The “Good Enough” Formula for Segmenting an Existing Market
The recent press about Mint’s acquisition and the “Good-Enough Revolution” has gotten me thinking that there’s an emerging pattern here that more startups (and established companies!) should be capitalizing on.
Look for markets where the existing solution is incredibly powerful but people dread using it, or feel stupid using it because they haven’t invested enough time in learning how.
You’ll recognize these when you repeatedly see people look sheepish and mutter, “I know I should do X…” or “It’s probably really simple to do X, but I just can’t figure it out…”
Define the Minimum Viable Product. What’s the smallest set of features in this problem that people absolutely need to complete?
Look for the offline alternatives to the market-leading software solution – for example, what are the bill payment behaviors for people who don’t use online bill pay? Circling dates on calendars, adding up numbers on scratch paper, sticking envelopes in the mail… (In some cases, the MVP may not be much smaller than the existing solution, but just contain totally different features.)
Build an intuitive user experience that aligns with the tasks users most need to do. Remember that this is an activity that people sort of dread, so make it beautiful! Make it dead-simple.
People should feel reassured using this new solution. They should feel like it’s preventing them from making mistakes.
- Mint (Quicken does everything you need in personal finance. It’s also bloated and overwhelming.)
- TurboTax (For most people, doing your taxes by hand isn’t rocket science. But it leaves you with a looming sense of dread and fear that an honest mistake will send the IRS pounding on your door, audit forms in hand.)
- Flip (Hand-held video recorders have been around for years, but most people still don’t know how to share that video with Grandma in another state.)
- BaseCamp (Microsoft Project has every feature imaginable. It’s also so complex that, reportedly, even the internal Microsoft team working on Project doesn’t use Project for their project management – they use Excel.)
- PayCycle (ADP and Paychex are probably the right choice for larger companies with more complicated payroll options – but total overkill for micro-businesses.)
- Twitter* (Blogging is a big time investment. A forced 140-character limit frees you to share thoughts and links without feeling the pressure to be super-eloquent.)
* I include Twitter because I know a lot of really smart people that I’ve learned from because they use Twitter when they could never invest the time in blogging. They haven’t invested in the “intuitive user experience” part at all, though – for new users, it’s totally unclear where they should start.
Why More Companies Aren’t Doing This
I call into evidence a quote from a couple years ago, when a friend was talking about FreshBooks:
“What a stupid idea! QuickBooks has the highest Net Promoter Score of practically any software out there! People LOVE QuickBooks!”
People who have already invested in using the existing solution are often happy with it. They’ve forgotten the steep learning curve. If you interview them, they’re much more likely to ask for additional features than to think about how the system they’re used to could be changed.
Your advisors and friends are likely to warn you off this path. Why would you deliberately choose a smaller set of functionality? At best, they warn, you’ll steal 1-5% of the market leader’s users – that’s not enough for an interesting business.
The trick is that, while you are entering an existing market, you will probably need to define a mostly new customer base.
(I don’t know, but based on Yodlee experience I’d be willing to bet that a very high percentage of Mint users are NOT ex-Quicken users but people who had NEVER used personal financial management software before.)
This means you need to find non-users, thoroughly understand their needs, and validate that there are enough of them, feeling enough pain, and enough willingness to spend money on their problem. This takes a lot of legwork, and there are no “let’s check the Forrester research” shortcuts here.
Now, Go Execute
and when you’re successful, throw me a few shares, eh?