By John Broadbent
Thanks for tuning into another episode of Make Your Mark Monday. Today we’re talking about validating a business idea. Too often we see that businesses don’t quite use this perfect framework that we’ve laid out in how to build a brand from scratch. And quite often they tend to do things a little bit differently.
You know, in real life what we’d do is we’d come in, and we’d do the 5 Cs of a situation analysis, beginning with the customer, and we’d focus on ourselves: What are our strengths and weaknesses? And we’d really try to understand our competitors, the collaborators and kind of the context of what we should be doing. And then we’d move kind of into this value creation mode where we’d really look at our customers or our consumers, and we’d try and understand them. We’d divide them into groups, you know – market segmentation. We’d choose a group that we thought would be the most profitable, and then we’d really target them. And then we’d go into our marketing mix to try and create some more value by developing the right product for those customers that we were looking at and then figuring out where we’re going to place this product, and how we’re going to promote the product. And then we’d capture value through good solid pricing strategies and then we’d sustain the value through sales and retentions, and that would kind of generate the profits that we were looking for.
But in real life, businesses usually don’t do that, in fact, usually what they do is they come up with this great idea for a product, and these are – a lot of start-ups will kind of go through this process. They’ll come out and say, “Wow I really think we should be doing ‘this.'” and so it’s usually a gut feeling: They get going on a product, and then they get it to market and they say, “Man this is awesome.”
A few years back, I worked with someone who basically, what they wanted to do was they wanted to create a software for men who wanted to make their wives happy. And they kind of followed this. They’re like, ‘This is a great idea!” And so they developed this product, they put it out there, and then they realized that they hadn’t quite looked at the customer first.
Now this doesn’t mean that you don’t have something that’s going to work. In fact, most business go through this, and then the ones who stick around, they’re the ones that got lucky, and they actually figured out – they created a product that worked for the customer, and then they kind of worked backward through these other steps, and so that’s why they’re still in business and things, because they’ve kind of learned how to work with it, and they’ve worked kind of backward through the traditional model that if we would have started with, we probably would have had something great to begin with.
But in real life, they’ll come, and they’ll develop the product, and then they’ll start looking at pricing, “Where should we be pricing this? Let’s price it at ‘this.’” And usually they do it kind of with profits in mind. Ok, costs us ‘this’ much, let’s do ‘this.’ They don’t really think, “What does the price communicate to the customer?” And things like that. And then, they come in, and they focus on sales, and then on retention, or just trying to get and keep customers. And then they come back and they say, “You know, I think we’re leaving some money on the table. Let’s get back to some basics of marketing that we never did before in this process. Let’s get back to the basics, and let’s try and really understand our market – our customers – and let’s segment them, and choose another segment that we want to go after, and we’ll kind of spin our product in a different way to them.” And that’s great, and then once they kind of get there, and they start feeling like they’re in this rut, then they have this big firm come in and the firm says, “Well, we really need to do a situation analysis.” Or maybe it’s not a big firm, it’s just a consultant, but that’s really what they do, is, “We really need to take a look at your company, figure out what the strengths and weaknesses are, and determine a few things here.”
So this is usually, in real life: What ends up happening in the product development cycle – is much more likely. What – as I mentioned before, this doesn’t mean that you’re doomed to fail, but it does mean that you have to do things a little bit differently in order to validate your business idea. And most companies, they feel that it’s prohibitive, especially in the early stages, to really go out and validate the business idea. We don’t have thousands of dollars to put into market research, to do focus groups, or to do surveys, or to do these other things.
And this Wednesday I’ll actually talk about some of the tools that are available at low cost or no cost that can help you validate your business idea or fine tune it to either figure out a way to either spin it to people a little bit differently, or maybe you can make a few fine tune adjustments to the product itself so that you’re delivering what the customers really want, and so you’ve got a much much more likely chance that you’re going to succeed, or that your business is going to stay afloat in the long run.