Before Falling in Love With Your Great Idea, Find Out If Anybody Wants It A remarkably large percentage of entrepreneurs do far too little market research before launching their product.
By Greg Petro Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
What's the top reason why startup founders believe their companies failed? According to recent research by CB Insights, it's that they made a product no one wanted.
As entrepreneurs, most of us started with an idea, did some research and then dove in head-first, developing the product and building a company. It seems obvious, but you can't blame entrepreneurs for moving forward with a product they thought would be a success. Wouldn't it have been great to have had a crystal ball that could tell you exactly how the market would react to your new concept and how your startup may find (or miss) success?
When I started First Insight in 2007, I had been a retail merchant for 15 years and then spent several years working in retail technology. I personally experienced the "pain" of making multi-million-dollar buys on new products with no predictive data on their potential success rate, only to see half of these items fail in the first year and show up on clearance racks.
Related: 9 Reasons Why Most Startups Fail
I was not alone. Gartner has stated that more than 50 percent of new products fail. Other studies have placed that number as high as 80 percent. I lost a lot of sleep after making those buys, so, I set out to build a software product and a company to solve this purchasing problem.
Even though I knew the problem and the customer well (I had been the customer myself), I did some market research to understand the size of the opportunity. Ultimately, an intimate understanding of the customer is the key to any successful business model. But the challenge is that as a business grows, the lead decision maker or designer gets further and further away from the target customer: They fall in love with the products they've created and forget what their customer truly wants.
Below are a few ideas that will help avoid this pitfall. Success is about knowing your customer, solving their problems and providing a catered solution, all while sourcing input from the bottom up to find answers that will provide incremental value.
Think about the consumer's needs first
Knowing what the consumer needs seems obvious but is too often overlooked. Before you fall in love with your own ideas, get intimate with your consumers. In other words, find the need of the consumer instead of assuming or creating a need that fits your solution. It is imperative to start with a problem, not a product. In my case, the problem I was solving was "retail buyer insomnia."
Fortunately, increasing usage of technology has created vast amounts of data that can be leveraged to take the guesswork out of understanding your consumer. New social listening and analytic tools can mine this data to provide insight into what your customers are looking for. You don't drive a car looking in the rear-view mirror, and you shouldn't take a risk on a new product by looking at historical data. But with any "voice of the customer" solution, it is critical to listen to the right customers. Many times people who share in online forums are those who have extreme views (either positive or negative). The right technology can help sift through the noise to find the "signal".
Related: The Top 3 Reasons Startups Fail, According to a Man Paid to Save Them
Stick to the problem.
Once you identify the problem, make sure your product is the solution, not just a cool gadget that is somewhat qualified to address it. For example, a phone may have the best camera in the world, but if it doesn't meet the basic needs of sending messages or receiving calls, it won't sell. This also happens when a product chooses to tackle too many problems but doesn't address any of them well.
Don't get blinded by the power of your own amazing ideas. Stick to the problem at hand. A "customer-first" mindset will ensure long-term success.
Size matters – is the market big enough? Keep testing.
Any given market will have dozens of products claiming to solve the same problem. Before you choose to enter, research whether the market is large enough for you to make an impact and a profit. A new and innovative product could change the market, but can it be done profitably?
Take Taco Bell—formerly known as Bell's Burgers. It's not commonly known that Taco Bell was once a burger stand, but it was when it was first founded post-WWII. Glenn Bell opened Bell's Burgers just as everyone else, including McDonald's, started flooding the market with burgers. He noticed this and pivoted to make tacos. Now, Taco Bell is one of the biggest franchises in the world.
Keep a finger on the pulse of industry trends to make sure the market is not going to pass you by while you are preparing to enter. Again, consumers are a great resource. Tap them for insights early and often.
Related: Brutal Lessons From 4 Failed Startups
Always provide incremental value
The demand for a solution is only as great as the need it addresses. A bottle of water is priceless in the desert but useless near a spring. Isolate your market and create your solution, but make sure it tackles the problem in a singular and differentiated fashion. When multiple products meet the same need, find the aspect that is overlooked and capitalize on it.
Amazon did this splendidly with its Kindle. They introduced a revolutionary new product that provided a new spin on the paperback. As other e-readers came to market, Amazon introduced new aspects that increased the Kindle's value. There was PDF support, e-ink, size changes for better portability, a touch screen and finally the most recent iterations that allow you to read, email, play games and use social media. They never lost stride and continued to differentiate as others moved to compete.
Starting and maintaining a successful business is more than having an amazing product. The key is finding a true problem among customers, understanding the space, and within it, forging a specifically catered solution that becomes invaluable by comparison. Test potential customers and take the time for market research. If you follow this bottom-up approach, you'll have crystal ball-like insights in no time.
Related: 10 Lessons to Learn From Failing Startups (Including My Own)
