July 3, 2017

Everyone Loves Your Product Until They Have to Pay For It

One of my favorite phrases is “Everyone loves your product until they have to pay for it.”  This is a simple but true sentence that describes the death of many products and companies.   Entrepreneurs have always been guided by the traditional customer discovery process.  But improper or insufficient customer discovery can lead to “Everyone loves your product until they have to pay for it.”  Peter Drucker says that “Sales is the only valid metric for your idea” People may like your product.  They may even try your product.  But those are not the valid criteria for product success.  The only valid metrics are a person’s willingness to make a decision on your product, pay for it and replace the incumbent solution with your product.  Entrepreneurs are constantly caught off guard by this simple but critical concept.

So, is the MVP is dead?  Well, not really, but using the term “MVP” might be misleading.  The main reason for this is a misunderstanding of the word “viable”. Viable was intended to imply salable.  But often entrepreneurs, in a rush to validate their idea, don’t think about or include the word “salable” into their thinking.  They believe that viable means it works.  A product can work, but no one may want to buy it.  Should we be building products that fit into that category?  I think not.

The main issue is that entrepreneurs perform too high a level of customer discovery and build something that sort-of works but is not salable (or buyable).  They also have “happy ears” in that they want to hear that their idea is great and that buyers will rush to their door to purchase the solution.  But they often miss the critical features and all of the other issues that go into a true purchase decision and rush off to build something that is destined to be unsuccessful.

Here are some common reasons that a product may not be salable:

  • Product does not solve a problem (if you find yourself in this situation, you really did not do any customer discovery)
  • Product solves a problem but the problem is not a priority for the market
  • Insufficient differentiation between what you built and the incumbent solution
  • Insufficient value for the buyer to justify the cost
  • It is too politically or functionally difficult to replace the incumbent solution
  • You have improperly priced it (too high or too low to be taken seriously. Free is rarely a good idea…see below)
  • You don’t know how to sell (position the product, set differentiation, have a value proposition, guide a buyer through a sales process, qualify accounts, handle objections and close)

It is important to note that when you describe your product to the market at the very beginning, before you actually build it, people will tell you that it is a good idea.  They may even tell you that it solves a problem.  But the issue is: “Will they buy it.”  Everyone loves your product until they have to pay for it.

So, the v1.0 product needs to be salable and the proper term should be Minimally Salable Product or MSP.  Below, let’s look at the criteria as to what makes a successful product.

  • Solves some need or pain the market has and that the market understands
  • Market understands how the product solves the above problem or need
  • Market understands who it is for (what is the target market and ideal customer?)
  • Market wants it and is willing to pay for it (at an appropriate/fair price)
  • It works
  • There are references
  • Users know how to use it
  • The outcomes expected are well-communicated
  • It produces the outcomes that were promised
  • Risk of purchase/use is reduced
  • Objections are overcome
  • People talk about it
  • Others try to copy it

While all of these are essential, #4 is the issue that we are covering today.

So, how do you better ensure that you are building a MSP?  Well we can start by asking better and harder questions of yourself and during your customer discovery.

Questions to ask during customer discovery:

  • What problem does this solve for you?
  • Is this a problem that you would focus time and attention on?
  • What are the cost implications of this problem?
  • Who would make this decision?
  • What is the incumbent solution?
  • What do you like and not like about it?
  • How difficult would it be to replace that solution?
  • What other applications does the incumbent solution integrate with?
  • How difficult would it be to replace those integrations?
  • Who would be opposed to replacing the solution?
  • How much more would you pay for a solution and what would that solution need to have before you would consider a replacement option?
  • How much effort would it take to replace the current solution and who would need to be involved?
  • What training and support would be required and how difficult would this be to do for you?
  • What differentiation is critical to you and would cause your organization to seriously consider a paid-for replacement?
  • What features are required (stack rank these)?
  • What perceived benefits would need to be derived from each feature?
  • How mission critical is this application to your business?
  • What criteria would you place on a vendor with a potential solution (size, revenue…)?
  • What objections would there be around a potential replacement (cognitive, resource, political, motivational)?
  • How would we need to overcome these objections?

Entrepreneurs need to learn to ask these questions and listen carefully to the responses and think through how they will deal with the identified issues.

The above problem goes hand-in-hand with another common entrepreneurial issue.  That is giving the product away for free and hoping the customer will want to keep it and pay for it.  This is called the “puppy dog sale”.  The theory is that if you hold the puppy for a while, you will want to take it home.  Entrepreneurs try this with their products all the time.  It rarely works.  It is much more important to sell on value.  You need to state that your product is designed for the tough problems and that you are for the serious buyer.  You are looking for the person or organization that doesn’t simply want to complain about a problem but wants to solve it and is serious about solving it.  Then you need a strong value proposition.  If you don’t know how to build a value proposition, please contact us.

If you can’t justify your price for your product it is not viable, or salable.  So, try to be honest with yourself.   This isn’t a hobby, it is a business.  And business means revenue and profits and to achieve these requires selling your product to a broad enough audience and at a cost that makes it profitable.

When thinking about and then developing your product, make sure that you are asking the right questions.  Hard questions and can get a commitment during customer discovery process about what price a potential customer would pay for your proposed solution.  Then build the product with the sale in mind.  That is the only important factor.  It doesn’t matter if you like it, it doesn’t matter if they like it (but won’t buy it), and it doesn’t matter if it just works.  It only matters if they will buy it.  Remember “Everyone loves your product until they have to pay for it.”

For more information on how to think about the Minimally Salable Product, contact Arbor Dakota below.  Arbor Dakota is committed to helping CEO’s grow their great ideas into great companies.