Not every “disruptive” idea is a good one. Here’s how to figure out if your genius idea will actually sell or if you should maybe stick to your day job.
Product-Market Fit is a fancy way of asking, “Will people actually buy this, and who will those people be?” Although it’s one of the most basic questions an entrepreneur should ask themselves, it’s all too easy for someone to get a bit arrogant and say “yeah absolutely, we’ll be raking in millions” without doing proper research before investing and crashing.
Achieving a good product-market fit involves two main parts: a good product, and people who want it (and can afford it). This post goes over a few ways to approach finding the right product and researching a market for successful product-market fit.
Econ 101: Imitation vs. Innovation
Conceptually, you can either imitate something you see in the market, or innovate to develop something entirely new. Most companies use some sort of combination: seeing something that is already on the market, adding value in some innovative way, and putting that tweaked model up for consumption. What end of the imitation-innovation spectrum you are on will entirely depend on how creative your team is, what resources you have available to you and how much risk you are willing to take on. Generally, if a true innovation is successful, it has a much higher reward than a good imitation - but it’s also more likely to fail because people are not used to the product, don’t actually need the product, can’t afford to buy it, or it cannot be scaled up enough.
Imitation is not a bad thing at all. Just because there is already a company selling denim jeans does not mean there isn’t room for more. Most companies imitate in some way, learning from previous companies that have paved the way before.
Innovation does not just happen in software development companies in Silicon Valley. It happens every day in small ways by people who are able to think creatively and take on an entrepreneurial spirit. Innovation can happen both in a product itself (something new) or in a process (a new way of doing something that has already been done).
Coming up with a good product: three approaches
1. See what’s in demand already
Many people start their business by seeing what customers are already buying, and jumping in themselves. This can either be done for products that are quite common and broad (books, furniture, electronics) or pretty niche (temporary tattoos, Justin Bieber toothbrushes, alarm clocks that sound like a cat). Niche products do well in a global online marketplace as there might not be enough demand in any one location, but there certainly could be worldwide.
2. Solve a common problem
This is one of the most foundational questions in entrepreneurship: "what problem am I solving by offering this product or service?" You can think of it the other way around - if you notice a common issue, even a very small issue, there could be something that would make dealing with that issue more efficient or just less of a pain. As an example, companies that began making durable stainless steel reusable water bottles were able to succeed because they address the environmental problem of waste from plastic bottles, and the human problem of needing to stay hydrated throughout the day.
One way to think about this is to find opportunity gaps and fill them. This means looking for and listening to common complaints about features in products that exist, and addressing those complaints in a new product. A place to start is customer review sections for popular items.
3. Add something to the market that you would want, but can’t find
You as an individual are not just a business person, but a consumer, too. If there’s something you think would be really useful in your own life, but it’s not available in the way you want it, hey - what’s stopping you from being the person to make it happen? And, if you have any expertise in something specific, you already have a competitive advantage over someone who tries to make a product they know nothing about.
Duct tape and ice lolly sticks
Once you’ve started to form a product idea, it’s a good practice to come up with a few different versions of it. Start by figuring out what elements of your final product are going to be flexible or inflexible (for example, do you have to have it made in a certain way? From a certain place? With certain materials?).
Before you jump in and spend hundreds of hours and who knows how much money investing in a state-of-the-art product that’s ready to sell, I strongly recommend the “duct tape and ice lolly sticks” approach to prototyping. Do as much as you can to sketch out or build your basic product with the tools and skills you already have at your disposal.
You can hire a professional designer and manufacturer further down the road, but getting a rough-and-ready version is an important starting point. You’ll then be able to use this to get feedback and build your minimum viable product - your functional product in its most basic form without all the bells and whistles.
Product Viability: Researching your market
In order to know if the product or service you’re brewing up will actually be received by real people, doing a fair bit of research comes in handy. There are a few different types of research you can do to help determine product viability.
Desk research: Scoping out the competition with keyword research
To find out what’s actually in demand, and who’s buying, you can learn a lot simply by reading updated consumer reports. Each time you get a whiff of a trending product, you have a few new things to look up and get a bigger picture.
If you’re just interested in what’s hot right now, there are a few sites that act as the Regina George of the Internet.
Websites like Trend Hunter tell you what niches are doing well and where. It’s a great place to start if you are hoping to get in quick for a fast-growing market. Another site we go to frequently is Shopify Burst which has a smaller list, but more content and support available for each trend.
Once you’ve started putting together a shortlist of products that might interest you, you can use Google Trends to compare a few different product choices. It will let you see how they stack up with one another in terms of online interest and discussion.
Search by Industry
If you already have an industry in mind, start by simply Googling key words in the field and reading up on blogs and websites of big-shots in it. There are sites like LittleBird and FollowerWonk that help you find out who those players are, and you can learn a lot by closely reading and following the online community.
Here’s our guide to Keyword Research.
Create fake people: Buyer personas
Buyer personas are a way to conceptualise your ideal customers into different groups, and build your company around them. Basically, you use the information you already have, plus a solid brainstorming session, to group all of the people you think are likely to buy into different archetypes within your target market. The “student trying to save a buck”, the “thrill-seeker with money to spend”, the “nerd who wants to find the best new gadget”, the “grandma who has a lot of gifting she wants to do”.
These can help you piece together your value proposition. Repeat after me.
Persona A has X problem frequently. My product Y will help them solve that problem by doing Z.
Here’s our guide to developing buyer personas.
Talk to real people: Designing surveys and focus groups
Another important piece is taking your DIY prototype and asking everyone you know and lots of people you don’t for feedback. What are their first impressions? What would they be willing to pay for it? What do they think it’s supposed to be for?
Holding a few focus groups can be useful to get lots of suggestions at once and come up with new ideas and questions to ask. Designing a survey that you can pass out online to your target group, or stand near their usual haunts, will give you larger quantities of data to analyse.
Here’s our guide to designing a useful survey.
A few examples of great product-market fit
They’re everywhere. Is it the highest quality material out there? No. Is it the most comfortable backpack? No. Is it competitive on price? Not at all. So why is it that the Vancouver-based company sells millions of bags worldwide and was profitable after their first year? As one of the co-owners said, “we reverse-design every bag, we look where we need to be in the marketplace and design to that price point - the right feature set."
Sufferfest is a craft beer company with a lot of competition. But they’ve found their niche, creating a brand around athletes and targeting their gluten-removed beer directly at people who sweat for a living. And hey, it’s now a multi-million dollar label.
Though there isn’t necessarily one company that dominates this market, little decorated card holders for keeping a transit pass handy are popping up everywhere. For areas like London, in which almost everyone has an Oyster card, it’s no surprise that there’s a huge market for a simple but convenient product like an Oyster holder.
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