How do we know when a product is solving a significant problem in a growing market? Do we need to build a brand and defend it with barriers against competitors? Read further in this article.

Notes on Des Traynor’s talk from Web Summit on developing a product strategy based on his experience at Intercom. The original article has been written by Vit Myshlaev and translated by Alconost.

How do you know when you’re really solving a significant problem?

If you can’t answer in the affirmative to the below three questions regarding your product, it makes no sense to move forward:

• It is viable. Can it make money?
• It is feasible. Can it be done?
• It is desirable. Does anyone want it?

Determining product desirability

Determine the types of problems a product can solve. We recommend analyzing how often a problem occurs and what its scope is:

• Necessary — a large and frequent problem. Example: Slack solves the problem of collaborating with colleagues almost every minute.
• Good to have — a big rare problem, holiday booking, for example.
• Good to have — a frequent, small problem. Example: ordering coffee every morning.
• DOA (dead on arrival) — small and rare problems.

Example of a DOA idea: the fridge is full of food, and there’s an app that helps select a recipe based on ingredients left over. However, this doesn’t happen often, and consequently, the problem is not very serious.

Evaluating product viability

How to charge for a product:

• You can either charge a lot of money or a small amount. You can spend a lot of time communicating with potential customers or a little bit of time.
• But you can’t take little money and spend a lot of time on sales. This is the case when the sales process is expensive and the price is small. Example: if you’re charging $9 per month and you need to personally meet each customer to get them signed up, your business is doomed to fail.
• Ask yourself: how much money, time and work does it take to engage a paying customer, and how do we recoup it?

Cost vs benefit for a client

Do you know how much incentive (benefit) your client needs in order to work with your product?

• High cost and little benefit: Google+ offered the idea of communicating with users using “circles” to make it easier to communicate. But you needed to find friends, understand how circles work, organize a lot of things, just to receive a small benefit from a very complicated process.
• Cost is not just money, but also user effort.
  Example of mistaken thinking about low cost: $0,99 + installation time + need to understand how to use app + another icon on my smartphone screen that I need to remember to check + they’re going to start emailing me and I have to read more email + then I need to press something… In the end, $0,99 isn’t such a small cost for users as it might seem.

Creating a product

To build a product around a large and frequent problem, ask yourself how often do you experience and understand the problem, and don’t make things up.

• How well do you personally understand the problem?
• Does this mainly solve my problem?
• Does the rest of the world need this?

Can you solve the problem without being tied to time and technology?

If you want your product to last more than 3–4 years, you need to think about this.

Example of uncertain value: “exchange phone numbers via Bluetooth with people nearby.” But people call less and write more, phone numbers become less used, and there're easier protocols for exchanging data than Bluetooth.

Example of copying bits of features: we’re going to copy part of Intercom’s feature “send automatic messages when users trigger events in a web app.” But the real problem is already beyond email (messengers). And triggers are now not just events: web apps are boosted with bots, intra-platform pages, etc.

Understanding market trends

• Will this problem be around for the next 5 years?
• Will these problems grow or shrink?
• Will the problem be more or less painful?

Let’s have a look at the Intercom example. Intercom helps internet business grow customer loyalty through messaging. The market trends are:

• There will be more internet businesses.
• Customer loyalty will matter more.
• There will be more tools to solve these problems.
• Messaging will eventually replace email.

You can practice analyzing market trends based on the examples below:

Almost everyone is looking for a niche in larger markets, but is there a market in these niches?

Growing vs stable markets

A growing market has customers with unsolved problems. In a stable market, all companies are established. The question is: do you need to study a new market or update an existing one?

A good comparison is selling something new or something established. Here’re some considerations:

• Users will adapt to your tool vs you’ll need to adapt your tool to an established market.
• In the case of a burning need and in the best-case scenario, customers need to optimize existing solutions, but mostly it’s not needed.
• Customers with unsolved problems are willing to take a risk, whereas established companies are afraid to disrupt what works.
• To update existing solutions, the customer has to go through the new product approval process.

A brand for IT products

A brand helps shape expectations from a product. This is the most overlooked instrument for software companies. Among others, the brand is addressing the following issues:

• What can and can’t your product do?
• What can and can’t your company do?
• What will your company talk and not talk about?

Decisions you make on your product drive your brand. What words do you most often use to talk about your product to customers? If you’re consistent in your talking about your product, you are forming expectations.

Example: what do you expect from Google Maps and Apple Maps? What about Facebook Messenger and Google Messenger?

Can your brand extend?

The listed companies have a certain set of expectations from customers. But they have already expanded beyond the original ideas. Their brand name doesn’t prevent them from growing past the original idea.

Which direction should you extend your brand in? Software and problem-solving

Each product is brought in to do a specific job:

• Solve one problem in a lot of different ways (for example, for different types of customers).
• Solve lots of different problems for existing clients and/or in the same or similar way.

Protect your product

Be ready: every single feature in your product will either fail or get copied.

Barriers against competitors:

• Economies of scale. You’re able to sell cheaper than your competitors if your overhead is lower (you buy cheaper) or you can have a smaller margin due to massive volume. Example: Amazon.
• Network effect. Your product becomes more valued as the number of users grows. Example: Facebook.
• Patents. Make copying your product illegal.
• High switch-over costs. If the customer is buried in a ton of information and has important processes locked in using your product, the benefit from switching is hard to justify based on price and/or new features. Example: CRM with a large database, hosting for a large project.
• Customer loyalty.

Making barriers

• Platform, ecosystem. This answer is easy to explain but it’s hard in practice: build a platform on which your customers rely. Example: switching away from the SalesForce family of products is nearly impossible.
• Community. You can’t copy satisfied customers. Meet with your customers, create groups/clubs/forums/meet-ups, know your customers.
• Unique messaging, ideology. What is the most unique thing you can say about yourself so that customers remember you? Example: Hubspot sells itself through Inbound Marketing, Drift calls itself Conversational Marketing.

A good product strategy is built from the inside out

1. Start with a serious problem that happens often.
2. Create a solution that will not be tied to time and technology.
3. Grow a brand that creates clear expectations among customers that your product will solve this problem.
4. Talk about your product in the growing markets.

You might also find useful:

The Hook Model: How to Make Using a Product into a Habit
10 Takeaways for Startups from 20 Lessons at Stanford University

About the translator

This article has been translated by Alconost, a global provider of localization services for apps, games, videos, and websites into 70+ languages. We offer translations by native-speaking linguists, linguistic testing, continuous localization, project management 24/7, and work with any format of string resources. We also make advertising and educational videos and images, teasers, explainers, and trailers for Google Play and the App Store.