It’s a hard truth that having a great idea isn’t enough to sustain you. According to the Small Business Association, 50% of new small businesses will fail in the first 5 years. According to Fortune, 90% of startups suffer the same fate.
Our job is to help you be part of the 10%, and doing so means you need a strong business foundation when developing any new digital product. There is no shortage of startups these days, so the difference between success and struggle can boil down to simple fundamental oversights.
The 3 Most Common Pitfalls
When we review the reasons products and businesses fail, we start to see trends. Start out ahead of the competition by avoiding these three common issues.
1. Poor Product-Market Fit
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It may sound simple, but many startups throw cash at their product without carefully researching what market it belongs in. As business owners, we often inject our own assumptions of what people want and who might want it—and often those assumptions are challenged when real, tangible data is collected.
When you achieve good product-market fit, your customers recommend you to their friends, are loyal to your brand, and don’t need much convincing to buy what you’re selling. In contrast, if you’re finding that you have to work hard to make a sale or that customers aren’t engaging with you past the first few interactions, you likely have the wrong product or are marketing it to the wrong customer base.
Think of recently failed Teavana, a subsidiary of Starbucks. Starbucks, of course, is massively successful, but not really because of their coffee. Starbucks stores offer an experience—a place to go and study, hold a business meeting, or just kill some time. Their product-market fit was with millennials who were after more than just a quick cup ‘o joe, and now it’s nearly impossible to go more than a block without seeing a Starbucks location. Teavana, on the other hand, was mostly found in retail spaces. It sold tea but offered nowhere to sit. It focused entirely on the product and not on the experience and, by doing so, they completely missed what made Starbucks so attractive.
2. Defining Product Buyer vs. Product User
Who buys your product isn’t always the same person that uses it. When it comes to sales, you need to focus on the product buyer rather than the user, or you risk coming up short.
Think of diapers. The product user for diapers is, well, babies—but it certainly wouldn’t make sense to try to market them to infants who can’t even talk, much less make a purchase. Instead, diaper companies market their products to parents, because parents are the product buyer.
We often encounter this scenario in enterprise organizations. A company invests in state-of-the-art software, without consulting the employees, to later be surprised with extremely low adoption rate or user engagement. It’s important to consider the needs and habits of the users, which in this case would be the employees.
It’s worth it to really define who will be using your product and who will be buying it. You may be surprised to find out it’s not the same person.
3. Choosing the Sales/Distribution Channels
Related to product-market fit and product buyers, successful launches choose the appropriate sales channel for the audience. A product geared towards millennials and Gen Z will likely do well when marketed through social media, but a product meant for seniors would not realize the same success. The key is to know where your product buyer spends their time, how they make their purchasing decisions, and then deploy an intentional strategy to reach them in their preferred environment.
Even within populations there are nuances that influence behaviour, such as region, interests, etc. Invest in market research from the get go to avoid costly mistakes later on.
If you can start your new business or product by having a clearly defined product-market fit, know who your buyers are, and where/how they make purchases, you’ll be well on your way to success. Avoid the temptation to rush to market if you haven’t nailed down these three elements. We’re always happy to help evaluate your product’s viability. You have an idea that belongs in the 10%—let us help you stay there.