Most of the entrepreneurs I have met over my long carrier had great product ideas. Yet, the failure rate of startup product companies is at astounding 73%. Have you ever thought why?
“You could have a million ideas, but they’re all worthless if you don’t get them done. ” – Lauren Amarante
The problem lies in the execution. Historically, entrepreneurs are driven by passion, not by wisdom. When an idea comes to their brain, they eagerly want to conceive it as a product. However, the harsh reality strikes them when they actually take the product to the market. Having launched more than five products in the last twenty one years, I have now realized that it takes more than just an idea to get a product successful. In this article, I will discuss various facets of new product strategy and provide a guide, to formulate a good go to market strategy which can help entrepreneurs to be financially successful. Let’s get started.
First of all, let us look at some of the common issues that a startup company faces when they take their product to the market. I will list down a few which I have faced over a period of time. You can add more if I missed some.
a) Issue of Product Validation: The first question a customer is going to ask when you take a product to the market is, “Who are your current customers?” If you say that you don’t have even a single customer, it becomes very hard to convince the prospects to buy. You may propose 10 value propositions but still, no one else have started realizing the value of your product. This is the first and foremost challenge a new product has. Your ideas are not validated in the real world.
b) Small market size: Even if you have a great product, but it fulfills the need of very small market, it is highly unlikely to earn profit from the product. Invariably, the cost of development exceeds the revenue generated from the new product. Entrepreneurs being very passionate about their product, put in lot of time and effort in developing it. All of it is cost. Please understand that market may not be as passionate about your product as you are.
c) High cost of initial development and customer acquisition: To get your first few customers, you may have to spend a lot of money, and that’s what entrepreneurs do. They expect that with time, the product will go viral as they will get to world through mouth references. Due to this phenomenon, they expect the customer acquisition cost to come down. Most of the times, it doesn’t happen. The product may not go viral enough to match the cost you are incurring. The only difference is, earlier you were making higher losses, now you are make less loss.
d) Competition: Entrepreneurs often forget about this critical aspect of business. Understanding competition is very important. We will discuss it in the next few paragraphs.
We have seen enough of problem statements and reasons for failure. So let’s hurry up and move to the solution part. Below, I have put up few guidelines which I myself had followed and perfected over time. Here we go.
a) Never build a product just out of passion: A product which is inside-out is bound to fail. A product should solve the actual problems and fulfill the need of the customers. It should be outside-in.
b) Validate your idea; Get the first paying customer: It’s understandable that you are passionate about your product and believe in its success, but as I discussed earlier, validation of the idea is of utmost important. Build a quick prototype, take it to a few of the prospects and see if they are interested in buying it. For a lower cost indeed, but if they are willing to pay for your prototype, this means your idea fits into the market. Usually we all go and ask the prospects about the value of our ideas, but we never ask them to pay. This step is very important.
c) Do a market research: Get a clear idea of how big the target market actually is. This may seem expensive initially but consider it as an investment. In fact, investing in market research is more fruitful than over investing in product itself.
d) Know your cost, and control it: Cost control is an art. In the search of an ultimate product and lots of features, we tend to put in lots of money. However, please understand that perfect product is a myth. No product is perfect. 80% of the cost goes in building in 20% of the features. Identify this 20% features part and cut it out. Good enough is awesome.
e) Keep it simple: Customer can get value out of your product only if they can use it. Make sure your product delivers the values in a simple manner. Your product may be having 50 features but customer can easily use only 5. You actually wasted your money in building other 45 as customer is not going for them.
f) Understand competition: Products compete at various levels. We usually see one or two aspects of it. Can you imagine a restaurant competing with movie theatre? If not, then you are missing something. A customer, who has $10 to spend, may go for movie or to a restaurant. They do compete at budgetary level. Similarly products compete at form and category levels too. Have a clear understanding of the competition and have a good plan to tackle it.
There are lots of aspects to the ‘go to market’ strategy which, we will be talking in upcoming articles. I think, for now the above guidelines should help you a bit in launching your product successfully into the market. All the best!
Author is an entrepreneur with an experience of having launched 5 new products into the Indian market. His most recent launch is Tula Projects, which is document management and collaboration software for architects .