Wednesday, September 08, 2004



But what does this mean? It means that every successful enterprise's offerings (products and/or services) meet four criteria:

1. They fill an unmet business, social or consumer need.
2. The enterprise understood why the need wasn't already being met, and overcame those obstacles.
3. The enterprise has the competencies to effectively create and deliver offerings that fill that need.
4. The enterprise has the resources to bring those offerings to the marketplace.

This may sound like a simple recipe, but it's actually quite difficult to achieve. The market for products and services, though far from perfect, is reasonably efficient at identifying and satisfying needs. If you find an unmet need, there is almost surely a reason why that need isn't being met by some other enterprise. You need to find out what that reason is, and overcome it. And then you need to gather a team of people with the collective competencies to design, produce, market and distribute the product or service that meets that need, and the resources (physical, financial and intellectual) needed to do so effectively. Easier said than done.

The key to doing this is in research, the difficult, time-consuming (but usually inexpensive) process of discovering the who, what, when, where, why and how of unmet needs. There are two kinds of research: Secondary research entails reading and browsing online to gather information that has already been published about the market, and need, and the possible solutions to it. Primary research entails talking to people directly to answer these questions, gathering unpublished information and intelligence. Successful needs identification usually stems from primary, not secondary research.

As you do your research, keep asking these questions until you're highly confident that you know the answers:

* What exactly is the need?
* Who exactly is the customer (the group that has that need)?
* What are the alternative solutions to it? What are the benefits and drawbacks of each alternative? Which, all things considered, are the best, affordable alternatives?
* Who is offering, and who could easily offer, each of those solutions? Why aren't they already offering these solutions?
* What competencies and what resources would your enterprise need to have to bring the best alternatives to market?

You might think it takes a lot of gall to get so many people to give you so much information and to offer their opinions free of charge. But entrepreneurs and researchers I know tell me people are often glad to help, and to offer their opinion, as long as the demand on their time is modest and that the solicitation is polite and personal. That means, ideally, face-to-face, with the telephone used only to secure an interview with them. Prepare to wear out a lot of shoes doing your research.

Because business' products and services are so diverse, it's hard to generalize beyond this point about the process of Filling an Unmet Need. As the next three chapters will show, not only does going through this painstaking and time-consuming process almost guarantee you success, it can also dramatically reduce the amount of time, effort and money you need to spend promoting and marketing your product or service (you've already met a lot of your first customers, and if you fill their unmet needs they will spread the word to others -- and take some pride in having played a part in your success), and it can even reduce the amount of money you need to raise to launch the enterprise. But most importantly, you should follow this process, gruelling as it may be, because it works. If you doubt me, talk to any successful entrepreneur about the value of doing this, and you'll be convinced.

Wednesday, August 18, 2004


Eric Sink writes about the importance of positioning and the need to capture a "position" in the mind of the target customer.

The basic idea of positioning is that your product occupies a place in the mind of the people in your target market. You are defined by their perceptions of you.

Let's try to explain this by using an example: Windows XP has a position which I would describe like this:

The most popular operating system for desktop PCs

The first thing to notice is that when you describe a position, the first word is usually "the", a definite article. Only one product can occupy a given position in the mind of the market.

Describing a position has three important parts:

  • First, describing a position almost always includes a superlative of some kind. In this case, the superlative is "most popular", but I could have said "number one". Often people can remember only the first and best thing in a category. Being number 6 in your market segment is probably not a position at all.

  • Second, a position will describe what label the market places on your product. In this case, the label is "operating system", which fits just fine. If there is no label which fits your product, you have a big problem. If the market cannot compare your product to something else, then you don't have a position.

  • Third, the position will have qualifiers which define exactly what group of people have this perspective of a product. In our example, the market segment is "for desktop PCs". This position doesn't say anything about operating systems for enterprise servers or mobile phones.

Another view of positioning is to ask in which market segment you want to be known as number one. You want to be known as the best of your breed, even if you need several qualifiers to constrain the scope of your claim. Don't think about being fifth place in a large market. Instead, be number one in a smaller market. Apple's Macintosh is a distant number two in desktop computer platforms, but they are number one among graphic designers.

Radio stations understand positioning very well. Obviously most small ISVs do not buy radio advertising time, but if you did, you would discover that every radio station claims to be number one in their local market. :-) One of them is the number one station for males 45 and up. Another station is number one with secretaries who listen at work. Another is the top radio station for classic rock.

What position do we want to have?

How do you want the world to think of your product? Identify the three parts of a position: superlative, label, and qualifiers.

Superlative ("why choose this product")

For what attribute do you want your product to be known? There are actually plenty of choices here besides just claiming to "the best" or "the number one". You can choose a superlative which says something more specific. Perhaps you want your product to be known as "the fastest" or "the easiest". For example, Fog Creek appears to be positioning CityDesk as "the easiest content management tool".

Label ("what is this product")

The important thing here is to choose a position which actually exists in the mind of the people in your target market segment. If you have to invent an entirely new category for your product, then you have chosen a position which doesn't really exist. VA Software describes their product SourceForge as "the leading Development Intelligence application". I don't think I've ever heard of that category of application before. I can't find anybody else that describes their product with that label. As far as I can tell, VA is trying to claim a position which doesn't actually exist. If I had asked you to name the number one Development Intelligence application, what would you have said?

Qualifiers ("who should choose this product")

The common mistake here is to avoid using qualifiers, as if their omission will magically increase market share. You need to get specific about who you want to reach with your product. You can describe your market segment by budget, platform, geography, specific feature need, etc. There are lots of qualifiers available. Don't be afraid to use them.

Marketing is not just telling the world about your product. Marketing is also deciding what product to build. You have to design and build your product to fit the market position you want it to have.

This discussion of positioning is certainly not a complete treatment of the topic. If you want to read more, check out Positioning: The Battle for Your Mind, by Al Ries and Jack Trout. It's an excellent read and is considered one of the classics of marketing.

Product Pricing Primer

Eric Sink writes about product pricing for a small software ISV.

Every small ISV wrestles with the question of how to set pricing for its software products. I've been asked many times to write an article on this topic, and I have finally decided to do so. Before we begin, I would like to offer a disclaimer:

Product pricing is hard. There is no magic formula that will determine the best price for your product. I can't provide any easy answers, but I can give you some things to think about as you make your pricing decisions. In the end, you will just have to make a decision using your own judgment. There will be times you will wonder if you made the right decision. You may never know for sure.

Stating the Problem

Let us first say that our goal is to find the price at which profit is maximized. If we say that a price is "too high" or "too low," we are saying that our profit could have been greater if we had set the price either lower or higher.

Obviously, revenue is the simple multiplication of quantity by price:

Revenue = Quantity * Price

It All Starts with Positioning

Pricing and positioning are inseparable. Don't bother trying to figure out your price point until you first figure out what position your product will have in the market.

Ask yourself these four questions:

  1. Who are your competitors? If you honestly think you don't have any, then your product is going to be either a huge success or a huge failure.
  2. How is your product different from your competitors? You should have a very short answer to this question, and you should be able to deliver it quickly. One important caveat: If you think your primary differentiator is price, think again. Differentiation is absolutely critical, but using low prices as your primary differentiator is a well-worn path to failure. More on this later.
  3. How do you want to be known in your market? You need to be able to describe what position you want to have in terms of the way you want your target market to perceive you.
  4. What are the prices of your competitors' products? Your prospective customers will compare your price against those of your competitors, so you might as well start doing it now.

Keeping all these things in mind, you should be able to figure out an approximate price range to use as a starting point. In rough terms, what price range is consistent with the perception you want people to have of your product?

What is RSS?

Background on RSS

RSS is an XML-based technology created in the 1990s that pulls headlines and text from Web sites and displays them on users' desktops or Web sites in RSS readers, or aggregators.

RSS feeds are getting a lot of attention since they avoid often spam-clogged e-mail inboxes.

RSS stands for
Rich Site Summary and Really Simple Syndication.

What does RSS do?

A growing number of web sites are adding an RSS "feed" to their site. Most of the time, you'll find the feed(s) by looking for a little button or link that says "XML", "RSS", or "Syndicate this site".

xml.gifBluee RSS copy.gifSyndicate copy.gif

When you see the button or link- you've found the feed for that site. An RSS "feed" is the website's way of alerting subscribers that the website has been updated. It feeds subscribers the latest updates that have occurred on the web site.

When you find an RSS feed for a site you like, you will subscribe to the feed in order to be notified. You *must* have a tool that can read these RSS feeds. These tools are often referred to as "News Aggregators", "RSS Readers" or "News Reader".

How do I subscribe to an RSS feed?

First- you need an aggregator as described above. Then, the single thing you'll need is the URL (link) for the site's RSS feed.

Usually, you can click the little "XML" or "RSS" button and it will display a bunch of code- don't worry about the code. What you need is the web site address that appears when you click the XML button.

It usually looks like: or . Once you have that address, you add it to your aggregator and you're all set as a subscriber. Aggregators make the subscription process easier in varied ways.

Why would I need RSS? What is the advantage?

Remember- the big deal is it allows you be notified when a web site has been updated. Normally, you would have to proactively visit the site or subscribe to get email as updates occur. RSS alerts you without email. RSS prevents you from having to be proactive. You just subscribe and watch the notifications roll into your news aggregator. Also, RSS is unspammable because you control your
subscriptions- the site owner never has your contact info.

That's great, but what would I use if for?

A growing number of websites are providing RSS feeds. Increasingly webloggers are creating their own independent news niches using weblogs. Every weblog has an accompanying RSS feed.

RSS aggregators simplify the process of viewing a vast amount of information from various sources. The most important benefit is the efficient use of time and making us more productive.