Desperately Seeking Customers
Entrepreneuring
December 2011 / January 2012
Volume 9 Number 6
Ron Popeil. You may not remember the name but I am certain that you are aware of the innovative products marketed by Ronco, Inc. His gadgets include the Pocket Fisherman and the Inside-the-Egg Egg Scrambler.
These world-changing ideas were actively marketed through a series of television commercials that featured an odd array of paid actors who were hired on their ability to make us believe that if we only had a fishing pole in our pocket our lives would be complete. Or If only we could scramble our eggs before we cracked their shells we would somehow become better people.
Massive advertising and a bit of showmanship helped Ronco sell thousands of units over the years, most of which ended up in garage sales and as gag gifts at white elephant gift exchanges. Ron's success spawned an entire industry, the infomercial, and was effectively copied in recent years by Billy Mays Hays and the ShamWow.
The “Ronco Model” is a logical approach to a product-centric business strategy. Also known as the “solution in search of a problem,” the product-centric approach is derived from the inventor's belief that he knows exactly what the customer wants and builds an invention based on his skill set and accompanying biases.
As the invention nears the market the inventor is oftentimes confronted with the daunting task of determining who will buy the product. This can be a very uncomfortable epiphany as this may be the first time that the inventor realizes that not everyone wants their product, in fact many don't.
The inventor then undergoes cursory market research in the desperate attempt of identifying a group of people who may want his product. I say cursory because in my experience as soon as an inventor finds someone who might care they stop looking and start refining to meet the potential needs of this first market.
The Ronco Model eschews market research in favor of broad polling. The product is offered for sale through mass marketing, such as SkyMall Magazine, billboards and infomercials. The marketing strategy is refined as customers start to order products and demographics become more available.
The problem is that the “Throw-it-Against-the-Wall-and-See-What-Sticks”and the product-centric approaches are expensive and rarely funded by venture capitalists. And few of us have the personal resources to invest in such a campaign.
A far more capital efficient strategy is the “problem first” approach. Under this approach nothing is built until a profitable market problem is identified. The entrepreneur then surveys all of the possible solutions and invests her time in developing a product that meets the minimum effective requirements for the market problem.
Now I know that my product-centric readers are screaming, “What about the risk associated with inventing a solution? What if you can't build it? Shouldn't you figure out that you can build it before you go out and sell something?” Absolutely.
The invention step is still very critical but in the marketplace it should happen after the entrepreneur gains an intimate understanding of the problems that a customer faces. Additionally most of the companies that I have seen fail rarely fail because they could not overcome the technical risk. Most often they fail because they cannot overcome the market risk—that not enough people will buy your product to make it worthwhile.
The problem-first approach also helps the inventors clearly understand the minimum effective requirements for an invention to meet a customer's expectations. I often have witnessed product-centric offerings that were so feature rich that no user would consider them. More features do not mean a better product. In fact, the reverse is true.
When confused by an overwhelming number of choices a buyer will often opt not to decide instead of risking making a bad decision. At one point in my career I worked as the vice president of sales and marketing for a high-performance computer network switch manufacturer. If ever there was an industry full of overly feature-rich offerings, networking switches is it. The industry is full of speeds and feeds data and technical jargon.
On one of my sales calls I asked my potential client what his biggest problem had been with previous purchases. His response surprised me. “John, honestly most switches in our data center are exactly the same. Same performance, same price, same reliability. My job is as much to make them work as it is to convince the CFO that his money is well spent. When I bring him down to our datacenter all he sees is a black box that looks like the last black box I bought. When he gives our shareholders a tour he frequently states that he can't tell one box from another so he really doesn't know which box he just invested their money in procuring.”
Imagine the surprise on my chief engineer's face when I came back proclaiming the we needed to paint our switches blue. His product-centric mind had limited his innovative thinking to adding more features. Our customer didn't care about more bells and whistles, all he wanted is something that stood out enough so he could show his boss that he had made a purchase and in turn his boss could readily identify to his stockholders his extensive knowledge of expenditures in the data center. (We sold lots of blue boxes!)
Minimum effective requirements also keeps your production and invention costs low and reduce your time to market. If left to their own devices engineers will create the “perfect” product, full of features and options. The problem with perfect is that it never occurs. It is always one more change away. In business “now shipping” is infinitely more profitable than “perfect.”
So before your rush to market with your next great invention, stop for a moment and remember the lesson of Ron Popeil. Without a clearly defined market you will likely end up blindly marketing to everyone. Understand what the customer needs before you build it. The world really doesn't need another Pocket Fisherman.
John Freisinger is president of Technology Ventures Corporation.
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