Why you need to get clear on your market

Hope you’ve had a great week.

In today’s letter:

• The importance of knowing your market

• The hierarchy of impact (illustrated)

Now to some this might be painfully obvious and simple. That’s because it is.

But if I’ve learned anything in life, it’s that most of what we should be doing is simple. It’s just that for whatever reason, we think we’re bigger, better or the laws of the universe don’t apply to us.

I’ve worked with dozens of founders by now and I can’t think of many who truly understood their market, most of them skipped right to building a product which can be a costly mistake. And when asked about their market, they can name a few job titles and industries but that’s where the understanding ends.

The importance of knowing your market

The reason why understanding your market is so important is because it’s a foundational piece in any business. Your market dictates the opportunity you have, the product you build, the channels you use for distribution and your pricing model as illustrated below—order of importance going bottom-up. The items at the top change often (channel expansion, new features and capabilities) whereas the ones at the bottom tend to be more difficult to change and require more effort.

At its core, product-market fit is when a company has found the right market, built a product that solves a problem for that market and priced that product in such a way that the perceived value (impact to be delivered) far outweighs the cost. Before product-market fit is solved, a company must first solve message-market fit. The promise must align with what the market desires— a product is then built to deliver that promise. Seeing the pattern here?

Without knowing your market, you can’t find a problem to solve. Without a problem to solve, you can’t determine the cost of solving said problem or build a solution. Some problems are worth more than others and require different solutions. Taking it a step further, the product and model you build dictates the channel on which it’s all distributed (not the other way around as most think).

You wouldn’t build an enterprise sales team to sell a $100/mo product and you wouldn’t aim for TikTok virality on a product that sells for $80k, annual contracts paid upfront.

So how do you calculate your market, assess its opportunity and go beyond job titles to deeply understand your target audience to build something they desire? We’ll discuss that in the next one.

Liam