When is What Users Want Not Enough for a Business?

 
I think that building something that users want is a necessary, but not a sufficient condition, to building a successful business. 

Below are some cases where you can build something users want, but still not end up with a successful business.  And there are also some suggestions for getting around these pitfalls.  

  • You build something users want, but there are just not enough high value users to reach profitability.  You can be very successful with very few users if the users are willing to pay a lot, e.g. big companies.  But sometimes you see entrepreneurs targeting really small niches where their user base is also not willing to pay a lot for their product.

    To escape this pitfall, you can broaden your user base by making your product useful to more potential users.  You can also try to make your product higher value, so that (at least some of) your users will pay you more, and hopefully enough to make a business out of it.

  • You build something users want, maybe a lot of users, but reaching them is cost prohibitive.  This often happens with low cost or mostly free (ad-supported/freemium) products, but can happen with anything.  All that matters is your average user acquisition cost is higher than your average user revenue. 

    To escape this pitfall, either lower your average user acquisition cost or increase your average user revenue--it sounds so simple!  In practice, this can prove quite difficult.  This is where all that "guerrilla" and "viral" marketing comes into play.

    Ultimately, you hope that if you truly built something users wanted, your average user acquisition cost would go down naturally as your user base grew and word of mouth increased on that increasingly larger base.  And if that is the case, you might be able to spend your way out of this problem or otherwise do something creative to get over the hump.  But unfortunately, some products are more prone to word of mouth than others.  And your viral coefficient just may not be high enough.

  • You build something users want, maybe a lot of users, but they just won't pay for it, won't upgrade, won't click on advertising, won't pay for support, etc.--nada. 

    To escape this pitfall, either build something complementary that people will pay for, or raise money and keep growing (unprofitably) until you get acquired. 


  • You build something users want, but a lot of other companies built it too.  You see this all the time.  One company is successful, and then the copies start flooding in.  The copiers know it is something users want given the first success.

    To escape this pitfall, don't just copy--differentiate in a noticeably better way or go after a particularly unsaturated niche.  You might end up in one of the other pitfalls, but at least then you aren't in a lottery situation.

One simple response to all of this pitfall talk is to say I'm going to consciously ignore it all and just concentrate on my users, hoping it will all work out in the end.  And it might, but not always.  (More on this related topic in a future post.)

Anyway, if you think of more cases (or disagree with these), please put your thoughts in the comments, and I will do the same.  I think a list (as complete as possible) of potential pitfalls of this variety is quite useful for aspiring entrepreneurs.

Btw, I've been thinking about this topic for a while, but this post today finally got me to write something down...so thanks for that.

Update: additional comments can be found here.

 

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