Market demand: create true value by listening to your customers
“If I had asked people what they wanted, they would have said: faster horses”
We at Merluno have heard quite a few CEOs come up with this quote during brainstorms or workshops. After all, how can you or your product be truly innovative or disruptive if you fail to think outside the box, right? Such a pioneering spirit implies letting go of current-day restrictions and limitations: “Where and how can my product create value no one has ever thought of?”
There is nothing wrong with thinking outside the box. We can only applaud it. As a matter of fact, we take it upon ourselves to facilitate our clients in doing so by revealing their dreams and turning their products or services into tangible value propositions.
That said, thinking outside the box does not mean thinking ‘outside the customer.’ We have witnessed numerous companies develop cutting edge tech products that only in a second stage tried to figure out whether there effectively was a market for their paradigm-shifting ideas.
As a matter of fact, there is not even proof that Ford actually ever said those words. What Ford did do, however, is manufacture the automobile – which he did not invent – cheaper than the other constructors. And what Ford also did know is that his actual competitors were horses. The customers did not ask for faster horses. They asked for cheaper horses. Over time, Henry Ford was indeed able to drive the cost of the automobile down so significantly that the ‘total cost of ownership’ of a horse turned out to be several times higher.
We at Merluno can only emphasize how important it is to listen to your customers. And not just once, as it is with them and for them that you realize your mission.
Still, how can your product create value for the market? What are your customers’ needs and demands with regard to your concept?
Does My Product Fit the Market Demand?
Designing your value proposition takes you through three main stages:
- The problem-solution fit: where you identify potential customers and their unmet needs to create a value proposition;
- The product-market fit: where you validate your value proposition on your customer segments;
- The business-model fit: where you identify the feasibility and viability of your value proposition.
The majority of our clients’ requests can be situated in the second phase. Valuable – no, scratch that – vital input can be gathered there that not only helps finetune or tweak your value proposition, but equally determine your pricing, communication, and distribution strategy.
How Do I Capture the Market Demand?
Your market research, again, consists of three main stages:
- Validate the proposition;
- Analyse the evidence and gain insights;
- Decide on the action.
Take your time to carry out this exercise. Too often decisions are made based on faulty, biased, or misinterpreted data. Don’t let confirmation bias get in the way. You want to believe your solution is valuable, yet this is not necessarily the case. Here is where you think outside the box and let your customer speak.
How Should I Approach This?
People more often than not hesitate when making decisions: “Do we do it, or not?” This is not because they ignore how to analyse, but rather have no idea how and what to research.
- “How do I get the right input?”
- “What questions do I need answered?”
- “What and how much effort should I put into this?”
At Merluno, we believe you should get your information first-hand from decision makers and influencers in your market. Whether you do this through face-to-face interviews, panel conversations, or through telephonic interviews: the aim is to get quality feedback on the proposition from a sample of each of your research markets (10-15 in depth interviews per segment will suffice)
Score those answers and benchmark the different segments as to be able to zoom out (i.e. ‘Where do you create the most value’?) and make an informed decision. This will give you a rudimentary understanding of the market demand you’ll want to focus on.
How Do I Validate the Market Demand?
For each of the potential customer segments, validate your customers’ proposition. We do this through our four market validation criteria: Market need and willingness-to-pay constitute the market opportunity, market requirements and ease-of-entry represent the cost of opportunity (what do I need to do to reach this potential).
Think carefully about how you formulate the questions for each of these criteria. Be open and neutral in your observations and critical in the analysis, since “What people say, do, and say they do are completely different things” (Margaret Mead).
Truly understanding what your market needs will help you identify how your product or service can create value:
- What challenges is your market facing? (do they have a problem and are they aware of it?)
- How do they formulate their needs?
- To what degree are they looking for a solution?
ProTip: Answers here provide input for the first cornerstone in your go-to-market strategy – i.e. turning your proposition into something that creates value for this specific customer.
What is your market willing to pay for the value you bring?
- What does your market think people are willing to pay for the solution (minimally)?
- What do they think about a specific price point?
- What budget do they typically allocate to this?
ProTip: This information is crucial for identifying or tweaking a price point and helps determine your pricing strategy – i.e. What value can you capture? At what margin can you be competitive?
What efforts do you need to produce to become a major player and relevant potential partner or supplier?
- What information is your market looking for and what types of questions do they ask themselves?
- How do they inform themselves?
- Where do they buy?
Tip: If you are unsure about your distribution strategy (e.g. direct sales or indirect) or your communication strategy, this helps you learn more about your market’s preferences.
What are the potential barriers for you to enter the market or a specific customer segment?
- What competitive solutions or alternatives are there?
- What is your market’s adoption rate for new technologies and how are decisions made?
- What legal, cultural, political, economic, or social barriers are there?
ProTip: Where you believe to have the competitive advantage helps you decide on the market you want to exclude (e.g. red ocean) or include.
The insights we provided in this blog clarify who to target, what to sell, and how to do it. In short, these insights will help you discover the market demand. After all, this forms the basis of your go-to-market strategy.
We at Merluno have created a set of tools and techniques to help you navigate your way from budding concept to practical roadmap. Do you want more information on what we do? Get in touch, and let us discuss how we can help you. With more than 12 years of market experience with over one thousand companies – from scale-ups to multinational corporations – in a wide range of sectors, we at Merluno would be happy to take a closer look at your company’s challenges.