25 May Market Entry Series, Part 1: The Importance of Product-Market Fit
Given the small size of the New Zealand market, New Zealand companies are often faced with a ceiling on how big and sustainable they can be. Consequently, many New Zealand companies are pressured into thinking global from day one.
The geographic proximity, cultural similarity, and relative market size of Australia makes it a great stepping stone for further global expansion.
As a first step when entering the Australian market, New Zealand technology companies need to validate the market and establish a product-market fit before committing themselves any further.
What is product-market fit?
As Marc Andreessen describes, it is:
Being in a good market with a product that can satisfy that market.
When entering a new market like Australia, part of the equation is addressed: the product. That is, the set of product features and UX that make up your offering.
However, on the ‘market’ side of the equation, you’re essentially starting from scratch. You need to determine your target market in Australia, and whether your solution meets an underserved need or pain point in that target market.
As a result, the common pitfalls for New Zealand technology companies entering Australia include:
- Targeting too many segments.
- Not having a strong value proposition, meaning the product or service is a ‘nice to have’ not a ‘must have’.
- Someone in the Australian market is already solving the problem, and the New Zealand company does not have a compelling enough value proposition to displace them.
- Selling to a tiny market.
- Selling in a noisy market.
Therefore, it is important to carefully validate your product-market fit to help determine the likelihood of gaining traction and growth in Australia. Here are some recommendations on how to do that:
Desktop research is an inexpensive way to understand key factors you will need to consider. Researching the size of the market you’re targeting, trends in the industry and regulatory or compliance issues you might experience is a good place to start.
There is nothing quite like visiting and immersing yourself in the Australian market. In the lead-up to entering Australia, it is a good idea to meet with about 10-15 customers, as well as industry associations and local influencers and advisors, and to attend relevant events or meetups.
The goal is to accumulate information on the key problems faced by the industry or segment you are targeting, whether anyone else is solving them, and whether your value proposition addresses these problems.
Understanding your Competition
It is important to understand who may be offering the same or a similar solution to you, and who their clients are. Research these companies and know how you are different from them.
What is more difficult to assess are the relationships that competitors have built with their customers. Customer loyalty can be another hurdle to overcome to displace your competition.
Your Value Proposition
To be successful in Australia you need a compelling and clear value proposition that resonates with your target market. This is not an outline of the features of your product, but rather a compelling and concise illustration of how your solution alleviates a problem for your target market.
In the B2B space, your value proposition should help your clients achieve one or more of the following:
- Make money.
- Save money.
- Help them mitigate risk.
- Help them be compliant.
The key is providing quantitative data around how you address one or more of the above. For example, your solution may reduce workplace incidents by 30% (mitigate risk), or save 200 administrative hours per year (save money).
Other factors come into it, such as how easy your product is to use. However, to capture the market, the four points listed above should be the foundation for any B2B value proposition.
Use Your Judgement
Trust your gut when validating the Australian market. Does the market seem extremely noisy with offerings similar to yours? Is there a lack of prospects? Could you build a solid, sustainable pipeline of leads over a two to three year period?
When entering the Australian market, you should address the ‘market’ component of the product-market fit.
Pain points can vary, and your competition may be solving the same problem in Australia as you are in New Zealand. Be prepared to ‘nail a niche’, ensuring you are focused on a target market that is sizable enough to be worth your investment and time commitment.