The Sweet Spot
The importance of product/market fit, and two companies that kick ass at identifying it
This post was inspired by my recent experience starting DRYV. Launching a service that has strong product-market fit was something I bet on, quickly allowing the market to validate this hypothesis has now allowed us to focus on other challenges of the business, and not spend additional resource understanding if people actually want what we’ve built, they do! Now it’s just about reaching more people, and continuously getting better.
Establishing product-market fit is fundamental for numerous reasons. First and foremost it validates that you’ve created something people want, secondly all the struggles that come with user acquisition get significantly easier. Hitting the sweet spot in a market vs. creating a new one are two entirely different scenarios to be in when building your business. If you can find a way to gracefully “fit” into a market that’s already in need, there tends to be less risk. Creating all of the awareness, education, and reinforcements needed to generate an entirely new market is expensive, and cost of failure is significantly higher.
I thought it would be beneficial to highlight two companies (1 service company, and 1 product) that have done a great job at finding the sweet-spot. From this we can learn why being educated about market needs, and placing bets on products and services that have a good fit can be lucrative.
Uber
There has been significant amounts of hype around Uber over the years covering everything from their constant battle with local law makers to their unconventional marketing tactics, like hailing helicopters to the hamptons or on-demand Christmas trees. Another story that is consistently published, is that Uber is one of the fastest growing companies in the world. Recent leaks showing roughly 80k users onboarded weekly and ~20mm in revenue per week supports this notion with flying colors. Besides the fact that Uber has great leadership, they produced the prefect product at the perfect time. Product-market fit is no doubt a contributor to their rapid success. Below are a few reasons why they were able to gracefully enter the hearts of consumers and verify their product-market fit.
Hello black car. Until Uber, most people wouldn’t have the slightest idea how to get a classier ride than a taxi (simply). When taking clients out or going on a date you didn’t have any options. Uber made it simple for the everyday person to have a private driver.
The pre-uber taxi experience sucks. I live in downtown Chicago and have not had a car for a few years now. Although selling my car was liberating, taking taxis in this city can be a mediocre experience at best for the following reasons:
- When the weather takes a turn (which it does in Chicago) it can be almost impossbile to hail a cab. Or when you’re hosting people, it’s tough to send everyone to the street to fend for themselves. The simple fact that Uber created the ability for users to request a car, and receive notification upon it’s arrival was already bringing huge value to the market.
- The quality of the car and driver can be less than desirable. I’ve been in plenty of Taxi’s that have smelled terrible, and some drivers make me fear for my life. Giving users the ability to rate their driver and the quality of their vehicle goes a long way. It also feels good knowing there is transparency on the experience which comforts the user and strengthens their loyalty to the brand.
- Cabbies make you feel like a jack ass if you wanted to pay with credit card. With automated payment to your credit card, you never have to worry about telling the driver you don’t have cash. Users were waiting for a better experience, and Uber was the first to deliver on this need.
UberX. Cheaper than a taxi. Yes, it’s cheaper than a taxi.
Introducing everyone’s private driver, an improved taxi experience, and the low cost UberX service has allowed them to successfully fill some major holes in the transportation market. It seems like they’re launching new cities weekly and haven’t slowed as it comes to an international footprint with cars on the ground in Europe, Asia, and Australia.
Warby Parker
Everybody knows the stylish eye-ware business is high margin and typically overpriced for the consumer. The inflated pricepoint is due to the distribution, licensing, and retail markups required to get a product out in front of the consumer. There are a few opportunities Warby Parker exploited when approaching the marketplace, the big wins I’m highlighting below:
The price is right. When shopping for designer shades you could easily spend upwards of $300-$400 for a slick pair of frames. Warby’s start at $95 and don’t go much higher than $150 — and those are for prescription sunglasses. By building their brand online and staying out of retailers they’re able to keep costs low. They do this by dodging retail markup and tricky distribution hurdles.
Warby also lets users try the product at their convenience before making a purhcase. You have 5 days to try on 5 pairs, and only keep the ones that you like the best. By approaching the market at lower price point, and giving the user time to experience the product they’re establishing trust and lower the barrier to entry of acquiring a new customer.
Buy a pair, give a pair. There are several ways brands pull at the heart-strings of their consumers. One way to do this is by donating product to those in need. This donation framework was recently made popular by Toms just a few years ago with their “One for One” program. When people feel good about purchasing a well priced item, it helps establish an emotional bond that they’re sure to remember.
Right time, right design. As the hipster fad crept into the mainstream and being a nerd became about as cool as being a pro athlete - stylish glasses definitely was part of this movement. Having slick frames, was about as important as your rolled up chinos and suede boots. Warby Parker brings a fresh new design to glasses and promotes the quality of their materials, not just the good asthetics. They were able to penetrate the market with the perfect design at just the right time.
In conclusion, if you’re thinking of starting a new company or creating a new service, it’s beneficial to do early tests to truly understand if there’s a fit in the market for your idea. As I’ve learned with DRYV, and as companies like Uber and Warby are demonstrating — there’s less friction getting early adopters when you don’t have to create a new market for your product, but simply “fit” your product into a user-base that’s already in need… I call this finding the sweet spot.
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