Over and over again, people spend fortunes building a product or service, only to discover that nobody wants it. This is called “lack of market need” and according to CB Insights, it is responsible for over 42% of business failures. These are the kinds of dumb ideas you see people pitch on TV, or that your friend who fancies themself an amateur inventor mentions after a few drinks.
Before you run out and start building, you should identify a Minimum Viable Segment of people you intend to serve with your product. Those are your early adopters and people most in need of it. They are also the most affordable to attract. According to Y Combinator, one of the key determining factors in predicting a business's chances of success is whether it can onboard big companies early.
Many people swing for the fences and build out entire platforms with features that nobody needs or a service few people will use, because they didn’t test the market first.
Founders always fall in love with their ideas; family and friends play along because they want to support a loved one, but please don’t rely on them for honest feedback. Instead, look for outside, unbiased sources of feedback — people who will tell you exactly how they feel. For example, the most significant benefit of crowdfunding platforms isn’t raising capital. Side note: having to manage hundreds or thousands of tiny investors creates an administrative nightmare. Intelligent founders use crowdfunding to assess market needs by gauging customer interest. When you raise a few million dollars from thousands of people, it demonstrates a market and gives you influencers who will tell all their friends about it. The only thing that matters is selling people something they want, so failing to prove the market, whether through crowdfunding or in some other way, is a critical error.
Once you prove a market exists, one of the most efficient ways to test a product is to bootstrap a Minimum Viable Product, where you build only what you need. Many people swing for the fences and build out entire platforms with features that nobody needs or a service few people will use, because they didn’t test the market first. It’s all about solving problems that are big enough and worthwhile enough.
Investors and founders are always interested in market size, but even when market size is promising, it still ultimately comes down to having Product-Market Fit (PMF). This is something that 17% of startup products get wrong. The interface is unintuitive, or the physical product is unfriendly to customers and hard to use. This has happened to me at least once. My business took off like a rocket at the beginning of the adult advertising network revolution, but then as time passed, the user interface did not evolve since we were busy with other things. One person described our interface as “stone-age at best.” So we spent years rebuilding it and relaunched it last year. We improved the product-market fit, and now the platform changes more often because updates roll out every week. For some longtime clients, it’s been an adjustment, but new customers love it.
Marc Andreessen once said, “The only thing that matters is getting to product-market fit.” For anyone starting from scratch, getting PMF correct as early as possible is critical, because whether you are bootstrapping or have investors, you will eventually run out of money or time.
Talk to your customers. They’re the ones who will give you the most honest, and often brutal, feedback. They complain because they care, and they want you to fix it. People who don’t care quietly disappear and never tell you. At the same time, remember that giving customers whatever they want is impossible. Customer feedback will help guide you, but making decisions about what to do with that feedback is your job. True visionaries recognize that people often don’t know what they want because they’re stuck in existing paradigms.
Remember when mobile phones were getting smaller and smaller? Customers sought smaller phones, so brick phones got smaller and eventually turned into flip phones. It took a visionary to decide that flip phones were not the best products for consumers, even when customers didn’t know an alternative could supplant it. That shift was to build a phone with a screen, and now phones keep getting bigger and bigger.
Look for the most objective metrics possible, like traction on your website, abandoned carts, completed sales and rebills. Don’t take social media statistics seriously in determining whether you have a viable product because all of that can be gamed and could be the result of good marketing rather than a good product. Posting a cute kitten photo will get a thousand likes, no matter what you’re selling.
Above all, if something isn’t working, either fix it or get rid of it. Anything causing problems or hurting the product or service needs to go, no matter how much time or money you’ve invested in it. Keep iterating and adapting your business and its benefits until there is a pull from the market. If you suddenly start to see significant growth, you’ve gotten something right. Even if it’s gradual and not “viral,” it will grow and compound over time.
Once you get to the top, stay there by using surveys and getting feedback from customers, understand your metrics, track customer lifetime value and acquisition costs — and then scale, scale, scale.
Juicy Jay is the CEO and founder of the JuicyAds advertising network, as well as the founder of Broker.xxx, which helps people buy and sell adult websites and businesses. He also provides executive consulting, business strategy and marketing services at Consulting.xxx.