by Demetrios Sapounas
Part 5: Quality/ Go to Market
In the past decade and a half, I have had the opportunity to work on several new ventures and advise and mentor numerous entrepreneurs on their journey to building a successful company from an idea. Recently, I also began working as a business coach with the Small Business Development Center (SBDC).
A common theme with all these interactions is the emphasis on building a product. This includes: raising capital, developing detailed revenue models, recruiting a team and getting customers – not necessarily in this order. This is the “classical” approach of going about launching a new venture where the belief of “build it and they will come” still seems to influence early- stage activities.
If you never open for business, you will never know how your product or service is received in the marketplace and you will never know if you had something that could have been a success.
Many founders feel that what they are going to sell needs to be perfect before it is released to the market. This belief can lead to continuous improvement and enhancement without even going to market, because the offering is never ready enough for someone to buy. If your business is a restaurant, you have made a considerable up-front investment before you are able to open for business. You will not keep the restaurant closed until you have the perfect menu or the perfect spice mix for your signature dish. If you are a technology business with a platform and a mobile application you will not wait until your product is free of bugs and your security such that nobody can breach it. This is a sure approach for going out of business, fast.
Going to market is about managing risk, getting customers, generating revenues, getting market feedback. No matter how much customer discovery and how much market research you have done, only direct engagement with customers will tell you how good your offering is and how it is received in the market. No matter how much planning and preparation you have done, you always must be ready to change course, because the market will truly tell you whether your offering is any good. The military quote “No plan survives first contact with the enemy.” holds true for business, too. The Silicon Valley originated quote “Fail fast, fail often.” is not about failing, rather about learning from failure and iterating to improve and get it right. You need to balance creative and critical thinking and apply what you learned iteratively. It could also be considered as the evolution of continuous improvement, part of Edwards Deming’s system, applied to start-ups.
You will never truly be ready for the market; no founder really is ready. However, you have to jump all-in and be ready for the unexpected. Some time back I was advising a founder who had developed a mobile application enabling people to engage by combining music and video. The application was available only on one of the mobile platforms. It had been released for beta testing and was getting engagement and some traction by users. The suggestion to leverage the World Cup to release the application and to hopefully get a sizeable user base was discounted as the application not being ready and by not being available on the other mobile platform would not be too popular and may result in negative reviews. As a result, the opportunity was missed and the application was never released! Following that the company decided to pivot in a different direction. There are many such examples and missed opportunities do not come up again. As a founder you should grub the opportunities that are presented to you and make the most out of them.
Many companies struggle with quality. That is not just a start-up issue. Large companies are also plagued with quality problems. You only have to look at Boeing and the 737 MAX issues. Boeing was able to survive those issues because of its size and its importance in the global marketplace and to the US economy. Start-ups or smaller companies usually cannot overcome such setbacks. Quality is important and though it adds cost and time to the development of your offering, it is worth the investment. How much time and money to invest depends on your industry, the market, how forgiving your users may be with small defects. If your product is a medical device, your quality will need to be very high and your risk tolerance should be very low. In addition to the market expectations, you also have regulatory hurdles you will need to pass, so making quality part of your product development process would be necessary and important.
If your product is a consumer mobile application in the entertainment space, your risk tolerance is higher and you could afford to go to market with a few small defects. In the software industry, it is almost impossible to identify and fix all defects, and users are forgiving small defects, as long as they do not take away from the overall experience. You could also engage your users with defect reporting and you could reward them through your application.
No matter your offering and the industry and whether you developed it onshore, offshore or somewhere in between, you should take quality seriously and preferably do your quality testing inhouse. You can certainly outsource quality testing, but third parties are not vested as you are to ensure the best possible quality. If you outsourced the development of your offering, and you have to outsource quality testing, engage a different group to do the testing. This way you are certain to avoid conflicts of interest. The best approach would be to do as much quality testing as possible, inhouse. The results will be much better and you will know exactly what the defects are, so you can work with your team to address them at the earliest opportunity. This also enables you to know the defects and decide which ones you have to address before going to market and which you can afford to leave for a later time.
Going to market directly relates to your customer discovery. During your customer discovery you refined your value proposition, and verified your customer segment(s), the market(s) they are in and who your exact customers are. This is the same information you will leverage for going to market.
You already know your market segment(s), so that is where your focus should be. If you have identified multiple segments, prioritise on one of them and make it your primary market. You should have some evidence to support this decision, from your customer discovery.
You should also know who your customers will be- from influencers, to decision makers, to those who will give you the money. You should already have a good list of prospects, who should be some of the first to reach out to, if they are not already piloting or testing your offering. You should also consider if it is necessary to do further customer segmentation, to group prospects into similar groups. Doing so helps with marketing and the message(s) that will be used for each group. For example, your message will be different for the 20 year-old demographic, compared to the 50-year old demographic. Similarly, the message to the CEO or the C-suite will be different compared to the message to the engineering or distribution or sales department people.
An important component of going to market is your distribution strategy. This will vary based on the product and the market. If your product is a gadget, will you sell directly to consumers or retailers or you will go through a distributor to get to your customers? If you have a software product, will it be available for download from your website or you will go through an app store? Even here you may choose to go through a distributor or wholesaler or an ecommerce site. These are important decisions and strategies, so your offering can be easily accessible to your target customers, through channels they commonly use and are comfortable with.
How you get the word out about your offering is critical. You have to let your target customers know about your product. If you expect to simply organically gain customers, it will be a very slow process. You will need to craft the product message for your different market(s) and customer segment(s). Your message should be clear, outline your value proposition, how it addresses specific needs, why your customers should believe it fulfils the need and how it is different from other offerings in the market.
The last important piece of going to market is the price you will charge for your offering. You should have gotten some data of what the market may be willing to pay for your offering, from your customer discovery process. You should have also augmented those data points with additional research. The price should not be based on the cost of making your product, rather on the value proposition and market position.
There are many pricing strategies you could adopt. You could choose to have a low price and require wide adoption and economies of scale to grow revenues. You could also use this approach to build loyalty and slowly raise prices. You could also go to market with a freemium model and upselling to a paid version. Another approach could be to adjust your pricing based on the customer (set a discount level for different customer segments, for example a different discount for non-profits, a different for start-ups and a very small or no discount for large enterprises), though it would be advisable to verify the customer status and have a method for increasing the price as their status changes.
If your product is unique, innovative or does things much better than alternatives, you may be able to command a premium price, based on the value your customers gain from your product. Depending on the industry you are in, you may be able to vary your price based on certain cycles or timing (for example, airlines have different prices for the same ticket, depending on when the ticket is purchased). Finally, if your product is considered a luxury or you have a premium brand, you may be able to command a high price, to reinforce the luxury perception or exclusivity.