When meeting real market needs there are some important questions that go along with satisfying those needs. We want to think:
- Why does the customer need my product or service?
- What is the best way to assess their needs?
- What are the important features?
- Why does my solution fit better than current and future offerings?
- What should I charge?
- Is it economically feasible to produce your expected product or service?
The economic viability of your product is one of the first things, I try to work with students to explore. It doesn't take long to get into a conversation.
- How do you earn money?
- How do you generate income?
- What are the least revenue and expenses for the category you're considering?
So, over-designing your product can be a big problem to do so, you may end up with a product that no one wants to buy because of the price.
We also want to think about making production costs manageable and scale appropriately high to have that good economic flexibility and balance.
We also want to think about worrying if something is too expensive and there aren't many people who want it will it be unprofitable? So again a crucial question to answer, we want to understand that before we build it.
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| Tesla roadster car |
So when you think of vehicles and retail, this was the original Tesla, the Tesla Roadster. A $109,000 car when it hit the market in 2009 and not many people can afford the $109,000, not many people want a two-seater, not many people want an all-electric car.
So they are not trying to serve everyone. But they made a niche and carved out a competitor in the context of Ferrari, Porsche, and other high-end sports car markets they initially chose to pursue, so that's where they started.
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| Volt recovery car |
There were other solutions in the electric car market so the Chevy Volt was introduced to the market shortly thereafter.
Different class, different price point, different technology, have different market and still contain electric and non-electric items.
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| small vehicles |
A third item, (global electric motorcars) or very small vehicles that are only allowed on motorways with a speed rating of 35 mph or less. Different market, different purpose.
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But it might be more oriented towards resort communities or golf course communities or campuses or golf courses or parks so it has a variety of other markets, different needs, different wants similar technology in a broad class of electric vehicles Similar purpose to getting me from A to B. But different approaches, different needs they satisfy.
These three companies may succeed in doing what they do, but they chose a segment, they chose a purpose and they prospected and focused on the needs and desires of a particular type of customer. This is what we want to do as entrepreneurs.
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| tesla sedan |
Tesla's second iteration was the sedan. bigger market. lower price point. The competition here against Mercedes, BMW, etc. Your first product is not your last product.
Why didn't they come up with this first? Well, a car with a higher price is likely to be more profitable.
It also defines an element of the brand and it defines the element of being a high-performance car company, and perhaps that is easier to do with sports cars than sedans.
So, great marketing, but also a great technique of focusing on a different segment and a different market.
Why you should be honest with yourself about competing products and how yours compares?
So we want you to be honest with yourself about competing products and also be data driven. Don't just assume a competitor's product is bad for one reason or another, do research, look for survey comments.
Try to get some quantitative understanding of what gaps and what gaps you can fill.
We also want to realize that you are not overly optimistic. We want you to be optimistic but we want that to be moderated by a certain level of data and a certain level of insight and expertise and we want you to make a fair assessment of what is out there.
- What are the strengths and weaknesses of competitors?
- What are the strengths and weaknesses of the solution you are considering.
We want you to use your relationships, think about your social networks, and think about your friends, family, customers, competitors, and others that you might have some affiliation with that can give you some real insight.
How to understand the processes of marketing and selling?
We want you to understand the process of marketing and selling In order to be successful, you have to realize that the best marketed products often win, it's not just the best products.
And we want to think about the personal selling side and pricing, and the role it plays in the new adventure.
So, as an entrepreneur, you may not only be the inventor and innovator but you may also be the chief salesperson.
Why success and profits depend on the right pricing?
And this success is often dependent on pricing and realizing all the costs involved it is not just a manufacturing cost. It is the cost of design, marketing and other elements that you should take into account in your pricing.
You should understand the difference between fixed and variable costs, which we will write about later.
We also want to think about finances, and then the competitor's finances and we'll write about that later as well.
Why you should beware of underestimating the price of your product?
We want to be aware of reducing the price of their products, we want to estimate volume and think about volume, match that to what we think the market will tolerate and make sure we understand the price of competing products and that if it takes us a while to get to market, the price of competing products may change as well.
In this context, we don't want to reduce the price to the point that people will warn about our quality. If we offer features that are comparable or even better than competitors, it's okay to price close to them, a little lower or maybe even above them if you have a superior feature set.
But don't feel that just because you're new you need to be exponentially cheaper. It may lead to a certain level of thinking that you are worse in the mind of customers.
Summary
Why do customers need your product? What is the best way to assess those needs? What features are they interested in? And talking to them early, very early in the process gives insight into that.
We want to think about how your product fits in, why it's better, and do you have some data that identifies the gap in relation to competitors, not just your personal opinion and pricing.
Beware of low pricing, and also beware of missing out on some of your expenses.
Don't just think beyond the cost of manufacturing your product:
- What is the cost of marketing it?
- What is the cost of your distribution and supply chain?
- What would it cost in overhead to really support that?
And have customer service or other items that you need a lot as well.
Broadly, think about all of these questions as you look at how the product will be brought to market.