A 6-Step Roadmap for Entering Digital Markets

Example of an Application Mockup

Whether you're building a new digital app or launching an existing product into a digital marketplace, you'll need a plan to succeed and thrive. Many companies survive by continually improving their core product or service. Surviving today may be good, but will you thrive tomorrow? As market dynamics shift towards "digital," thriving businesses alter their business models to adapt.

Digital natives like Facebook and those who made the leap to digital like GEICO thrived by focusing on an overlooked niche, offered a good-enough product, that eventually allowed them to expand into the broader market.

Some companies have the resources to play in the digital marketplace, but many shy away. The cause? The marginal returns are not compelling.

Imagine a large bookstore retails a book at a 40% margin. Amazon sells the same book at a 20% margin. Why would the retailer want to get into the digital market to earn less? But, if the traditional book retailer can only sell 10,000 copies of a book - due to their regional reach - at 40% margin, and Amazon sells 100,000 copies at 20%, then…well, you can do the math. Amazon is the winner. Digital products and services win using market reach and lowering costs of customer acquisition.

Where many companies continue to miss the mark(et) (pun intended) is focusing on the wrong metrics.

The lesson? Don't miss out on the ability of the digital market to scale volume at a fraction of the cost. Customers who buy from digital businesses and like the experience will return and buy more later—reducing the number of customers making that trip to the traditional company.

Entering the digital market playground is not as hard as you may think. But as we mentioned, you'll need a plan. Startups and established companies can get there by following these steps.

1. Change perspective

When profits or sales decline, we naturally ask, "What can we do to improve sales?" The usual response is to push the Sales and Marketing teams to work harder. But the relevant questions should be, "Why didn't our customer buy from us this time?" And "Why can't we attract as many customers as they do?" (i.e., the digital business).

These questions are about the customer and their experience, not pushing to sell harder. Digital businesses focus on customer motivations and making the buying experience the center of the product development process.

Digital market platforms focus on removing friction in the buying process. These platforms include giving prospective buyers more information, letting them test or sample before buying, and reducing hesitation to buy with a risk-free return process. What a business does to reduce buying process friction and enhance the overall experience depends on the next step.

2. Get the data

Digital businesses build "avatars" or "personas" of the ideal customer. An avatar is a detailed representation of who will buy a product or service. Making an avatar helps you define and get to know your customer better – their needs, wants, and objections.

You'll need data to answer critical questions to build out your avatar's profile:

• Who are or will be my customers?

• What are their goals and values?

• Where do they go for sources of information?

• What's their journey to my business?

• What challenges or opportunities are they seeking solutions?

• What are their challenges and pain points?

• Why do they need my solution over others?

• What is their role in the buying process? (the authorizer, the user, the one who writes the check, etc.)

• Why wouldn't my ideal customer want to work with me right now?

 Where is the data? Start with your best customers. Examine your existing data to answer questions such as:

• What do they buy now?

• Why?

• How often?

• What new challenges are they facing as markets become more digital?

Where there are gaps in the profile, use customer surveys, Google, Facebook, and LinkedIn to help round out your current customer data. If you already have a customer base, you'll need to look beyond that limited data. Your customers already buy your products. Identify those who might prefer a digital experience. Vanderbilt University provides a list of consumer behavior websites for broader customer insights. If you need more data, companies like Mintel sell their research on consumer trends in just about any industry.

So, when do you stop building your avatar? When you know so much about your ideal customer's challenges that your customer feels you "get" them. That's when you've researched enough.

With a clear idea of your ideal customer and how to best engage them, you'll be on track to meet or exceed your customers' needs and expectations in the digital marketplace.

3. Determine viability

A Mckinsey study found that 70% of digital transformations fail. Everest Group found nearly the same number, and according to Bain & Company, it's even worse. Each report highlights different causal factors, including initiatives primarily focused only on technology; (going "Cloud" or using "AI") or on Agile/Scrum techniques; making a "digital twin" of existing products and services, lack of long-term sponsorship, and several others.

From our point of view, the key to viability is determining who needs your solution or product and if they are willing to pay a price so you can earn a profit. This assessment is no different than assessing the funding of a startup. Each venture has unique feasibility, viability, and capital requirements. Failure to account for them will have detrimental consequences sooner rather than later. For example, it's a problem if your initiative cannot earn more from users acquired than the costs to attract them.

The two basic metrics you'll need are customer acquisition costs and customer lifetime value. To measure these two metrics, find the average revenue per customer, churn rate, marketing, and operating expenses, and number of new customers over a measured period. Existing companies have easier access to this data from their current customer base. More research is needed for startups without a product on the market yet and will need to make realistic assumptions to determine viability.

4. Design the customer experience

After you determine the viability of your digital product or digital transformation, you're ready to design the user experience (abbr: "UX") that matches your avatar's needs.  

UX focuses on how a person interacts with your solution, the ease and efficiency in use, and the value or satisfaction achieved when using that solution:

1.   Construct a "journey map" of the avatar. What steps must they take to achieve their goal?

2.   Determine what information the avatar needs at each stage of the journey.

3.   Create a model, mockup, or functional prototype for testing.

People who are a close representation of your avatar are your initial "beta" testers. Feedback from them refines your prototype. A prototype isn't necessarily scalable. For example, DoorDash's founders envisioned an app. They had programming backgrounds but resorted to a website to display local restaurant menus and a phone number for ordering. Once they validated that the website was "good enough" and there was enough order volume, the founders built the first version of the app and got funded by top VC firms.

When you have positive confirmation that your digital solution is usable, it's time to build the functionality that wows your customers.

5. Get the word out

Now you're ready to build your minimum viable product (MVP). Your MVP helps validate your solution works as planned, attracts a sufficient audience, and validates that your operating model works—like DoorDash's first version of their app. You're scaling to a more significant portion of the market, not just early adopters and beta testers.

There's more to an MVP than just coding an application. You may build the most fantastic product the world has ever seen, but if no one knows about it, then it doesn't matter. You need a compelling message on the channels your avatar uses.

The Apple iPod is a good case study. Apple's initial target markets included college students and young business professionals—those most likely to be using Macs and iBooks. But they had an eye on Microsoft computer users. To appeal to a broader audience, their message was: "Every song you've ever owned. In your pocket." The message is much more powerful than something like: "Just for your songs. A digital music player." The first message focuses on the experience every buyer wants – "enjoy ALL your favorite music, anytime, anywhere," but the second one emphasizes utility. Boring. UX matters. It's the differentiator. Crafting messages to that experience separates you from the competition.

Where do you send your carefully crafted UX message? Where your avatar usually goes to find information for their problems. Step 2 tells you where that is. Those places are called "channels." Some good channels for business-to-business markets include:

• Websites and blogs (like Medium)

• Social media sub-groups

• Advertising

• Conferences and events

• Influencer endorsements

6. Measure & Validate

As mentioned above, most digital products and transformations fail. What wasn't said is that one cause of failure is failure to measure the product's success. As part of your business case in Step 3, you must include relevant, realistic, and measurable key performance indicators (KPIs). KPIs will help you set goals, detect problems, and make informed decisions.

There are four categories of metrics to consider (and we'll leave the detail for future blog post. (So, stay tuned):

• Launch campaign metrics (ex., website traffic volume)

• Product adoption metrics (ex., customer usage)

• Market impact metrics (ex., revenue targets)

• Qualitative feedback (ex., surveys)

While metrics give you knowledge, the real power lies in what you learn from them and how you interpret, hypothesize, and change to improve the product.

Bonus: Don't go it alone

Existing teams in traditional businesses are often too busy or invested in current products and business models to switch gears for digital transformation without disrupting the business flow.

But to avoid being displaced by upstarts, traditional companies need to get out of their own way.

Engaging a partner with a successful track record can help clear the way. A digital transformation or product expert can quickly ramp up a digital startup team. Their expertise combines business acumen, human science, and data science to help you design, build, and launch digital products to market at scale.

Strategies a partner may suggest might include digitizing your existing assets, integrating more existing systems, or even changing your company's organization and culture. However, we don't believe all of these are true for digital launches or transformations. Successful startups begin with even less. It is possible to succeed bringing digital products to market using a center-of-excellence, subsidiary, or Skunkworks-like business team.

Each of these steps is worthy of an entire blog post (or book!), but we hope they've given you some ideas and a place to start.

If you wish to consider us as your partner, we are available to chat with you about your plans to enter the digital marketplace. Together we’ll determine if our approach is right for your business. If not, we’ll recommend someone who is. Contact us to set up a free initial consultation.

We look forward to connecting with you.