is back to front!
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THE COMMON SCENARIO
Let’s first paint the picture of the way it usually unfolds…
You identify a problem in the market that seems ripe for a new solution.
The market size looks tremendous, so you proceed to build the solution—the product.
Then you figure out how to sell it.
But when you reach this point, things often go pear-shaped.
Selling the product proves much harder than anticipated, leaving you wondering:
What’s gone wrong?
The issue lies in skipping over critical steps in the market research and discovery phases, such as:
market segmentation, selecting a specific market segment, and user research
– all before building the product.
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THE TWO MAJOR PITFALLS
1. Lack of Problem Validation with Users
Without validating the problem (and your proposed solution) with real users, you might end up solving a non-critical issue.
Even if the problem exists, it might not be one that users care enough about to buy and adopt your solution.
Making sure the problem you’re targeting is both important AND urgent in the eyes of the user is essential.
This?“pants on fire” problem ?is what you’re seeking to validate exists with the users.
And validating that you have deep clarity on the problem and its pain points to ensure your solution can be designed to be the perfectly suited pain killer for this problem.
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2. Building for a Large, Heterogeneous Market
Building a solution for a?large?market is the second common pitfall.
This mostly happens when a problem is identified in the market, and that problem applies to many customer or business types. (This type of market is what is called “heterogeneous”.)
It’s only natural to want to cater for as many as possible when building a solution.
However, marketing to such a?broad?audience requires?generic?messaging, which often doesn’t land with anyone, and hence fails to attract customers effectively.
By not selecting a specific segment (your beachhead segment) and not optimizing the product for that segment, your marketing doesn’t address specific value and specific benefits.
It’s no wonder this type of generic product and hence generic marketing doesn’t grab the attention of anyone.
In the end, using this “large market” approach, marketing and sales become vastly more costly and frustrating.
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A SPECIFIC SEGMENT APPROACH
Conversely, focusing on a specific segment allows you to tailor your product and messaging precisely to the user’s needs.
An example:
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Imagine you’re helping companies with inventory reporting in a warehouse.
Companies dealing with high-priced electronics, perishable goods, and low-cost items all have different needs.
A generic inventory solution won’t effectively address each segment’s unique challenges.
If it were a generic solution, the marketing would have to say something basic like: “I’m an inventory tracking product” in order to be relevant to all the companies.
However, if you target companies managing perishable goods, you can tailor your product and messaging to their unique needs:
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This leads to better engagement and higher sales conversion rates.
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OVERCOMING THE CHALLENGE OF LIMITING YOUR MARKET
It’s understandably difficult to intentionally limit your startup’s focus to just one part of your market.
However, this doesn’t mean you cannot go after the entire market.
A different approach is required to improve your chances of success: doing it across multiple stages.
Think of it like eating the market – one chunk at a time.
Focusing on how to minimize the risk and maximize your resources so you can eventually dominate the market is key.
Most of the work is done in the first stage with one specific market segment and one product.
Subsequent stages involve making tweaks to make the product relevant for the follow-on segments.
Amazon and Tesla are two of the best-known examples of this approach of going after one market at a time. You can read more about this?here .
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THE RIGHT APPROACH
Design the product and marketing from the beginning with a specific target market in mind, rather than building a generic product and trying to find a market.
The latter often results in wasting significant time and money through the need to redefine your product, solution, problem, and market segment.
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HERE ARE PRACTICAL STEPS TO AVOID THE PITFALLS
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UNDERSTANDING FOUNDERS’ PERSPECTIVE
It’s worth reflecting on and unpacking some additional factors relevant to founders in this situation.
Founders often seek affirmation for their decisions and choices, especially after committing to significant steps like hiring a developer to build their product.
It’s natural to want reassurance that they are on the right path, and they are often open to support that aligns with their plans.
When founders are deeply engaged in execution mode, they often exhibit strong confidence in the strength of their strategy.
This focus can sometimes mean they are not actively seeking additional advice, as they trust in their plan’s viability.
When founders prioritize building their product, they are understandably passionate about bringing their ideas to life.
While this dedication is admirable, exploring the market early and gathering meaningful feedback during product development can significantly enhance their startup journey.
This ensures their product resonates even more strongly with their audience.?
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In conclusion, if you’re a startup founder about to engage a software development team, take a moment to reflect.
The outlined approach will save you time, money, and effort, ensuring that your product development aligns with market needs from the get-go.
By avoiding the pitfalls of building a product first and then finding a market, you set your startup on a path toward success.