Startup companies need to identify markets where their products (or services) can succeed, but face greater barriers to entry than established companies.
I find that the main barriers for startups can be grouped into four categories.
Startups are often offering innovative product that replaces an existing product or process. It is easy to assume that because the new product is better, it will be easy to get people to switch but often there is huge resistance to change – Inertia. Even where customers know an existing product or process is unsatisfactory, they follow a “better the devil you know” approach rather than taking a chance on change.
Startups also have Limited Resources for sales and marketing, which often makes it hard to get heard above the din of larger competitors. Even where they can get a hearing, supporting customers through an evaluation process is often harder than for a larger competitor.
Potential customers also often see Risk in buying from a startup. Their products may be unproven, and if the company is small then will it be around for long enough to support the product? Statistically, most startups fail.
Size can also be a problem for potential customers. Does the startup have the resources to produce the product fast enough? To handle installation and customer support? Is support available 24/7 in all the locations where the customer operates?
Inertia, Limited Resources, Risk and Size all make it harder for a startup to sell a new product than it is for competitors that are already operating. Having a better product is part of the battle, but to succeed, startups also need to find the right sort of market.
The type of market startups need will be next blog in this series, but if you can’t wait for that you can go to our website and download the Salient Point Guide to Finding Markets, which has much more on this subject.