Who’s going to buy this? And why?

The modus operandi in the start-up and investment world seems to be: develop a minimum viable product as quickly as possible, put it on the market, learn from what happens and iterate. There are a number of arguments that seem to support this modus operandi, such as speed and gathering real feedback in the market.

But there are also many arguments against this way of working. For instance, it is a very risky way of working, the chances of success are low and, moreover, it often turns out to be not very fast at all. You may collect feedback from users, but it comes at a time when you may not be able to do anything with that feedback anymore (because your product is already on the market).

But aren’t all successful companies that have grown from zero to multinational this way? That is what the biographies of their founders tell us and it may seem true, but it is probably a case of survivor bias: Survivorship bias or survival bias is the logical error of concentrating on entities that passed a selection process while overlooking those that did not. This can lead to incorrect conclusions because of incomplete data. Survivorship bias is a form of selection bias that can lead to overly optimistic beliefs because multiple failures are overlooked, such as when companies that no longer exist are excluded from analyses. It can also lead to the false belief that the successes in a group have some special property. 

In other words: To really understand what makes a start-up successful, you should NOT just look at the companies that are successful and learn from how they did it. Instead, you should compare successful companies with unsuccessful ones, or failed ones. And then you might get a totally different view of what a successful start-up is. And my hypothesis is that the companies that are successful outperform their less successful peers on one very important point. And that is how well they understand their market, the end users and the dynamics in the market.

All start-ups are based on a number of fundamental hypotheses. If these turn out to be true, great success lies ahead. We can summarise these with what we call The Big Assumption:

• There is a substantial target market
• who has an unmet need,
• and who sees my solution as an attractive way to fulfil this need.

Every entrepreneur (and marketer) should have a very clear idea about who his or her target audience is and how the product will fulfil the needs of this target audience. Some constantly validate their hypotheses. But many entrepreneurs I have met have only a vague idea. Or even no idea at all.

Many start-ups do not become as successful as the founders imagined. Why? Because they solve a non-existent problem. Or solve an existing problem in a way that is no better than solutions already on the market. A hard and expensive, but also an avoidable lesson.

Ignoring consumers is one of the main reasons why start-ups fail or don’t even make it out of the founder’s garage. And think about investors. There are many investment funds and incubators that support sustainable food start-ups. They want their money to be invested in start-ups that have the highest chance of success. Therefore, the first question an investor should ask is: who is going to buy this? Immediately followed by: and why? In other words, what is your Big Assumption? A founder who has a well-reasoned answer will be much more likely to get funding.

There is a simple and feasible way to come up with clear and well-researched answers to these fundamental questions. It is as simple as presenting your idea to the target audience and gathering structured, honest and unbiased feedback. This is called a concept test and it gives you a good idea of your start-up’s potential. By listening to your future target group at an early stage, you can innovate faster and reduce risks. You can validate your idea with real, honest consumers while it is still just an idea.

Testing your idea with real consumers is going to help you develop the right product and tell the right message. And thus increase your chances of success. OR, instead of finding out the hard way, you might learn that your idea is not as good as you thought after all.

Learning fundamentals

Every time we run a concept test, we find valuable insights that can fundamentally change the way entrepreneurs market their products. And we can uncover these insights in weeks rather than years. By engaging with real consumers from real audiences.

Some examples:

• The description of the ‘tropical flavour’ of a soft drink actually sounded very chemical and very sweet (while the drink itself is natural and not sweet at all).
• The chosen name for a vegan caterer was not associated with healthy and conscious eating, but with abundance and too much food.

A concept test is a proven way to achieve this. This is what market research companies and big brands have been doing for years. But start-ups and investors often seem to think it is not feasible for them or perhaps overlook the opportunity. May I suggest you just give it a try? The affordability and speed may surprise you.

Contact us for a concept-test, or for other solutions for your products or business

• Marketing Facts: Innovation and marketing