A common mistake technical entrepreneurs can make is to focus on what’s easy to build, and enter a market with dozens of competitors without thought to differentiation. Or to hope that by making it “free” they can make money by selling ads.
A Google Search Finds Dozens of Competitors, What Now?
Q: We are planning to start up an an on-line survey software. We are thinking of it as a hosted service, which could cater to virtually, any business or individual who wants to conduct a survey on any area like market research, customer satisfaction, employee satisfaction current affairs etc… We plan to start out offering free surveys and sell ads. We have a basic service working, what should we do next?
A: “market research, customer satisfaction, employee satisfaction, current affairs” are four distinct needs with four different kinds of decision makers and purchasing cycles. The most dangerous words in your plan are “cater to virtually any business or individual who want to conduct a survey.”
Given that five minutes on Google turns up dozens of competitors in each of the verticals you have identified:
- What is a key barrier that a prospect faces in using one of your competitors that you will remove?
- How will you differentiate yourself?
- Why do you believe that there is unmet demand for on-line survey tools?
- Starting out free may undercut your credibility with prospects: you will be contacting folks on their behalf, acting in effect as their agent, with the ability to damage their reputation. Cost may not be a barrier. In fact, many of the survey tools have a “free option.”
- What is it about this market that you find attractive?
- Does anyone on your team have any experience in designing and interpreting surveys?
Q: That’s a lot of questions.
- I don’t think that there are any.
- Can you please define what you mean by this and offer some examples?
- I am not sure I do, I am not sure why this matters.
- Perhaps we should offer a free trial or consider a subscription model.
- A survey tool was easy to code.
- Not really, but if we have a demo that’s easy to use why does this matter?
A: My apologies if this is too direct, but I believe you have to build a software service such as the one you outline based on deep knowledge of your customers’ needs. The good news is that it’s clear that a market exists and people understand the problem.
To segment an existing market consider what features can you:
- Eliminate or dramatically reduce that competitors invest in but your customer segment does not value?
- Improve well above industry standards because your customers will pay more for them?
- Add that your customers need or can use that no other competitor offers?
Kathy Sierra’s Tips for Adding Features
Kathy Sierra offers a useful “graphic equalizer model” visualization in “How To Come Up With Breakthrough Ideas.” She offers tips for finding new features (“sliders” in the original to keep with her graphical equalizer metaphor):
- Borrow features from an entirely different product or service type. Customization, Subscription, Home Delivery, Entertainment, etc. — things that make sense in some domains but have never been used on your product or service.
- Look at the conventional wisdom–things everybody offering that product or service takes for granted–and see if you can tune a slider the others consider immutable (or unimportant).
- Randomly add features and play what-if brainstorming games.
- Ask users to come up with sliders. This is more effective (and similar to #3) if you ask users from a different domain! Remember, directly asking users what they want rarely leads to breakthrough ideas. Breakthrough ideas are, by definition, things nobody has yet imagined, but which users find compelling.
Kathy Sierra in “How To Come Up With Breakthrough Ideas.“
The Blue Ocean Strategy also offers a similar approach.
Related Blog Posts
- Customer Development: Scouting A New Market
- Few Against Many Requires Focus and Perseverance
- 3 Equations & 3 Unknowns: Customers, Features, MessageYou’re trying to solve three equations, three unknowns:
- Are you talking to the right people?
- Do you have the right features?
- Do those features translate into benefits that are going to be useful to them?
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