Saving Hundreds of Thousands of Euros: How Product Discovery Transformed Our Product Development
The right amount of product discovery and understanding our customers and their needs saved us hundreds of thousands of euros in product development.
Many early-stage start-ups begin with technology in mind. They have a solution and then look for a problem they can solve. Even though the Lean Startup movement advocates finding a problem and an early user base first, there are examples on the market that successfully apply the "solution first" approach.
When we developed the Locafox POS system in 2016, we knew that the government's upcoming strict reporting regulations would create a pull effect on the cash register market that would force many retailers to buy cash register systems and or update their old systems to new ones. So, we took the gamble and decided to get into the POS market.
We knew we needed to learn more about the market because our challenge was that we were the latest joiner to the cloud-based, tablet-based POS market. We had to find our niche and our Unique Value Proposition to be successful in the market; we could not just build and ship "another" POS. We would fail if we did that.
User-Centered Design Approach
Having had some bad experience developing products that users didn't need, I decided to approached it differently this time. In the first month we developed the POS system, we conducted more than 150 problem interviews with retailers to understand their problems with POS systems.
We decided to structure our problem interviews in groups of 20 retailers each. We began by laying out our initial assumptions and crafting the relevant questions based on them. After conducting each batch of interviews, we would regroup, meticulously analyze the feedback, and refine our assumptions. This iterative process meant adapting our questions for the subsequent batches to gain clearer insights. It took roughly a month and the dedication of three team members to conduct and thoroughly dissect the feedback from 150 interviews. We reached a point in our problem interviews where we began to hear repeated answers. This repetition signaled to us that we had sufficiently understood the problem landscape and were poised to transition our focus to the solution space.
In the following months, we applied the same approach and conducted more than 100 solution interviews in which we presented potential customers with the unique value proposition, the price we would charge, and the features, and found out what resonated with them and what didn't. All this insight informed our product and market launch strategy. When we had the designs for our POS system ready, we also began conducting UX tests with users to validate our design assumptions.
When we brought the POS to market (5 months after the starting signal), we signed up more than 20 customers to buy the POS as soon as it was available, we knew exactly which product we could sell, to whom, and at what price. We also knew what our unique selling proposition and the hook for the positioning of our POS would be, which has an incredibly restricted functionality compared to all the competitors out there: checking out the customer with just 4 fingertip taps.
Our strategy was to sell our POS system to small retailers who didn't need a sophisticated POS system, at a very aggressive price.
Launching the Product
So, why am I telling this?
After the market launch of the POS, we were confronted with really poor sales figures, although we were quite sure that we had pursued the right strategy. As usual in such situations, we started a fervent search for the reasons behind this development. Typically, the discussion in such a situation can be summarized as follows:
Sales: The product is terrible; we can't sell it unless you build these features in... Product: You can't sell the product because you don't know it well enough...
In such situations, I have seen many teams retreat into their development rooms, close the doors, and start building more features because sales thought that would help them sell the product. Fortunately for us, we had spoken to more than 300 potential customers before the market launch of the POS and were quite sure that we had the right product. So, we instead began investigating what was happening in our "lead generation machine."
Investigating the Lead Gen Problem
We finally found the reasons. We had acquired the wrong leads. We acquired leads who already had a pretty sophisticated POS and were looking for a better one. Of course, our product couldn't meet their needs.
In the end, we solved the problem by shifting our acquisition efforts to the right leads. The success story: After 3 months since the launch of the new acquisition strategy we were selling 150 POS/month to customers, which we confirmed during our research before the launch.
Lessons Learned
The lesson from this story: Conducting solid discovery saved us hundreds of thousands of Euros in product development, because we did not get back into the engineering room and started adding features for the “wrong” target group demanded. So even if you have some solid assumptions or knowledge about the market and start developing the product, you should not skip the path of problem, solution, and customer discovery. It can save you a lot of money and resources.