Did you know?
- Only about 20% of all consumer packaged goods (CPG) startups make a combined sales volume of a million dollars?
- In Canada, out of 82 newly registered food and drink businesses, 47 fail within the first five years in the market because they don't achieve product-market fit?
As an upcoming DTC store, there are umpteen questions you want answers to, so you can sail to profit island and save yourself from becoming one of the numbers.
But understanding your 🎇 problem solution fit and product market fit should be the first question in your head before anything else.
And we have the perfect person to help you understand just that!
So if your questions are something like:
1. How do you know if you have a product market fit?
2. What comes after product market fit?
3. Why is product market fit important?
4. How to validate product market fit?
We can absolutely help!
In conversation with Kaus, Co-founder of Mason, this is D2C Growth Stories, Day 3 with Andreas Düss, Co-founder of Auralis Botanical Brewing & Founder of Audacious Food Marketing.
Why is product market fit important?
Andreas: Let's say you are a baker and live in a small town in Ontario, and there is no bakery here, so you have got a market, right?
It's like you have 10,000 people around you, 5,000 people of them bake great bread, and you make great cakes, so you have a business opportunity here.
But if you start the same thing in downtown Toronto, how many good bakeries are in this circle? Three to eight, right? So does it need another bakery?
We tend to glorify people who build million-dollar businesses.
A vast majority of food businesses today are lifestyle businesses where people do stuff that makes them happy to feed their family.
And that's all the scaling they ever want to do.
Now the fundamental question remains here—whether you can solve a consumer problem or not? And, how to validate product market fit?
For instance, if you're selling organic carrots in a local farmers market, ask yourself, are there enough people who care about organic carrots,
Yes or no?
If there are not enough people, you don't have a business.
But if there are, then you do have a business.
The market decides everything. There is no escaping the market as it decides the value of your offering.
But, how do you know if you have a product market fit?
Andreas: Before starting or launching anything new in the market, as Andreas strongly recommends, a DTC brand owner must make certain of two factors.
- Understand if there are people whose lives you are making better, and whether there are enough people whose life you can make better.
- Do the financials surrounding your product make sense from a profit perspective?
What comes after product market fit?
Andreas: The holy grail of all sales is repeat sales. Especially for food entrepreneurs who chase what is called ‘doors’ which means as many stores—they want to be in as many stores as possible.
However, in my opinion, that is an absolute fools game.
You want to go deep before you go wide, and by deep, I mean that you need to prove to the industry that people need and buy your product more than once.
So when you start out selling anything; you could be a software company offering subscription models or whether you are selling drinks made from mushrooms, if people buy our product only once, you don’t have a business because it is not sustainable.
It is here that the 80-20 rules apply: 20% of all the consumers will give you 80% of your profits, and they will become your fans or super fans, so leverage sales strategies particularly at the beginning, and do everything you can to drive repeat purchases, because if you don't get repeat purchases and if you focus on only width, your customer acquisition cost will be so high that you'll find yourself in a cash-burning situation in no time whatsoever.
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