Entrepreneur's everywhere are turning their ideas into tangible products and services, yet they are making a crucial mistake. According to the Bureau of Labor Statistics, about 50% of small businesses fail in the first four years. The top reason why startups fail is that there is no market need for their product or service. Out of the top ten reasons startups are failing, according to this article, eight of those reasons fall under marketing. Let’s look at these reasons again, and I will expand a little further to my statement.
1. No Market Need
2. Ran Out of Cash
3. Not the Right Team
4. Get outcompeted
5. Pricing/cost Issues
6. User Unfriendly Product
7. Product Without a Business Model
8. Poor Marketing
9. Ignore Customers
10. Product Mistimed
If you remove number two (cash) and number three (team), the rest of those items traditionally fall under marketing or product management. The one crucial mistake startups are making is not bringing an experienced product marketer onto the team until its too late. In a lot of cases, startups see marketing as tactical items, not strategic elements of launching their product to the market.
No Market Need –
Most founders are engineers, scientist or other technology focused professionals. Being technology focused is ok, but many of these startups have little to no marketing experience. Even if they have some knowledge of marketing, they often brush aside marketing until its time to stand up a website and social media profiles. Experienced product marketing professionals can ensure the product market fit, including a strong understanding of customer problems.
Get Outcompeted –
90% of the time when founders of startups put together a competitive slide in their pitch deck to investors; they have not done a thorough competitive analysis. They haven’t tried the competitor’s product; they haven’t contacted competitors’ customers. They have a very high-level competitive profile based on a google search of the industry they are going to compete. When you launch your product, you will need to launch that product with the minimal marketable requirements. You will likely launch with fewer capabilities as your competitors, which is why it is important to build in competitive differentiation from the start. Product marketing experts can help you understand your competitors, alternatives and validate the perceived competitive advantages.
Pricing / Cost Issues –
The majority of startups price their product using similar pricing models as their competitors by going to their website and developing a model either slightly higher or slightly lower than your top competitors. Establishing a pricing model that customers will accept is the first challenge, but the second challenge is building a pricing model that will cover total costs and margins. In larger organizations, product management organizations with experienced pricing specialist will conduct financial calculations, competitive pricing evaluations and develop models that meet profit margins for each product line. For startups, this exercise may be a new one that founders will wing or they will rely on business coaches and advisors to assist them. It is recommended to bring in a product expert that has experience developing pricing models, they can conduct competitive pricing analysis and provide your team with recommendations on where to start.
User Unfriendly Product –
Usually when products turn out to be user unfriendly, it comes down to the fact that they didn’t listen to what customers wanted. I would argue that maybe that they did listen, but asked the wrong questions when listening to customers. I once worked with a startup that started developing their product without once talking to a prospective customer about the problems they were trying to solve. Unfriendly products often result from involving the customer feedback after you have started development, typically during Alpha or Beta testing. Customer discovery should be done early and often when developing a new product or service. Having experienced product marketing or product management consultants working side-by-side with your founding team can make a huge difference during this process.
When conducting deep discovery with customers, you must have the ability to realize that a surface level problem is not the real problem the customer has. Being skilled at finding the impact of the problem is critical. Asking questions such as “how does that affect your business?” or “What impact does that have on your business?” or “How does that impact you, your team, your profit margins, your customers?”. When you ask the right questions up front and understand how your product can impact the real customer's problem, you can develop your product with their problems in mind. Unfriendly can also relate to User Experience (UX), which if done wrong, the user experience can be worse than not addressing the real customers problem.
Product Without a Business Model –
Building a business with scalability in mind or focusing on a single channel can prevent your company from being successful. I had seen so many startups see their growth slow to a halt when they generated more than 80% of their revenue from a single channel. The founders wondered why they saw marginal growth, but it was because they didn’t build their business with a business model in mind. Others had tremendous growth but built their products or services without a business model that could allow them to scale. They either didn’t implement the right systems for scalability or ignored the ones they had.
Poor Marketing –
When you involve marketing a few months before you launch your product, rather than during the ideation stage, you will most definitely have poor marketing. Too many startups look at marketing as simply generating leads for the business, branding or digital marketing. Marketing your startup should start during the ideation phase of your startup. You should have at the minimum a fractional product marketing expert to help during the fund-raising stage of your business, and definitely during the product ideation and development stages. Most startups establish their product idea first, but if you had a marketing professional working side-by-side with you during the early stages, you could have a clearer picture of your dream customer, target market, and have better messaging. Doing the work up front will lead to more effective marketing once you are ready to announce your product to the market later.
Ignore Customers –
There could be a reason why no one is buying your product. It’s because you ignored the customers during the research and ideation phase. In a lot of cases, startups will wait until they have an alpha or beta product out the door to start asking customers for feedback. Experienced marketers can home in on the dream customer by segmenting, targeting, developing user personas and understanding how your dream customer buys (customer journey). You must get customers involved early in the process so that they can provide you with feedback on your ideas, to test your concepts, to tell you whether they value what you plan to deliver. Will they spend money on your product? Customers will consider your product if it makes them money, saves them money or solves a problem for them.
Product Mistimed –
Is there such a thing as launching a product too early? Absolutely! If you introduce your product to the market too early and you miss the mark, you may miss the chance to capture clients forever. Launching a product that is not good enough could give your brand a black eye that will be almost impossible to recover. Some products are too early to market by introducing technology that either isn’t ready to be adopted or is just a bit too early to market. I would argue that it isn't too early to market, it goes back to ignoring customers or not asking the right questions. Sometimes timing comes down to market need, technology and economics.
There are plenty of reasons why startups fail, and those reasons extend outside of the areas I have provided. The fact is that most startups fail to include a marketing expert on their teams because they see marketing as a cost, not a strategic element of their business. There is one startup I am aware of that has never seen the value of marketing in their organization, because they see marketing as a cost not a strategic resource to their business. Product Marketing in larger organizations is seen as a strategic part of their product management and marketing teams. They understand the value of establishing market need before launching a product, establishing sound pricing/cost models, conducting competitive intelligence, and truly listening to the customer. Hmm, all listed above as reasons startups fail! To learn more about how product marketing professionals can help your startup, visit http://www.avvocatto.com.