Marketing & Market Research
The story of the Key and the Lock
Imagine you’re walking over one of Paris’ famous bridges and the railings are covered in thousands of ‘love locks’, padlocks that have been placed by couples to represent their love for each other. The locks are all shapes and sizes. Some look similar, others wildly different, but all need a unique key to open.
Now lets imagine that each of these padlocks is a different customer group. They are all different because every customer segment is different, are worth different amounts, the potential earnings from each is different etc… and so whilst some may appear similar, each of them require a unique key of their own.
The engineers and product people see this and think to themselves, “I’ve got an idea for a great key, I know how to make it and it’s going to be amazing” so off they go, up all hours, sleepless nights, blood sweat and tears until they have a perfect key. Now all they have to do is find a lock that it fits.
The problem with this story (I hope you’ve guessed it already) is that it doesn’t matter how perfect the key is if you don’t know which lock it will unlock. It takes them years to find a lock that their key fits and then to their disappointment the lock is small, rusty and not worth the effort.
A marketing person on the other hand, walks along the bridge, examines the locks and finds the largest one, the one easiest to reach or perhaps the one with the most basic looking mechanism. They then show this lock to an engineer who studies it and makes a key to fit.
The lock opens and they go in search of the next one, ideally something similar so that the previous key needs only to be modified rather than built new from scratch.
Marketing is not sales.
Marketing is about understanding the customer and thus guiding the business or product strategy accordingly.
Sales is the result of good marketing. A sales team has the goal of making a transaction, closing the deal and fulfilling demand.
Both are important and can often overlap in terms of activities, but since marketing is a larger area of study that steers the other, it should be your primary focus because it makes everything else easier.
Marketing is not advertising.
Advertising is about communicating a message, a story that your marketing has revealed will best connect with your audience. It’s a sales tool, the result of your clear and rigorous market research.
Marketing is understanding
Understanding the customer, understanding what they want, need, like, how it all fits together. The goal is to “Cross the Chasm” and find “Product-Market Fit”.
Product-Market Fit
Finding the right key for the right lock.
Excerpts from 12 Things about Product - Market Fit:
“A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product-market fit. A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product. Companies often go through many iterations before they find product-market fit, if they ever do.”
“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.”
“If you address a market that really wants your product, if the dogs are eating the dog food, then you can screw up almost everything in the company and you will succeed. Conversely, if you’re really good at execution but the dogs don’t want to eat the dog food, you have no chance of winning.”
“You often stumble into your product/market fit. Serendipity plays a role in finding product/market fit but the process to get to serendipity is incredibly consistent. What we do is teach that incredibly consistent process.”
“First you need to define and test your value hypothesis. And then only once proven do you move on to your growth hypothesis. The value hypothesis defines the what, the who, and the how. What are you going to build, who is desperate for it, and what is the business model you are going to use to deliver it?”
- Andy Rachleff (famous US venture capitalist)
“The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product’.”
- Eric Ries (author of the Lean Startup)
Products don’t create value, customers do.
Bill Sahlman
Crossing the Chasm
Customers all sit on a curve
Geoffrey Moore wrote a great book “Crossing the Chasm” and its lessons are an important foundation for any customer understanding.
The customers in any market will all be different, will have different requirements and traits. But one thing that is predictable is that they will fall onto a bell curve distribution, based on their rate of adoption. It’s size, height and length will vary but the basic shape is the same.
The important bits to remember is that to be a huge mainstream success (what any investor is hoping for) the goal is to progress through the middle of the curve where the bulk of potential customers are.
Geoffrey breaks the curve down into 5 adoption rates:
Innovators - The fastest adopters, these people love anything new, if you can’t sell your offering to these people then you’re really in trouble.
Early Adopters - Closely following the innovators, they also like new things, but they won’t be the first. They want to see some validation, someone else has to go first.
Early Majority - As the name suggests, the majority is where any real commercial success lies. This is when you’ve found Product-Market Fit.
Late Majority - The other half of the majority, they won’t do anything until all the first half have done it.
Laggards - These people won’t do anything until it’s illegal not to. (OK I’m exaggerating a little, but some will genuinely even break the law to prevent having to change!)
Whilst the curve and the different categories are interesting, it’s perhaps not surprising, Geoffrey’s great insight was that there is a gap between the Early Adopters and the Early Majority, you don’t just flow across this barrier as time goes on.
This gap is huge, a chasm in fact and many new products and businesses fail to make their way across it. So despite early customer traction may still fail to become long lasting successes that go mainstream.
All models have limitations…
These models are always an oversimplification or a generalisation of one thing or another. Always do thorough research and keep actively reflecting on what you’re seeing and experiencing, perhaps your offering is niche and will always be that way, maybe there is no mainstream early majority, perhaps sales are always going to be a hard slog and there will never be the pull of a majority customer. It won’t always follow the nice tidy model.
Martin Casado from Andreessen Horowitz (a famous US investment firm) sums up a few issues he see’s when startups use these approaches and how to overcome them…
“Crossing the chasm” is a popular concept for almost all new products/startups, and is a useful lens for entrepreneurs to view the theory of innovation…
For tech founders, this model affects how to think about everything but especially how to think about sales. As the model goes, until the chasm is crossed, sales must be evangelical, sale cycles are long, and startups struggle with anemic productivity. But once the chasm is crossed, hallelujah! - those product-market fit issues are solved and the challenge now is to just keep up with demand. Because once you cross the chasm, your company goes from a difficult “push-based market” to one that is “pull-based”, where customers are naturally drawn in.
It’s a useful theory but in widespread practice, crossing-the-chasm almost never plays out… [but] that’s OK”
It’s well worth a read “the unending chasm” by Martin Casado.
Focus on the Early Adopters
These people should be your initial focus. They are the ones that have a clear problem, will tolerate your mistakes (because they share your desire to solve this problem), have probably already tried to solve the problem themselves and have money to spend on this.
Why not start with the Innovators? Surely they are the easiest segment to target? You will naturally, but they should not be your development focus because they will not help you progress to the next larger segment. Innovators are so excited about your offering they will forgive almost any problem, but there aren’t enough of these customers to sustain you.
Let me explain with an example…
Years ago I co-founded a company building the world’s most capable off-road wheelchair (The Mountain Trike) and we used to take it all over the country to trade shows and events to find customers. Typically the people who go to these kinds of events, looking for new products, are your innovators and early adopters. They are looking for something new.
The more shows we went to and the more people we got to try it, it soon became apparent that apart from a very small group of people who loved the trike immediately, everyone else had issues with it. The seat was difficult to get into, it was too wide, too heavy, too bulky etc…
These innovators wanted it no matter what, we could have wrapped barbed wire around it and they would have still wanted it. It was only when speaking to the others that the problems became apparent. They were keen, but we needed to fix a few things, and sure enough, version 2 was a big success.
Had we been arrogant enough to only listen to those very early few who thought we could do no wrong and our initial design was perfect, we wouldn’t have a product or a business today.
Why do these ridiculous email scams work?
An email like this is one of so many from an entire industry of email scammers based out of Nigeria. One of the oldest internet scams of all time and amazingly they still work.
They work because of market research.
These scammers have found a unique set of people who fit in the small overlap of different customer attributes; have money, are greedy, believe in free lunches and are of course… gullible. Sadly what makes the situation worse, the victims are also often desperate, willing to trust a stranger because they are desperate for the illusion to work.
The initial email may be enough by itself, but the goal is to hook you in deeper and deeper and this is where their knowledge and market research comes in. Some scammers even fly their victims out to Ghana and put them up in hotels to meet their ‘business partners’ and get even more money out of them… “Since Ghana is a less corrupt country, they say, victims are more likely to enter into a business deal with a Ghanaian than a Nigerian.”
How to do market research.
With any business research, the most important thing is to get up out of your chair and actually go speak to people. You are trying to do 3 things:
test your business model hypothesis, so you need to explore all the assumptions you’ve made in each section of your business model canvas.
understand your running mates, the competition and their journeys to where they are now. If it’s taken them 10 years to get to where they are, why will you be any quicker?
understand your customers (current or potential), for they are the market value. What are their pains and blockers, how much might they pay and how often? Often the best way to do this is with a Minimum Viable Product, which we’ll explain later.
For tools, methods and approaches, this article in the Entrepreneur magazine has some good suggestions.
The Guardian wrote a short article on market research, and the key message from their interviews I took away was from business adviser Paul Mooney who points out the obvious, but a hugely important issue:
"If you ask the wrong questions you could end up getting misleading answers which will then lead to poor business decisions."
How do you know if you’ve asked the wrong question?
You don’t.
So be careful not to jump to conclusions, triangulate your results from a number of different sources and a number of different angles. You might need to extrapolate up from the bottom or scale down from the top. My preferred method is always through comparison with something else, does what I’m seeing make sense based on what else I’m seeing.