Validating the problem-solutions-market fit is a must for each startup. Unless, of course, you want to play the lottery instead of building a sustainable business.
The lottery attitude means you are creating a product according to your assumptions first, and then you are going to try to sell it. You might succeed, but the chances are higher that you won’t.
Actually, in-depth interviews with nearly 500 startup founders showed that 98.5% of startups currently in the market had to modify their product or service, to redefine their target customer, to find new ways of using their product, or to change the pricing strategy.
How should you approach this challenge?
The main goal is to understand the severity of the problem you intend to solve compared to the value of your solution. The most dangerous trap the startup can fall into is creating a product nobody wants.
This almost inevitably will happen if you decide to solve a problem which is not causing anyone a severe headache. You will end up delivering just “nice to have” value instead of proposing something your target customers have been dreaming about or maybe even something they didn’t dare to dream!
Steve Blank and Bob Dorf suggested a sophisticated scorecard including seven criteria that help to determine if your chosen problem is worth solving.
As for early stage startups, I would say it’s a great achievement if you can assess your chosen problem according to four main criteria. Let your target customer rank each criterion from 1 to 5 (or 1 to 10) and explain how painful and urgent the problem is and how likely they would pay to have better/best solution. Assess if they are decision makers or at least influencers regarding purchasing the solution.
Always compare how many potential customers declared the problem as “very important” as opposed to those who said it is “somewhat important.” You should target those to whom the problem is very important, and don’t expect to earn much profit from the others. Yes, you’ll probably earn something from the others, but they won’t become the foundation of your business.
Ask your potential customers about specifics in the past instead of generics or opinions about the future. You want facts and commitments, not assumptions and guesses.
You might ask them to show you how they solve the problem. Talk about which parts they love and hate. Ask which other tools and processes they tried before settling on this one. Are they actively searching for a replacement? If not, why not? Maybe it’s not a severe problem anymore?
Quite often customers are solving their problems with home-made solutions. This at least shows that the particular problem is worth solving. The question is whether or not you can you deliver a much better solution. If you have validated the problem hypothesis, now it’s time to see if you can deliver a solution customers will adore.
The type of MVPs most suitable for testing this hypothesis strongly depends on the specifics of your product or service.
When you use higher fidelity MVPs, you can expect more reliable results (we’ve talked about different types of MVPs in the previous post). You will get more accurate data from your experiment if the customer has a positive feeling about how your product or service looks, the benefits they receive, and their overall experience. It’s up to you to determine the solution validation rules, but most of the startups I surveyed used rules similar to the following:
It’s good to have the solution hypothesis verified, but it’s still not enough. You want to earn a profit, therefore, you want to be absolutely certain that customers will gladly pay a certain price for solving their problem with your solution.
Many traditional business owners think there are only two possible solutions:
Startups might consider these solutions, but it’s important to remember that the customer does not always know how valuable the product is until they try it.
Therefore, customer surveys could be good just for the initial phase of formulating your market fit (or, simply, price) hypothesis. Survey results can only lead to some assumptions, but not to the actual facts. Producing pilot batch of products might be quite expensive, especially if you don’t have any initial confirmation about the possible price level.
So what to do?
Choose the most acceptable higher fidelity MVP type (evaluate the costs of the experiment and how reliable the results will be) and proceed with the experiment.
Always try to sell, even if you are just doing an initial market research. This will allow you to make a list of potential clients (early adopters-evangelists) which will be very helpful once you have a product ready for sale and will need to get your first clients’ testimonials.
One of the most cost-effective experiments is to try and sell your product online even if you don’t have a product yet! Upload design mockups of your product to eBay or any other platform, if you still don’t have your own website or a landing page devoted for this product.
Drive traffic to this offer, and check how many visitors will add your product to the cart. Once they click to “add to cart” or “buy now,” you can politely make an excuse and explain that product is currently unavailable.
You could even suggest potential customers to leave their email address if they would like to be notified once the product is available. But the most important thing is that you will find out the number of people who were ready to buy your product, and these are facts, not assumptions!
After finishing the market fit experiment, you should review your results:
Before starting your problem-solution-market fit experiments, you should have already created your target customer persona (the template can be downloaded from www.EvolutionCurve.com). A customer persona combines everything you know about your “most typical” customers into either one or a few complete profiles.
Remember, you are looking for ideal customers who:
To determine if there are enough customers to create a sizable business opportunity, be sure you can answer these top 10 questions:
While conducting your experiments, try to find an opportunity to interview people who are similar to your potential customers so you can understand who they are, what they do, what they want, and how they behave.
It’s very important to continue to update your customer personas as you learn more over time. This will have a great payback as you’ll be able to implement more effective marketing tactics to reach your customers and sell them your product.
It’s quite easy to make decisions when you get clear answers from your experiments. But what do you do if your results fall into the “gray zone.” Let’s say only 10% or less of your target customers confirmed that your offer is good. What should you do? Generally, there are three possible ways to proceed:
Find out who the 10% of your customers are. Maybe only a small portion of your real target customers participated in your experiment? If so, find out what the real market potential is and determine if it would be sufficient for you.
Change the target segment. Maybe your initial assumptions about your target customers were wrong. Check to see if there might be additional customer segments and repeat the experiment on different segments.
Modify the offer (your value proposition). This includes not only experimenting with setting different price levels, but also adding extra value and removing non-essential value from your main offer.
If you find yourself in a situation where you have to update your core value proposition, it might be helpful to use this short assessment of how good is your offer. Evaluate each of those key points of your offer and decide what you could improve. If it’s realistic, proceed with modifying your offer and get ready to repeat the market fit experiment.
Give me 15 min a day and I’ll show you how. Spend extra 45 min on practical tasks and you will achieve it!
Yes, I know that sounds like a great challenge. But that’s what we, innovators, do – we overcome challenges! I’m building an online course for startup founders to help validate their business idea and get initial traction.
If you are 100% focused on developing your startup and have no time for other stuff, this course is definitely for you! It’s designed as a 2 in 1 system: you learn by working on your startup! Short 10-15 minutes video lessons explain the essence of each lesson and give you practical tasks that you’ll complete by working on your own startup.
Roadmap to Market Fit Infographic