So what has 24 years of business experience taught me? Well, that list would be rather long and maybe some day I will write a book or three about it all, but I can try to summarize some important points here and share them for anyone who may care to read.
Start with a market
The true purpose of any business is to service a market. You might hear a lot of advice about the importance of mission statements, finding your company “why”, etc. In the end, the “why”, the reason you exist, is to provide a service to a specified market.
What is a “market”? It’s a group of people or companies that have a defined problem, and are willing to pay money to solve that problem. To service a market, then, is to provide a solution to their problem at a price where you can make money. Not feeling super inspired? That’s ok. Not all companies do inspiring work. Some just make toilet paper, for example.
This may seam pretty obvious when you read it, but it is in fact the #1 thing businesses get wrong, resulting in any success being a fluke of chance. Most companies start when a founder or founders discover a problem, think of a solution, and then build their solution and take it to market. The problem with this approach is it skips the most important step of any business. Just because YOU have a problem, doesn’t mean others do, and certainly doesn’t mean others will pay sufficient money to solve that problem so that you can make a profit. Put simply, most companies fail to ensure that a market exists for their product.
This is often referred to as “product-market fit”. Founders too often fall in love with their own invention, and when confronted with a non-existent market, opt to push their product idea instead of making needed changes. They will put good money behind bad, refer to people as “stupid” for not seeing their visionary ideas, and push their company off a cliff before recognizing that they are trying to sell something nobody wants.
This is all backward. Free market systems are demand-driven, not supply driven. Markets are made of people and those people make choices. If your product or service solves a real problem at a profitable price, you WILL make money. How much and how fast depends on the size of the market along with other simple factors. When people say no, when they tell you that the market you think is there is not, you must listen.
Market research companies exist to help people identify markets. They will survey people, run simple experiments, and try to identify problems people have that they would be willing to pay to solve. It’s not an exact science, as people often lie, or simply don’t know what they want until they see it. Often times too, these companies will conduct experiments on too small a group of people to produce meaningful statistics. Know that any data taken with less than 1000 samples is basically useless.
People see your product through this problem solving lens. They won’t care about innovations in behind the scenes processes like manufacturing, number crunching, etc. They have a problem, and if you solve it, they might give you money for it.
Marketing people and firms
So knowing this, the most important question you need to answer is “who is our market”. But as stated above, the market isn’t really defined by demographics like age ranges, income levels, etc… its defined by problems. If your marketing person or firm cannot answer the “who’s our market” question in this way, RUN AWAY. They aren’t top tier. Instead they’re just someone who goes through standard playbooks.
You see, you can’t develop a meaningful marketing strategy if you don’t even know why people would buy the product; WHO the market IS. Any idiot can watch YouTube videos these days and learn about placing Facebook ads, or Podcast, etc. None of that will do you a damn bit of good if you don’t know who will see what, and most importantly why they would care.
Everyone loves a good story right? And marketing is really story telling. But it turns out, not everyone loves every kind of good story at every moment. Great movies have flopped at the box office, while some terrible ones have made bank. This happens because almost all decisions people make are emotionally based. They are all driven off “why” statements.
Why do people buy insurance? If you’re selling insurance, you might want to know this. If you’re trying to build the next hot social network, you better understand what emotional needs you’re fulfilling. If you ask your marketing people about this, and they can’t answer it, you’ve got a lot of problems.
So now suppose you already have a product (many of you do), and suppose you’ve got some issues getting it sold or used. Maybe your app’s retention rate is trash, or your gizmo isn’t pulling in customers left and right despite your hefty ad spend. What do you do?
Well, definitely DON’T do what I have seen more times than I’d like. Don’t act like a drowning man, flailing about like a toolshed hoping to find something to grab on to. Trying anything and everything is just a recipe for panic and wasting a ton of money. You’ll loose EVERYTHING do this.
Instead, make sure first and foremost to “get the data”. If your marketing people are asking for surveys, fire their asses. Surveys are for donkeys. They tell you basically squat, as people lie. Don’t waste your time. Rather, make sure your process has every bit of analytics it possibly can.
Truth in human behavior can only be found when people don’t know they are being monitored. With technology products this is relatively easy as there are dozens of tools out there. With physical products, you’ll need to be more crafty. Watch them as they pick up your product, look at it, as questions etc. Look for emotional disconnects.
Make money, not love
You’ve got a mission. Great. Change the world, make it better, blah blah blah. Other than Gandhi and a few others, nobody has changed the entire world completely broke. Running a company takes capital, and growing it so you can fulfill your world changing destiny requires profits.
Your pricing needs to be based on demand and supply, not desperation and fear. Any moron can sell something by giving it away. Good sales people don’t leave money on the table, and good marketing firms don’t build strategies around discounts and freebies.
If your product is valuable, people will pay for it. If you have to give it away just to get attention, your business is in serious trouble. This is another sign of a fraud for a saleman / marketer… don’t be fooled by this. The best way to build a profitable company is to find a market and give that market what it wants: a valuable solution to their problem.
I don’t care what you make and for who. The rules that apply here are the same and if you follow them, you have the best possible chance of success. Remember the 90/10 rule and know that 90% of the people you will meet, the self proclaimed experts, are full of shit. If you genuinely know your market and bring them value you will make money.