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Every great business has three elements that must blend together to create a harmonious, and profitable ecosystem — from customer acquisition to purchase — a perfect elixir of the right product, the right market and the right business model that produces rapid growth. Calculate this formula correctly, and your customers should love your product or service and want to boast about it to their peers, not to mention, the business should have scalable potential and sufficient revenue prospects.
Unfortunately, many startups and small businesses find themselves only achieving one, possibly two of the key elements, and thus, struggle to gain market adoption, differentiation and financial tailwinds. Outlined herein are examples of how just one element can stunt your company’s growth curve.
Failure #1: Fighting to win the wrong market
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Right product
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Right business model
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Wrong market
With a great product in hand, coupled with an acceptable business model, the entrepreneur that fails to pick the right market is often plagued by slow customer adoption and often, failure. Not only will she fail to gain new customers quickly, but she will burn through precious cash trying to convert the “unconvertable” as they do not value her intended value proposition.
Think of selling lemonade outside of a restaurant. They have lemonade inside and several other cold options, so why would the market want yours? You might win for a small period of time if you decide to undercut the restaurant on pricing, but that race to the bottom is not sustainable for long. Here, it’s the right product, right model, wrong market.
Related: You’ve Got to Rethink Product-Market Fit to Stand Out
Failure #2: Deploying the wrong business model
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Right product
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Wrong business model
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Right market
If you’ve listened deeply to what the market needs and deployed a unique and compelling product offering into the right market, you’ve done more than most entrepreneurs accomplish.
However, where many founders and small business owners stumble here is to force the wrong business model — such as advertising, subscriptions, high pricing, heavy up-front switching costs, etc. — onto their customer base. The wrong business model creates unnecessary friction, and thus, only a small percentage of customers convert. Moreover, the ones that convert aren’t incentivized sufficiently to promote your company within their networks.
Think of selling lemonade on a hot summer day at the beach (right product and market), but asking people to pay for an annual subscription to your lemonade-as-a-service model just doesn’t go down easy. They have the need, you’ve picked the right market, but the business model is holding rapid adoption back.
Related: 6 Keys to Proving a Viable Startup Business Model
Failure #3: Offering an undifferentiated product
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Wrong product
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Right business model
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Right market
Congratulations on figuring out which market is in dire need of a solution and determining the right type of business model that could work seamlessly to unlock customer value. However, where many entrepreneurs fail in this third category is when they launch a “copy cat” product, or more aptly, one that lacks true differentiation from a functional, utilitarian or brand positioning perspective. Here, the entrepreneur’s product lacks the uniqueness factor, thus leading to high customer acquisition costs (as they have to fight to win eyeballs in a crowded space). And should they gain some level of customer adoption, they will have to manage a high rate of churn or defection as customers may quickly become underwhelmed and switch back to another provider’s comparable offerings.
Think on-demand lemonade that gets conveniently delivered to your office from a slick mobile app for a flat rate of $9.95 per month (all your team can drink). However, when it arrives, it’s warm, tastes bad and doesn’t match the food that the staff is eating. Here, the entrepreneur has identified the right potential market (a thirsty crowd) and has a scalable business model leveraging technology and on-demand, independent drivers, but they have chosen the wrong product to offer. By substituting coffee on-demand, they could match up all three elements — the right (unique) product, the right (scalable) business model, and the right (receptive) market.
Whether you are currently running a business or just in the research and development phase, adjusting your strategic scope to focus on PMMF (Product-Market-Model Fit) will help you immensely to service the right market and delight your customers, while creating the tailwinds that propel your business to new heights.
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