Market is the only thing that matters.
So says Marc Andreessen, cofounder of venture capital firm Andreessen Horowitz. You can have a stellar product, and a great team building it, but if the market isn’t there to buy, your company can’t go anywhere.
This makes finding, and appealing to, the right market one of your most crucial tasks. This is true not just for new brands trying to find their footing but also for established brands that want to either move into a new market or see their existing market shift below them.
Identifying your target market and their desires is a significant step toward business success. If you want to build a great product and a great company, you need to find the market and give it what it wants. Or as Andy Rachleff, CEO and cofounder of fintech company Wealthfront, puts it:
“Time after time, the winner is the first company to deliver the food the dogs want to eat.”
Social media analytics and industry analysis can help you find out what food the dogs want to eat.
Asking your audience about your product/market fit
When you successfully deliver that dog food, and build a business around delivering it, you are said to have achieved product/market fit. This term was originally coined by Rachleff, though it is Andreessen’s description that is more widely accepted:
“Product/market fit means being in a good market with a product that can satisfy that market.”
This definition raises two obvious questions:
- How do you know what is a good market?
- How do you know your product can satisfy that market?
The answer to both questions is the same: Ask your audience. You go out into your market and find out what people truly think about your product, whether it is helping them or whether they have any interest in the first place (thus finding out whether there really is any market for you).
The most common ways to perform market research are surveys, user tests, focus groups, and interviews. All of these work, and customer research of all types should be a core component of your business. But with all of these, you are (a) only getting a subset of the entire possible market and (b) only getting a subset of the opinions of that subset.
Social listening and industry analysis allow you to reach a more representative array of your market and get a more representative sample of their opinions. Like an on-demand focus group composed of billions of consumers, social media data can help brands of all types better understand what their market is actually looking for. Not what they were looking for last year, or what they’re willing to tell focus group moderators they’re looking for — what they’re really, truly looking for.
That is what restaurant company Levy found when they started analyzing how to expand into different markets.
The unvarnished truth
Levy had a number of different products—types of restaurants—and needed to know whether there was a market for them if they expanded into St. Louis. They had survey data, market data, and even menu data from their restaurants. But they didn’t know how to act on any of that data. They brought in E15 Group for data and analytics support to help understand that data.
This data gave The E15 Group insights into some of what was happening in that market. But it didn’t give them the entire picture. E15 Group turned to Crimson Hexagon and industry analysis to — as Linsey Smith, Director of consumer insights at E15 Group, puts it — “fill in the gaps.” Smith says,
“Social listening really gives us the color behind all that data, and it also gives us people’s honest opinions.”
This allowed Levy to discover an entirely new area of the market that they were unaware of. There was significant interest in fusion restaurants in St. Louis. The company opened one in the Enterprise Center and exceeded the previous year’s revenue in half the time.
Social media is your market talking. Listening to them will tell you what they need and what their problems are and build a hypothesis to better understand them. It will, in short, help you identify the dog food your audience craves and how you can deliver it to them.
Building your market hypothesis using industry analysis
Amazon is famously data-driven, so they must have data that backs up their recent launch of an Alexa-powered microwave. Yet the industry analysis after the launch showed that people were talking about the appliance, but not in a good way. Their audience seems concerned about usefulness and security:
Using social media analysis, Amazon could have understood what people think about smart devices in general, as well as the usefulness and security of those devices. Most importantly, the company could have found out whether a voice-powered microwave would solve a core problem for the customer.
What they needed was a market hypothesis. A market hypothesis defines certain aspects of your audience. Then you can start working toward what is needed to “satisfy that market.” Brian Balfour, founder and CEO of Reforge, and previously VP Growth at HubSpot, sees answering four core questions as necessary for a valid market hypothesis:
- What overall category is your product in? Is it a SaaS, ecommerce, or a consumer product, for example.
- Who are the main personas within this category? Are you going for a wider audience, as is common in consumer markets (all women ages 18–34), or a much narrower audience, as you might have in B2B (sales managers at $5M+ revenue software companies)?
- What are the main problems that your persona has in this category? What do you really want to help them do?
- What are the main motivations for this audience? Why do they have these problems?
Alongside other market-research techniques, social media analytics is ideal for helping define your hypothesis, understand the market, and answer these questions—especially the last two. Most companies know what category they are in and what personas they are after. But understanding the true problems and frustrations of this target market is a much bigger challenge.
Yet people talk about these online all the time. Take this series of tweets from a sales manager:
I manage sales for our agency and have been using an Asana board to manage a simple CRM. Today I’m moving it to @airtable for a few reasons.
— Jimmy Daly (@jimmy_daly) October 17, 2018
Reason #1: Airtable has a better @zapier integration. I can trigger email notifications to our team as leads move through the pipeline. In an Asana board, column changes in boards can’t trigger zaps. Tags are a workaround, but also add more admin work.
— Jimmy Daly (@jimmy_daly) October 17, 2018
Reason #3: Asana custom fields are really limited and @airtable custom fields are basically limitless. Also, it’s easier to include Airtable custom fields in zaps.
— Jimmy Daly (@jimmy_daly) October 17, 2018
If your product is a CRM, that information is gold dust. A sales manager is telling every CRM company out there what their main problems are (lack of integration, lack of customization) and what their main motivation for those problems is (a need for full communication with the team).
Running this analysis gives you a competitive advantage. You are seeing what your market really thinks of not just your product but also other products in the space. If you are a new competitor, you can easily see how this information can help you build a competitive strategy against more dominant companies.
If you want to satisfy the market, you have to solve their problems. You use industry analysis to see what problems the core personas are talking about, and you can start to think about moving your product in that direction.
Iterating on the who, not the what
Product/market fit isn’t a one-and-done challenge. Markets do two things:
- They expand. Over time, either more people have entered your original market, or you’re considering moving into new markets.
- They evolve. What was important and what was a problem for a persona once might not be their current issues.
We can see this with the sales example. The sales CRM market has expanded but also evolved. Initially, salespeople might have been concerned just with data integrity and basic fields. Now, it’s more important for a CRM to talk to other tools in the stack and for companies to be free to customize according to their own needs.
That means that product/market fit is an ongoing process:
(Source: Brian Balfour)
Audiences change, industries trends change, and consumer expectations change. If you are Asana in the tweets above, there are two crucial insights:
- You don’t seem to have achieved product/market fit. According to Andreessen, you aren’t satisfying the needs of the market.
- Your market has expanded. Asana isn’t supposed to be a CRM, but there is a market available for it in the CRM space.
Asana is struggling, but struggling in a new market. If Asana’s market research is tied to its usual market—task tracking—this market could be missed. Yet people are telling them openly online about this possible market. Asana just has to listen. Then they can go through the process outlined above:
- Refine their original market hypothesis to take into account this new use case. People want to use it as a CRM.
- Build a version that satisfies this new market. Include more customization and integration.
- See whether this new persona (sales managers) is now getting value from Asana. Perhaps this is shown through tweets from people switching from regular CRMs to Asana, or from Airtable/Trello to Asana.
Let’s have Marc Andressen have the last word:
“In a great market—a market with lots of real potential customers—the market pulls product out of the startup.”
This is the opportunity here — and one that might be missed. But with industry analysis built on social media analytics, companies can see what everyone in their market is saying about them—good, bad, indifferent—and understand whether they are satisfying the market and whether they truly have product/market fit.