In the previous
blogs, the focus was mostly around how to build a great product that customers
want using a lean approach while ensuring there is a solid GTM plan in
place. While all this is critical, and
essential for the success of any product, it’s equally important that product
leaders understand the logical precedence of identifying the primary customer
before engaging in a large scale sales effort.
The process of
identifying primary customer does not begin by hiring a sales team. It begins with assessing the product-market
fit. More on that in my previous blog: http://20-milesmarch.blogspot.com/2014/02/gtm-plans-easy-rear-view-driving-vs.html.
From an
organization standpoint, it behooves product leaders to first focus on
balancing marketing and business development efforts to assess product-market
fit and fine tuning the product value for the primary customers while
validating the GTM plans to make persevere or pivot decisions. This also creates an opportunity to secure
early wins and to validate whether these wins are repeatable or not. Early
sales engagement without a thorough product-market fit can lead to
situations where you end up creating custom products which do not deliver
repeatable sales. And, you spend a significant amount of precious marketing
dollars in demand generation even before understanding your primary customer.
In the earlier blogs
I had shared several metrics that the product leaders would want to capture in order
to evaluate product-market fit. Having said that, one needs to review these
metrics not as an accountant but as an analyst.
This is critical otherwise companies end up spending a large sum of
marketing and GTM dollars for no real gain. So, how can we avoid the temptation
of playing an accountant vs analyst in evaluating these metrics and data that
bring a wealth of information to make product-market fit decisions? Being an
analyst is a lot of hard work. Looking at the metrics as an accountant is lot
easier; and, ease is something we often gravitate towards due to a natural
proclivity of how we think :-).
I am
going to share a checklist that I have found pretty useful in analyzing a set
of metrics to determine product-market fit from an analyst’s angle. Before we go through the checklist, it’s also
important to highlight something pretty obvious, which we often miss out (I do too!),
and I was reminded of that again when I was reading Antifragile by Nassim
Nicholas Taleb. Here it is:
- We should not look at the future by the naïve projection of the past, and that
- Evidence of absence is not absence of evidence.
We should keep
this in mind as a frame of reference while analyzing the metrics, and also we should
try to test the hypotheses by trying to refute them instead of testing them
based on a positive test strategy. This
will ensure that we address the likely confirmed biases which can lead to inaccurate
analysis and conclusions.
Let us get back
to our original challenge: How can we avoid the temptation of playing an
accountant vs analyst in evaluating these metrics and data that bring a wealth
of information to make product-market fit decisions?
Here is a
checklist for the product-market fit analysis:
Validate Purchase Criteria
For a quick
reference, I am reproducing a diagram from one of my earlier blogs.
Identify purchase criteria through a simple metrics relative to
the value that the customer may assign to it. This could include a simple graph
where you plot the value attributed by the customer to each purchase criterion
(eg. Product feature, Consumption cycle, Cost benefits, Brand, Pricing and
Business model) along Y-axis while Purchase criteria are plotted on X-axis.
While doing this for your product, also plot the value that your customer
assigns to competing solutions and alternate options that are available to
them.
This graph would look something like a strategy canvass discussed
in the previous blogs. It can serve as a
compass to determine what you should do from a product-market fit. Also, this approach allows you to test
hypotheses by refuting them while taking care of potential confirmed biases
which we all have.
You want to drill deeper to understand why some of the customers
assigned lower value to a given purchase criterion. This insight is valuable to
determine what features or a new set of purchase criteria you need to enable.
At this stage you also want to seek answers to the following
questions: What is the business outcome your primary customers are hoping to
achieve? What they are not able to accomplish using current options? What’s the
new task you would like to accomplish? Validate and refine new purchase
criteria around customer outcomes to set your product priorities to fine tune
product-market fit.
Outcome of this step would also help identify primary customers
and whether you are able to deliver the stated or expected value to them. It
will allow you to determine key gaps which you may want to address before you
decide about launching a large scale demand generation campaign for your
product.
Know The Buyer
Understanding the primary customer is crucial. Equally, important is to map the buying
center, economic buyer, and the influencers. Product-market fit is not just
limited to testing product messaging, but it’s also about understanding the
purchase cycle.
At this stage, you also want to develop an understanding of the
consumption cycle to determine what the value delivery chain may look
like. For example, would you be better
off in delivering the stated value of you product by partnering with another
vendor?
Here is a simple set of parameters which can help in analyzing the
potential economic impacts on the user organizations based on the expected
value delivered by the product:
|
Improvements over current options to achieve the stated Outcomes
|
Impact
|
|
Purchase criteria for the end-user
|
Economic: High/ Medium/ Low
Ease of use: High/ Medium/ Low
|
|
Purchase criteria for the
buyer…
|
|
|
Purchase criteria for the
influencer…
|
|
Also, it would be prudent to gain an understanding of how they
gather information on making a purchase decision. Example: If the end-users influence buying
decisions, then you may want to consider a plan to offer a Free Trial option for
your product to generate demands. Unfortunately, this aspect is often looked
over and confirmed biases take over prudent GTM planning. If your product adds value to IT’s
infrastructure then your approach may require focusing on integrating with the
key infrastructure vendor products vs creating free trial version of your
product which may not deliver the expected value to the end-users.
Needless to say that securing a referenceable customer and achieving an
adoption velocity is crucial, and knowing your customer helps with that goal.
Assess Competitive Landscape
Through customer insights and by understanding the use cases, one
can determine relative positioning against various competitors and alternate
options that the primary customer may have to achieve the stated outcomes. It’s important not to interdict oneself to
only looking at the players in the same space, you need to look at the
alternate options that your primary customer may exercise to achieve the same outcomes.
Analyzing this is critical for 2-reasons – first, you want to know
who you are competing with and why you are competitive (this could include
another product or an alternate way to accomplishing the same outcome that you
want to enable), and second, you want to review which purchase criteria would
give you the needed advantage over other vendors and competing alternate
options.
Validate Business Model
I strongly recommend using the Business Model Generation framework
by Alexander Osterwalder and Yves Pigneur (www. Businessmodelgeneration.com).
As you test hypotheses and develop GTM plans, understanding key partners,
customer relationships, cost structure and revenue streams are essential to
delivering the stated value to your primary customer.
Any GTM plan that does not capture these aspects is very limiting
and it interdicts one’s ability to develop a comprehensive GTM plan; you don’t
want to launch a campaign with ad-words without doing this diligence.
Sales channels
By understanding
the business model, and by capturing the feedback in the steps mentioned above,
you can make some critical decisions about your customers and channels to reach
them. For example:
·
Is
this an opportunity to create value for the existing customers – Could you sell
this to the existing customers by enabling key outcomes they care about?
·
Is
this a new customer opportunity – What new segment of the customers would
benefit from the product? For example, a company with a focus on mobile
security may look at segments of the market where mobility and compliance are
of prime importance.
·
Do
you need key partners to deliver stated outcomes to your primary customers –
Who are the key partners that you need to integrate with in order to deliver
expected outcomes? What is the strategy to establish these relationships?
· What
are your key channels to reach your target customers – How do you sell your
product to target customers? What’s the
channel to deliver the product to the customers?
Any
product-market fit exercise, which does not include a detailed analysis of
various metrics captured above, would lead to a false start of your GTM plans
often driven by confirmed biases and a naïve projection of the past.
