Myth: Good Products Sell Themselves
Fact: Marketing Matters for Startups
A brilliant engineer from a leading tech university, let’s call him John, came up with a new technology that produces faster and more accurate automation of speech transcription than anything on the market. He then transformed this technology into a mobile app that anyone could use.
John decided that his creation was so remarkable that he dropped out of school and focus on his business fulltime. When asked if his product is better than existing solutions, he explained in great detail the features of his algorithm compared to researchers in other labs across the country. In fact, he decided to name his company JATA, an acronym for John’s Awesome Transcription Algorithm. Of course, this means nothing to the buyer or end-user.
John’s plan was to start by selling his mobile app to consumers and charging $100 in the App Store to download it. He arrived at this price by figuring if he can get 500 people to buy his app each month it would net him $35,000 per month (after Apple takes their 30%). He figured revenue of $35,000 per month would allow him to cover the costs of hiring a few programming friends to keep working on his app. After all, if the product keeps getting better soon he expected to be selling 10 to 20 times as many orders each month.
Suddenly reality hit John. Three months after releasing the product with great coverage on TechCrunch, John’s mobile app had 30 downloads. Oops.
The lack of sales motived the now less confident John to reach out to a friend of his, Bill, a serial entrepreneur, and asked him for help. John thought he had a superior product but something was wrong. Why wasn’t it selling? After all he had one of the greatest mobile apps in history.
Bill’s first step was to look at the competition. He downloaded some of the competing apps. From Bill’s analysis of the competition, he gained several key insights. First, all of the competitors were positioned very differently, not as simply a transcription service but focused on the benefit of “saving people time”. Second, the leading apps had a much targeted customer base. The competing apps talk communicate how lawyers, doctors and other professionals use the service specifically to achieve that benefit of saving time. Third, their app store pages included better screen shots, an overview video and customer testimonials. Lastly, the price of the competitive products ranges from $4.99 to $14.99, a much more appropriate price point for the value being delivered.
Before going further, Bill decided to conduct an informal test of John’s product and the competitors with a dozen target customers. He recorded a dozen friends speaking into their cell phone’s microphone and then had them transcribed by three services including John’s. He showed his friends the results simply labeling them results A, B, & C, carefully rotating the letters so they were randomized. He learned that John’s solution was preferred by 90% of his friends.
The good news is that John does have a better product. But total sales were 30 unit. Let’s review where it failed. 1) Poor marketing materials on the app store page. 2) Pricing was unrealistically high. 3) No understanding of who his target market is. And 4) a failure to focus on the product’s benefits, not its technology. What this shows is that there is more to marketing and selling a product than putting it out in the market place and hoping it will sell. A great product is a requirement for success, not a guarantee of success. Marketing matters.
While John’s story is an intentionally extreme story with the facts modified to protect confidentiality, we interact with entrepreneurs all the time who fail to recognize how important marketing is to the success of their products or services. It is worth repeating. Good products don’t sell themselves. Marketing matter.
In our three courses at Carnegie Mellon University (Lean Entrepreneurship, The Science of Growth & Marketing for Entrepreneurs) we have emphasized a number of important marketing principles and teach entrepreneurs how to apply them.
In this Medium publication, we are going to provide our materials for a broader audience than our students at Carnegie Mellon University.
If you want to learn more about marketing for startups, you can download our free two-page worksheet here.
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