One of the most common questions asked by up-and-coming entrepreneurs is “ What matters most for a startup’s success? ”
The answers vary depending on who you ask. Some say it is the market you choose or the team you surround yourself with while others believe it is your product.
I believe the market is always the winner. History has proven that statement right time and time again while seasoned entrepreneurs have also often stated that your choice of market can predict how successful your startup will be.
Product-market fit is key. The right description of a product-market fit is creating a great product that will compel people to purchase it at the price you quote.
So how do you find a product-market fit and come up with the right product strategy? Well, that is what I am here to talk about.
What do you mean by product strategy?
This is generally defined as what you plan to do with your product in the near future. The reason we concern ourselves with a product strategy is that it allows us to gain a product-market fit.
The product strategy must contain answers for 3 questions:
What are you selling?
Who is your target customer?
How can you measure success?
Who is your target customer?
How can you measure success?
These 3 questions can be broken down further into 8 constituents.
- Who are you selling to and what is the problem that you can solve?
- Size of the market
- Who are your competitors?
- How will you attract customers to purchase your product i.e. value proposition.
- Differentiation strategy
- What are your customer acquisition strategies?
- Strategic pricing and monetization
- Key performance indicators
While there are several other factors, these are just the essentials that we need to worry about.
Now back to the topic.
A great product strategy begins with research and its easily one of the more difficult things to accomplish. We begin with…
A great product strategy begins with research and its easily one of the more difficult things to accomplish. We begin with…
…Finding your target audience
Every successful product in the internet age has two common attributes. They find a narrow target audience and a problem that the said audience is experiencing.
How do you figure this out? Let’s have a look.
Put yourself in the shoes of the target audience – this allows you to understand the real issue as well as the specific factors you need to prioritize.
Decide on the perfect target market – you will be able to settle on a larger market but try narrowing it down to a smaller audience who simply cannot do without your product or service.
Interview customers. What better way to narrow down the problem than ask the customer himself?
Create a buyer’s persona. This persona must include personal details like age, gender, lifestyle, income, work and more. More details about the buyer allow you to envision things from the customer’s perspective and prioritize problems accordingly.
Keep the end users and customers separate (Business-to-Business)
Estimate the size of the market
There are many approaches to this, but you can opt for the two most common methods.
Top-down analysis
Bottom-up analysis
Who are your competitors?
There are two reasons this is necessary.
You need to identify the competitors to understand the size of the market. Knowing the competitors will allow you to recognize the market share you can win over.
You can figure out how your target audience is managing without your product.
Detail the value of your product
The general idea is that a value proposition is about highlighting what’s innovative about your product. That’s hardly the case. Instead, focus on:
The promise you make
Why your competitor’s product can’t match yours
Making sure the advertising language is compelling
Making a true promise. Do not "over promise"!
Differentiation Strategy
When you are at this step, layout the advantages you have that can increase the value:
By diversifying your sales means (highly recommended), you will have several funnel variations
CAC = marketing cost/number of acquired customers.
In the end, your product could be less expensive.
Take for example, Google’s Pixel line. They were packed with Google’s unrivalled AI but in an uninspired design.
What are your customer acquisition strategies?
Your product might be the best, but no one will purchase it if you don’t market it well. To do that you should:
Narrow down the target market. Your buyer persona will be of great help here.
Note down your key channels and focus on them. What is the shortest way to find new customers and make clear the benefits of your product?
Do you know your sales funnel? This is the process which begins when a customer finds your product till the purchase. Outline what you need to do and who will be responsible for each stage.
Have you calculated the cost of customer acquisition (CAC)?
Make the strategy a sustainable one.
Strategic pricing and monetization
There are many ways one could monetize their product; a subscription based product, freemium, transaction fees and more. The best one depends on the product you are selling.
Pricing is a tad bit trickier.
You could opt for competitive pricing but that makes it harder to maximize your income.
A value based pricing might see better results in a nascent market where the market does not have a specific expectation where the price will depend on the perceived value.
Measuring success
Last of all, you need to be able to understand if the product is successful.
It is recommended that you prioritize KPIs (key performance indicators) that match the life cycle stage.
For a newly released product, great ROI should not be expected. Acquisition and engagement are indicators you should look at. As the product grows, you can start to look at monetization metrics. When the product has finally peaked and sales are stagnant, you should be checking retention KPIs and net promoter score.