Leverage your local market without derailing product market fit in your target market

Focus on product market fit in your target market

Differences between markets can and will influence your product, value proposition, business model, legal/regulatory approach, and many other aspects. Even with B2C global businesses that can span markets more easily you will encounter important nuances. This is why it is called product-market-fit in singular form.

For the benefit of your business, you should focus your energy and efforts on your primary target market and let it guide your decisions on the path to achieve product-market-fit (PMF). Once PMF is reached for your primary market, you can shift your focus to scaling the business there. Then you can expand to another market by refining and adapting to achieve product-market-fit there.

When you are located outside the primary target market it can be very valuable to leverage your local market for certain things, but you also run the risk of it becoming a distraction or derailing you from PMF in your primary market. Let’s explore how you can leverage the benefits without these risks.

Benefits of working locally

Your local market can be a valuable resource and sometimes even an advantage despite it not being your target market. This is because the local market offers a few distinct benefits and advantages:

• No cultural or language barriers - Communication is much easier without a language barrier, and since you know the local culture you can read through nuanced feedback.

• Lower costs for various activities - Operating in your local market will usually be cheaper for you. You benefit from familiarity, physical proximity (less travel, etc) and can more easily leverage your staff and feet on the ground.

• More frequent and deeper feedback cycles - No travel overheads mean you can visit partners and customers in your local market more frequently. Being able to visit in person means better insights as you can easily pick up on all the non-verbal signs too.

• Local network and ecosystem leverage - You can tap into your immediate and likely broader network, making connections quickly and closing agreements more easily. Local ecosystem benefits such as grants, subsidies and other programs are also easier to leverage with a home advantage.

Key risks if your local market is not your target

When The two main risks of focusing too much on your local market are:

• Pursuing non-representative insights and feedback – the insights and feedback you get in your local market most likely do not represent your target market. Pursuing it creates a false sense of making informed decisions while in fact moving you farther away from PMF in your target market.

• Resource commitments that create drag – commitments in your local market can end up requiring significant resource and time investments (for example, customer support, R&D) that take away from your capacity that should be focusing on your target market.
  

What works and what doesn’t?

To help navigate the delicate balance of leveraging your local market while avoiding risks and pitfalls, let’s look at specific activities and see which ones you can safely pursue locally being mindful of pitfalls, and which ones you should simply avoid.

Proceed with caution and avoid pitfalls

Initial proof of concept

Many times, you can perform an initial proof of concept in the local market faster and cheaper.  For example, if you are developing a novel way to measure a vital sign you can run the initial proof of concept locally. If the local market offers no speed or cost advantage

Pitfalls to avoid

• Local aspects can have a significant effect on the core technology.

• Avoid if there is no speed or cost advantage.

• The local proof of concept requires significant development efforts that won’t translate to the target market.
  

Alpha/Beta site for technology development

Having a locally accessible alpha or beta customer can be of huge value giving you fast iterations and almost immediate feedback. The important thing though is to focus the work with this site on the technology development and act on feedback very carefully – see “design the product” in the red category.

Pitfalls to avoid

• Pursuing all feedback and requests from local customers.

• Significant investments to make your solution work in the local environment which are irrelevant for your target market.

• Committing to develop features and enhancements without ensuring their relevance to your target market.

Data access and collection

Depending on your venture, access to datasets can be paramount. Your local market might offer opportunities to access large datasets, and it might also be easier to collect data within your local environment.

Pitfalls to avoid

• Dataset is highly non-representative of target market (many potential aspects).

• Inherent biases in the local datasets falsely derail development.

• Significant custom development required to work with local datasets.

Early proof points, pilot customers and testimonials

Early in your venture you want to create certain proof points to aid in engagements with investors, partners, and prospective customers (in your target market). Your local market can offer opportunities for early pilot engagements, evaluations that can help you generate such initial proof points or testimonials.

Pitfalls to avoid

• Demonstrating benefits that are not relevant outside the local context.

• Assuming target market customers will not expect proof points from local peers.

• Using local proof points and testimonials in your primary marketing materials.

Clinical Studies [if relevant]

There are several aspects of clinical studies and validation that translate well across markets. After all, we are all human beings. You can leverage local sites for those aspects and for some proportion of your clinical studies. Usually, the local market alone will not suffice for regulatory approvals in other target markets though.

Pitfalls to avoid

• Not accounting for fundamental differences between local and target market.

• Failing to consult and validate your study design or regulatory approach up front.

Non-dilutive funding, grants and subsidies

Your local ecosystem might offer opportunities for non-dilutive funding, grants, cloud credits or other subsidies and benefits. These can help you significantly as a power multiplier on your entrepreneurial journey. Many of these do come with certain “strings attached” or commitments.

Pitfalls to avoid

• Not understanding the full extent of “strings attached” and commitments related to local grants or subsidies.

• Not understanding potential implications on current and future investors and deals.

• Committing significant resources to non-core activities just for sake of eligibility.

Activities to avoid altogether

Validating needs, pain points and benefits (customer discovery)

It is very tempting to validate key aspects of your venture early on in your local environment. The problem though is that this validation is only true in your local market, not your target market. When combined with confirmation bias, which every entrepreneur is susceptible to, this combo can lead you to falsely believe you figured it out.

Warning sign: Spending non-marginal customer discovery efforts with local stakeholders.

Designing the product

If you are using customers in your local market to test your technology or support your development there’s a slippery slope ahead of you. You will undoubtedly receive feedback about your product and various ideas for new features and enhancements. Some of this feedback will carry over to your target market well, but some will be highly non-representative of your true target users/customers. Use these suggestions and ideas as inputs but be sure to validate them with target market users/customers before acting on it.

Warning sign: Pursuing local feedback without asking if it translates or validating with your target market.

Business Model Development and Refinement

Economic environments, value chains, incentives, payment preferences and various other aspects of the business model side can vary greatly across markets. These can even vary across market segments. Do not use your local market to validate or develop your business model. Test and refine your business model in your target market only.

Warning sign: Any business model development based on the local market.

Weigh the benefits and downsides for the best path

Operating in your local market can offer significant benefits which you should try to leverage. As long as you make sure it is worth the extra investment, watch out for warning signs and avoid the pitfalls you should absolutely pursue it. If you find however that the time and resource investment in your local environment takes away from your ability to focus on your target market without rendering significant benefits you should avoid it.