How to Define Your Market Fit, from Idealized Innovation Principal Alan Klement
Failure to properly define your market has a cascading effect on every aspect of your business. In fact, according to CB Insights data shared by Labs mentor Alan Klement, principal at Idealized Innovation, having no market need is the top reason why startups fail. Klement held a Labs session about defining your market and the principles startups need to remember as they both define their market and grow from there.
Principle #1 - Define your market with customer purpose, not demographics
“The best way to define a market is in two parts. First, what positive changes are consumers hoping to make, and what is stopping them from making that change. And second, what solutions might they use to help them overcome those constraints, and make that positive change,” Klement says. “Or to sum it up, what is your customer's ‘Job to be Done’, and what possible solutions could they hire for that ‘Job to be Done.’” (Learn more about how to connect with your core customers.)
During his session, Klement shared a case study about a children’s theater company defining its market. “They did some research and they found that one job parents were trying to accomplish was figuring out ways to pass life lessons on to their children. That’s the progress they were looking to make,” Klement says. “The theater company also looked at who or what else could be hired to do that job. It ranged from organizations like the Girl Scouts to certain kinds of video games to Disney movies.” Their real market wasn’t just other kids theater companies—it was any company creating ways for parents to teach their children life lessons. “Your competition and your market shouldn’t be defined in terms of demographics, psychographics, or product categories,” Klement says. “Define them by the positive changes people are trying to make in their lives and the solutions they can use to make those changes.”
“Once you do that, you’ll recognize that people from all different types of demographics will buy the same product for the same purpose, and the same thing goes for psychographics,” Klement says. “Once you have that market defined in a way that reflects how consumers actually view markets, your initial product and direction will be more successful and you’ll be in a better position to create more growth, acquire more customers, and develop new products. That will help you solve for four of the top 20 reasons why startups fail, which are having no need for your product in the market, running out of cash, not having the right team, and being beaten by the competition.”
Principle #2 - Use customer purpose to find growth opportunities for your company
Once you understand your market and find your product market fit, “you’re in a better position to find growth opportunities,” Klement says. Take Webber, the grill company, for example. “If you look at their grill, it’s largely unchanged since the 1950s. So imagine, for a company that hasn’t really changed their product in 60 years, how have they continued to grow? They’ve recognized that they’re not in the grilling food business—they’re in the business of making people better grillers.” The thing that consumers want from them is to improve their grilling abilities, and the company’s strategy has progressed in line with that purpose.
From that starting point, the company expanded out to ask the question, “What are all of the different situations where someone would want to grill?” And as a consumer’s grilling ability improves, how might their needs and desires change? The question then becomes, “How can we provide products that meet those changing needs and desires?” Klement says. “If you’re just beginning, you might be happy with a very simple charcoal grill, but as you improve, you’ll want bigger and fancier grills,” which Webber offers. “But more than that, Webber sells cookbooks and training videos, and even recipes, spices, grilling tools, and catering services,” Klement says. “They offer everything involved in making you a better and more successful griller.” Webber is an example of a company that understood and continues to understand the positive change its consumers are trying to make and has tailored it’s growth and products around, as Klement says, “helping people progress at those positive changes.”
This post is based on content from a WeWork Labs programming session.
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