Page 108 - 6 Secrets to Startup Success

The Pull of the Market 87

want. It permeates every Y Combinator program and is printed on T-
shirts given to startup teams. “If you had to reduce the recipe for a
successful startup to four words,” Graham says, “those would probably
be the four.”6

KNOW YOUR MARKET

Anyone who has played Pin the Tail on the Donkey can understand
the challenge of launching a new product or service. You’re blind-
folded and reaching forward, hopefully closing in on your target but
with no way of knowing for sure. The kids who did well in that child-
hood game always had parents who grabbed their shoulders and lined
them up in the right direction. The rest of us blindly wandered
halfway across the house.

Knowing your market is like having someone grab you by the
shoulders and point you in the right direction. Although you’re flying
somewhat blind, your odds of finding a robust market go up dramat-
ically. The reason is simple: Your ability to meet customer needs is
strongly correlated to how well you understand them.

In 2005, American companies spent over a trillion dollars a year
on outbound marketing, representing almost 10 percent of the coun-
try’s gross domestic product. If it were a vertical industry, marketing
would rank as the country’s fifth largest, behind manufacturing, gov-
ernment, real estate, and professional services.7 The primary purpose
of all this activity is to broadcast product messages out to as many
prospective customers as possible. Seth Godin, in his 2005 book, All
Marketers Are Liars, wrote that “all marketing is about telling stories . . .
painting pictures that they (customers) choose to believe.”8

Granted, storytelling can be a powerful tool, but it is not the
essence of business. A more essential issue is whether a business cre-
ates actual value for customers, rather than expected or perceived
value, the kind created by marketing impressions. A story won’t de-
termine how well you solve customer problems or whether the market
is ultimately satisfied or frustrated with your product. Your customer’s
experience of your product, not the stories they hear about it, will
make or break your business.

American Management Association • www.amanet.org