In my book, Traversing the Traction Gap, I introduced the term “market engineering” to represent category design/redesign, thought leadership, storytelling, messaging, and positioning.
The research I did for the book and my own personal experience as a founder/entrepreneur, CEO, senior operating exec and venture capitalist suggested that great product engineering is table stakes. What almost always differentiates successful startups and new product releases in mature companies is phenomenal market engineering.
I don’t mean “marketing”. I mean “market engineering”. Each year, research firms such as CB Insights analyze why startups/new products fail. Invariably, the number 1 reason is “no market need”. My advisory firm, Traction Gap Partners, has found that few teams possess the internal skills or experience to engineer a market for their product or service. Surprisingly, this fact is true for both startups and product teams in mature companies (i.e., product failure rates for new product offerings in mature companies range between 40% and 60%). Consequently, we invest a significant amount of effort up front with our clients using a well-defined, tried, tested, and proven process to help them define a category and install themselves as the thought leader in it.
We have found that a common and deadly mistake most startups and product teams make is that they begin with “demand engineering” before they have completed critical market engineering tasks that establish their category and their position in it.
Demand engineering – or demand generation – requires expensive personnel (sales and marketing) generating outbound campaigns. Startups invest significant sums on these tactics with generally poor response and conversion rates. Typically, they find themselves in dire straights as they begin to run out of capital with little to show for their efforts.
Until and unless you engineer a market and establish your company as a thought leader in it, you are wasting valuable time and capital using demand engineering tactics. Your emails will go unopened and deleted. Your phone calls will go unanswered. Your website will have few visitors. Your investors will become impatient as they see the cash runout date rapidly approaching and realize they may be forced to bridge or shut down the company.
Don’t do this!
You want people coming to you to find out more about your offerings v you having to reach out to them. Market engineering is focused on the former. If you do it well, you can dramatically reduce your CAC and significantly improve your contact to cash conversion rates.
Read my prior newsletter titled, “Category Design & Measurement” for tips how to determine if and when you have established a category and you are considered a thought leader in it. Only then should you invest heavily in demand engineering.
If you’re not quite sure how to engineer a market, my book can be a helpful prescriptive guide or my firm can assist you as well. You can reach me at [email protected].