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Product-to-Market Fit: The Foundation of your Business

This is where successful businesses start. It’s the equivalent of the foundation that goes under a building or the roots under a tree.

Everything else your business ever does is to support this one thing. Without it, you have nothing to communicate to customers and you have no operations that need to run smoothly. Customers won’t even start the journey without this.

It is product-to-market fit. It’s a question of whether your product (or service) meets the needs of the market.

It’s much harder than it sounds. It’s hard to get initially and it can slip away from you as market conditions change or new competitors enter the market.

The next several blog posts will dig into it in more detail. This is an overview of the major parts of it:

  • Target Market Definition
  • Market Requirements
  • Market Validation
  • Product Development
  • Solution Validation

Target Market Definition

I’ve written a bit about target market before, in Target Market MontageIt’s Not You, It’s Me, and The Perfect Gift.

I’ll be digging into it a lot more in the more detailed post coming, but it’s basically the people you want to sell to, how many other competitors are already selling to them, and what the conditions are like in the market.

The more you understand your target market, the easier it is to sell them something they will love.

Market Requirements

Once you know WHO you want to sell to, market requirements are WHAT those people want.

Market requirements have two levels to them, which you can think of as big picture and little picture.

  • Strategic questions (big picture): Why are they buying? What will they use it for? How will they use your products in combination with others they own? What do they like? What don’t they like? What frustrations do they have with their current options? What level of quality do they prefer? Are they willing to pay more for quality?
  • Detail-level questions (little picture): What colors do they like? What materials do they prefer? What kind of finish do they like best? What style to they like best? (font, layout, graphics)

The kind of unspoken thing here is that these requirements fall into two other categories:

  • Currently unmet needs: these are the things that customers tell you they want, either directly by asking for them or indirectly by complaining about not having them. This is where most entrepreneurs focus heavily on the unmet needs.
  • Currently met needs: these are all the things that people can get out of products currently on the market. Customers tend not to talk about them much because these needs are already met and they don’t think to mention them. This can be a major problem for entrepreneurs who focus heavily on unmet needs, but completely miss many currently met needs. Customers won’t switch from a product that (for example) meets 6 currently met needs and does not meet 1 need for a product that meets that one need (which they complain loudly about) but does not meet the 6 other needs (which they never mention).

You can also think of these as “things the customer wants and has” and “things the customer wants but doesn’t have.”

Being able to collect both requires patience and empathy with your target market.

Problem Validation

Validation just means “making sure you’re right before you move on”.

Validation requires you to talk to actual human beings and each thing you’re validating is a yes/no question. You’re not asking “what would you like?” You’re asking “is this correct?” No matter what the answer is, it can be helpful to ask “can you tell me more about why?”

This is the first of two times you’ll see validation in Product-to-Market fit. This time, you’re testing to make sure of a few critical things:

  • Is there actually a group of people who self-identify the way you think they do?
  • Are there enough of them to make a profitable business?
  • Can you reach the target customer you want to reach?
  • Is your list of both their currently met and currently unmet needs correct?
  • Do they care enough about the unmet needs to pay for a product that meets them? Later on, you’ll find out this question has two components: “will they pay for ANY product to fix this?” and “will they pay for MY product to fix this?”
  • Will they pay enough to make the product/service profitable?
  • Are there competitors? If so, what are they offering? If not, why not?

You will want all of these answers to be “yes” before you start developing products for this target market. Otherwise you will find yourself struggling later.

Product Development

This is when you get to be creative and have some fun.

You know who the product is for. You know what they like and don’t like about their current options. And now you have a blank slate of what you want to make or sell to them. Most of all, it needs to be for them… it can have your personality and brand to it, but it needs to be for them. The customer is the one buying it, not you.

That’s where people get stuck.

When they are making or buying for themselves, it’s easy. When they are doing it for someone else, it’s much harder. I wrote about this a while ago, relating it to someone who is really great at selecting gifts. It takes a high level of understanding and empathy for the customer.

Once you narrow down your focus so it’s on the customer, and not you, Product Development has several aspects to consider:

  • Do you believe it meets all of your target customers currently met and currently unmet needs?
  • What features are different from the competition?
  • What benefits are different from the competition?
  • What advantages does it offer compared to the competition?
  • Can you make/offer it profitably at a price the customer is willing to pay?
  • Can you make/offer it in larger quantities as the business scales up?
  • Is it something you could teach to someone else when the business starts to grow?
  • Are there ways to make it faster/more efficiently than you are now? (either to lower labor costs or to keep up with demand)
  • How can you get the necessary parts and materials cheaply but at the right quality level?
  • How will you check for quality, making sure the items are made correctly?
  • Can you ship it at a reasonable price?
  • Can you ship it without it getting damaged?
  • How well does it hold up under normal wear and tear?

These are things you want to consider BEFORE you show it to your customers. That way they see your best effort, something that if they ask “could I buy it today?”, you are ready to go. You might not have the inventory in stock, but you don’t suddenly find out that it costs more to ship than to make or that you can’t get the supplies for three months.

It’s a lot to consider, but it’s important to figure all this out in advance, both to get the best results now and to have fewer problems later on as your business grows.

Solution Validation

This is the final test.

After making sure you know who you are selling to, what they want, and come up with a possible product for them, now you have a possible solution for them and you want to see if your target customers love it enough to buy it.

  • How will you get early feedback from customers on your product ideas?
  • How willing are you to change it if they don’t like it?
  • Does your product meet their currently met and currently unmet needs?
  • Will they pay the price you plan to charge?

One of the hardest parts will be asking neutral, non-leading questions. You don’t want to influence the customer you are interviewing.

Closing

I know… this was a huge post. It’s a huge concept, but it’s also the foundation of your entire business. This is the kind of post you might come back to a few times in order to absorb it all.

I’ll be digging into these concepts (and more) in the coming weeks.

If you want to keep the discussion going and get daily tips on running your business, join my Facebook Group! (and be sure to answer the questions… I only accept new members who answer them)

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