In study after study, the number one reason that startups fail is that they do not offer something new that better meets customers’ needs.[1] See the details in our previous blogpost on product/market fit. This same factor is the biggest predictor of new product failure as well.[2] We call this the Customer Value Void – not offering something that is needed, that is a better solution than the current practice, and that is worth paying for. Note that all three of these elements are necessary! Navigating around this Void starts with our previous blogpost on Target Marketing. If a startup is narrowly focused, it stands a better chance of figuring out what these target customers need the most.
Once a startup has a target market, then it can figure out what pain points it can solve for them. Think of pain points as problems the customer is actively trying to solve. If you want to understand more about customer pain points, check out Strategyzer’s widely popular Business Model Canvas, whose value proposition approach is highlighted in the graphic below. It’s easier to get customers to adopt something that addresses their existing pain. After all, they’ve already hired a product to do some job for them. So, a startup needs to figure out what their prospects’ existing pain is. By focusing on existing pain points, startups get a marketing bonus – not only are customers willing to pay for it, but they probably are already searching for a solution. That makes it easier to find them less expensive marketing communications.
The Business Model Value Proposition Canvas
Once a startup knows what pain points its target customers have, product development becomes key. The priority shifts to building a better solution. The best solution gives the customer gains as well as overcoming pains. At some point, the emphasis will have to shift to understanding what they will pay for this solution (BTW - the bigger the pain reduction and the bigger the gains, the more value they see). But first, it has to be a solution that solves their problems better than they can solve them now. Think of all the Unicorns (i.e. startups with a valuation over $1 billion) that have already done this:
Instacart – have groceries ready when you arrive at the store or delivered to your house
Airbnb – find a room easily when you travel or rent out an extra room in your house
Rent the Runway - avoid the high cost of special gowns by renting them
23 and Me – find out about your genetic history with a simple, at-home test
But, it’s not just Unicorns that do this. Even smaller but very successful startups do this:
Clif Bar – an energy bar that both tastes good and is good for you
Chesapeake Bay Candle – stylish candles that smell great
TRX – a portable workout system that builds functional strength
Even the “Titanic” offered a value to its customer segments – the finest most luxurious way across the Atlantic for Americans that wanted to experience the best, or a comfortable, low-cost ride to the land of opportunity for Europeans looking to change their destiny. Even so, they only sold about half of the capacity that they had!
So, get out there and start figuring out what problems your target market already wants to solve and build them a solution. While you are at it, review the other blogposts here and subscribe to our mail list below.
[1]Sources: http://research.frac.tl/startup-failureand https://www.cbinsights.com/research-reports/The-20-Reasons-Startups-Fail.pdf
[2]Kahn, Kenneth B. 2013. The PDMA Handbook of New Product Development. Hoboken, NJ: John Wiley & Sons, Inc.