If you are looking to educate the market about a new product or solution you must understand that you are planning to provide a product or service that nobody is currently looking for. People who aren’t looking for things tend not to find them. Fundamentally their mind is closed and you have to work on creating a space where the potential buyer will listen. In today’s market where consumers are bombarded by messages at every turn, this is very difficult.
There are exceptions to this and they tend to run along viral marketing lines. In the late 70’s when I was working at Texas Instruments we introduced a calculator that did conversion from decimal to hexadecimal. Nothing like it existed and the adoption was immediate and swift. The size of the problem was so large, the solution so elegant, the market target so well defined and so communal in nature, that the product took off like a rocket. So you can do it but I would caution that this is the exception, not the rule.
The key thing to remember is that adoption will be slow, marketing expenses will be high, and you had better have a plan to lock out competition because they will wait like vultures for you to educate the market at your expense and then come in on your heels and steal your prospects.
Let me give you one more example of this. In 2001 I was VP of Marketing for PhotoAccess, a startup Internet company providing digital photo storage and print making. In late 2001, we and several others, including Ofoto and Snapfish, had spent significant money educating the market about photo hosting. We had attempted to form a relationship with District Photo who was the largest independent photo finisher in the United States. Wisely, District Photo didn’t bite and instead sat on the sidelines as the flurry of start ups built market awareness. In late 2001, the venture capital market dried up and start ups were forced to sell out. PhotoAccess was sold to Photoworks, Ofoto was sold to Kodak and Snapfish was sold to District Photo. To my knowledge, none of these companies recouped the investment that was put into them, while companies like District Photo got market awareness at bargain basement prices.
Does this mean you shouldn’t introduce products and services if you have to educate the market? No, but it does mean that you better have a plan on how to leverage your investment and maintain your market dominance once competitors come swooping in.
You now have a value proposition and well defined target customer set that you believe has a high need for your solution. Before you move forward you need to determine what the customer’s alternative solutions are. Is someone already providing a solution to this problem that directly competes with you? If so, then there are several questions you need to ask yourself. But for now, let’s stick with a situation where there are no obvious alternative solutions that compete directly with your plans.
You need to ask yourself how people are solving the problem today. Don’t say that they don’t have a solution because they do. They are finding a way to live with or to mitigate the problem. This is your current competition and it is what you will have to displace.
To do that you will have to create a new category of product or service in your customer’s mind. Said another way you will have to educate them that this new category exists. They are not looking for it because they think they have to live with what they have. You have to interrupt their train of thought and get them to pay attention long enough to show them they have a problem they didn’t know they had.
This can be an expensive proposition to go through in terms of both expense (in advertising) and calendar time to break through. You must ask yourself a) is it compelling enough to get the customer to stop and pay attention, b) do I have enough dollars to establish that position in the customers’ minds, c) does the money spent provide and adequate ROI, and d) do I have a way to capitalize on the money I will spend to educate in a way that keeps other companies from capitalizing on MY expenditures?
To lock out other potential competitors from cannibalizing your educational efforts you either need to move extremely rapidly in educating the market, b) have a patent position that protects your interests, or c) have a technology advantage that provides a clear time advantage over potential competitors.
Traditionally, entirely new product categories have taken on average ten years to reach maturation. This is true for refrigerators, desktop computers, television sets and many other products. In today’s hyper-accelerated Internet society it appears that the adoption curve has accelerated dramatically. This is especially true of online services delivered by the Internet. Many companies have chosen to drive to rapid adoption using “free” as a tactic because of the low marginal cost of production. While this may be a good and valid strategy one must realize the difficulty in changing customer behavior down the road when you seek to institute a pay for service model. Consider this one carefully.
You have an idea for a new service or product (I am going to refer to it as a product for simplicity’s sake). god forbid you’ve already built the service or product. You think it is a great idea and you don’t know of anybody doing it or doing it as well as you plan. Now, sit down and take the time to think through the buying process.
First thing is who do you expect to buy your product? Don’t say everybody. You need to articulate very, very clearly who you are going after and who will be attracted to your product. Try to delineate the target by easily measurable criteria as it will be easier to find data to quantify the size of the market and it will be easier to target your advertising and promotion later on.
Let’s use a hypothetical example. Let’s say you have an idea for an internet service that provides “human spam filtering” for email. You plan to combine automated spam filtering with a human back up and radically improve the user experience. Since virtually everyone uses email and has some kind of spam filter, you believe everyone is your target. Think again.
To narrow the target, consider what unique benefits you are bringing and what segment is likely to benefit the most from it. In this case, while everyone might benefit some, it might be the well-paid middle to upper level manager in a business setting that might benefit the most. A flood of junk mail in the inbox might mean a missed email that is critical while an incorrectly spammed email might result in similar consequences. The criticality of missed opportunity among lower paid workers or consumers may be too low to drive demand in these groups.
Notice that this exercise results in a better definition of the value proposition and crystallizes the product requirements around the ideal customer.
Iterate this process several times. Identify several target customer segments if it makes sense. Refine the value proposition and the target definition. The more concrete you can be about this the better you will be able to move forward with confidence.
Marketing your product starts way before you are ready to launch. In fact, in most cases it should start before you begin design and development. I think that the lack of doing this is why so many start ups don’t even remotely resemble the company they launched as 24 months after launch. They often find that the product or service they came out with misses the mark. If the start up survives it is because those initial customers came back and said, “what you have done is only minimally interesting, but if you were to change it like this…it would be really valuable”.
Now don’t get me wrong, this is perhaps a viable start up strategy. The only problem with it is that it tends to burn time and dollars in a very ineffective way. It would be much less expensive in both time and dollars to test the market using marketing tools than completed product! (how many entrepreneurs do you think really do this though? not many i’ll bet. They are too eager to start coding or pouring cement…as the case may be.)
So, here is the upshot. If you are 70% of the way to your product and haven’t done the market research, start doing it. If you are thinking about starting a product development, stop and do the market research first. If you think that the market research sounds too hard and laborious, it is. But it will pay off in the end.
Before I go on about how to do market research, in my next blog, I will talk about what you need to do before doing the market research.
In the world of the Internet, cheap or free server time, and open source software almost anyone can start a company on the cheap. There are a lot of good ideas out there. Usually, a dozen people have the same idea at once or virtually at the same time. Voila! The market goes from completely open to saturated in months.
Witness, social networking, especially targeted at cellphones. I did a search of Seattle start ups the other day and found dozens of small social networking purveyors many targeted at some sort of cellphone experience.
My take on all these creative juices and frenetic activity is that it is great. It is what democracy and free enterprise are all about. It models Darwinism to the nth degree. And for me it exposes the truth of market forces: the winners and the losers are largely separated by market execution rather than product execution. I love it.
In this blog, I want to take you through a journey of marketing a start up. An adventure that is challenging, inspiring, and evocative.
