Is the Problem in the Market or in Your Business Model?
When sales are not growing, customers are postponing decisions, and pricing pressure is increasing, management often arrives at one simple conclusion:
The market is bad.
The economy is uncertain. Customers are not buying. Competition is too strong. Prices have been driven down. Investors are cautious. Everyone is waiting for better times.
Sometimes the market really is the problem.
But a “bad market” is far too convenient an explanation to accept without scrutiny.
The market may be more challenging than before, but the company’s real problem may lie in its business model. The company may no longer be reaching the right customer, solving a sufficiently important problem, charging the right price, or delivering its solution in a way that can be repeated profitably.
If the problem is the market, the company must adapt to a changed reality.
If the problem is the business model, waiting for the market to improve will solve nothing.
The market does not owe a company sales
Companies sometimes talk about the market as if it ought to be interested in the product they have created.
The product is ready.
The team has worked hard.
Money has been invested in the solution.
It therefore feels unfair when customers do not buy.
But customers do not assess the company’s effort. They assess whether the solution helps them solve a sufficiently important problem at an acceptable price, risk, and level of effort.
The market does not decide whether a company’s idea is good.
The market decides whether the value on offer is sufficiently better than the alternatives for customers to change their behaviour and pay for it.
If a customer does not buy, the reason may be a lack of demand.
But the company may also have chosen the wrong customer, message, channel, price, or an overly complicated buying process.
These problems are often bundled together and labelled a bad market.
The real cause then remains undiscovered.
A business model is not just what the customer pays for
A business model is often treated simply as pricing or a source of revenue.
In reality, a business model is the entire logic through which a company turns a customer’s problem into sustainable value creation for itself.
This means the company must know:
- whom it creates value for; - which problem it solves; - why the customer chooses this particular solution; - how the right customer finds the company; - who makes the purchasing decision; - what the customer pays for and when; - how the promised outcome is delivered to the customer; - how much it costs to acquire and serve the customer; - why the customer stays; - how the same model can be repeated without costs and complexity growing at the same rate.
If any of these elements fails, demand may exist in the market, but the company cannot turn that demand into a viable business.
That is not necessarily a market problem.
It is a business-model problem.
If competitors are growing, the market cannot be the whole problem
One of the simplest checks is to see whether any companies in the same market are still able to grow.
If every market participant is rapidly losing customers, prices are falling, demand is disappearing, and the entire category is shrinking, the market may indeed be the problem.
But if some competitors are growing, winning customers, and maintaining profitability, then money and willingness to buy still exist in the market.
In that case, saying that the market is bad is not enough.
You need to ask what the more successful companies are doing differently:
- Are they serving a different kind of customer? - Are they solving a more important problem? - Is their offer easier to understand? - Are they reaching customers through a different channel? - Is their sales process faster? - Does their pricing reduce the customer’s risk? - Is their cost to serve lower? - Does their solution create value faster? - Have they adapted their model to the changed market?
A competitor’s success does not automatically mean its model should be copied.
It does, however, prove that overall market conditions do not explain everything.
The problem may be the wrong customer
A company may be trying to sell into a good market, but to the wrong customer.
Not everyone who could use the product is willing to pay for it.
Some customers recognise the problem, but it is not important enough to them. Some lack the budget. Some cannot make the purchasing decision themselves. Some require so much customisation that serving them is not profitable for the company.
If the company’s target group is too broad, its offer also becomes generic.
Marketing tries to speak to everyone.
Sales meets very different kinds of customers.
Product development receives conflicting feedback.
Customer support must handle countless exceptions.
Selling may be difficult not because the market is unwilling to buy.
The company has not decided who has the strongest reason to buy.
Defining the right customer requires more than an industry, company size, or job title.
You need to understand:
- the situation in which the problem becomes urgent; - the event that triggers the need to buy; - who bears the consequences of the problem; - whose budget pays for the solution; - which alternative is currently being used; - why the current solution is no longer adequate; - when the cost of inaction becomes greater than the purchase price.
The market may well exist.
The company may simply be looking for customers in the wrong place or at the wrong time.
The problem may be a weak value proposition
“Our product helps companies become more efficient.”
“We provide high-quality, personalised service.”
“Our platform saves time.”
Such promises may be true, but they do not give the customer a compelling enough reason to act.
Customers do not buy a general benefit.
They buy a specific change when their current problem has become sufficiently painful, costly, or dangerous.
If the value proposition does not clearly state:
- which problem is solved; - for whom; - what outcome it creates; - how quickly; - why this particular solution works; - which risk or cost is reduced,
the salesperson must reinvent the offer in every meeting.
A strong salesperson may be able to close deals even with a weak value proposition.
That does not mean the company has a repeatable sales model.
If a customer understands the product only after an hour-long meeting with the founder, the problem may not be a lack of market interest.
The problem may be that the company cannot articulate its value clearly enough.
The problem being solved may be too small
Not every real problem is a good business problem.
A customer may agree that a solution would be useful, yet not consider the problem important enough to change how they work, take a risk, and spend budget on it.
This matters especially for new products.
People may:
- respond positively to a survey; - attend a demo; - praise the idea; - register as a free user; - promise to return later.
But they do not buy.
That is because “this would be useful” and “we need to solve this now” are two different things.
If leaving the problem unsolved has no clear cost, a more urgent priority will almost always win.
In that case, increasing marketing or sales may not help.
The company must either find customers for whom the same problem matters far more, connect the solution to a more valuable outcome, or admit that the chosen problem cannot support a sufficiently large business.
The market may be large by number of people, but small by willingness to buy.
The problem may be price, but not in the way management thinks
When customers say the price is too high, the conclusion is often that there is no money in the market.
But a price objection does not always mean that the customer cannot afford the solution.
It may mean that:
- the value is not clear enough; - the problem lacks urgency; - the customer does not trust the solution; - the risk associated with the purchase feels too great; - the pricing logic does not fit the customer’s cash flow; - the customer does not understand the price; - the offer contains too many things the customer does not need; - the solution requires too much additional work from the customer; - the decision-maker does not see a sufficient outcome for themselves.
Lowering the price may improve sales temporarily.
But if the real problem is value or trust, a lower price merely leaves the company with less money to serve the same difficult customer.
At the other extreme, the price may genuinely be too low.
The company wins customers but cannot serve them profitably. Sales grow, people become overworked, and no money is left over.
In that case, the problem is not a lack of demand.
The business model cannot turn demand into profit.
The problem may be the sales channel
A good solution can fail if the company tries to sell it in the wrong place or in the wrong way.
A cheap, simple product cannot always be sold through a long, consultative sales process. The cost of selling becomes greater than the value of the deal.
A complex, high-risk solution cannot always be sold through self-service. The customer needs trust, proof, and help making the decision.
A small-business owner may not respond to the same channels as an HR director at a large organisation. A user may be interested in the product but lack purchasing authority. A decision-maker may have the budget but not experience the day-to-day problem.
When the channel, message, buyer, and price point do not fit together, sales seem random.
Some customers come.
Some campaigns work.
Some salespeople get results.
But the company cannot explain why.
That is not yet a viable go-to-market model.
Before blaming the market, the company must check whether it is reaching the right person at the right time with a message that matches their real reason for buying.
The problem may be that sales promises something the company cannot deliver
In some companies, winning the customer is not difficult.
Delivering the promised value is.
Sales makes exceptions, customises the offer, and promises fast results. After the deal, the rest of the organisation must work out how to fulfil that promise.
Such a model may grow rapidly for a while.
Revenue increases, but so do:
- the cost to serve; - customer queries; - custom development requests; - the number of errors; - project duration; - employee workload; - customer dissatisfaction.
Management may see the market as the problem because customers demand too much and are unwilling to pay enough.
In reality, the company has created a business model that sells bespoke solutions at standard prices.
If every new customer makes the company’s operations more complex, the problem is not necessarily the customer.
The problem is a mismatch between the offer, sales, and delivery.
The problem may be customer retention, not acquisition
If the company must find ever more new customers to sustain growth, it may seem that the market has become more difficult.
But before increasing sales, it must look at what happens to existing customers.
Do they use the solution?
Do they achieve the promised outcome?
Do they buy again?
Do they recommend the company to others?
Would they stay even if they were not bound by a contract?
If customers leave quickly, more marketing will not solve the problem. The company is pouring new customers into a leaky system.
Customer churn may mean that:
- the product does not create enough value; - value takes too long to materialise; - the customer does not know how to use the solution; - sales brought in the wrong customer; - the promise and the actual outcome do not match; - the price does not reflect the value received; - the problem is not persistently important to the customer.
In that case, demand may exist in the market.
The company simply cannot turn it into a long-term customer relationship.
A market shift can make an old business model obsolete
Sometimes the question is not whether the problem is the market or the business model.
The market changes and makes the old business model unsuitable.
Technology may make a previously expensive solution cheap.
New regulation may make an established way of working more difficult.
Customer buying behaviour may shift towards self-service.
A new competitor may deliver the same outcome ten times faster.
An economic downturn may shift budget from one buyer to another.
In that case, the problem is not that management designed a bad model to begin with.
The model no longer fits the changed environment.
The quality of management is not demonstrated by how long it can defend the old model.
It is demonstrated by how quickly the company notices which of its core assumptions no longer holds.
Market change cannot be managed.
The business model can.
When is the market genuinely the problem?
Situations that indicate a market problem include:
- demand across the entire product category is declining; - the customer need has disappeared or been replaced by another solution; - regulation makes the business impossible or economically unviable; - technology eliminates the problem the company used to solve; - customer budgets or purchasing authority have disappeared across the market; - even the best and most efficient competitors are pulling back; - a sufficiently large number of the right customers are unwilling to pay for any reasonable solution; - the total size of the market cannot support a company of the desired scale; - the frequency or urgency of the problem has declined.
Even then, concluding that the market is bad is not enough.
The company must decide whether to:
- adapt the product to a new need; - move to a different customer segment; - change its pricing or sales channel; - use its existing expertise to solve another problem; - reduce its cost base; - exit the market.
Blaming the market is not a strategy.
Responding to market change is.
When is the business model likely to be the problem?
Signs of a business-model problem include situations where:
- competitors are able to grow in the same market; - customers recognise the problem but do not understand the value of the offer; - interest is high but purchasing decisions do not follow; - customers buy only with substantial discounts; - new customers arrive but leave quickly; - revenue grows while profitability deteriorates; - every new customer requires a bespoke solution; - sales depend on the founder’s personal involvement; - the company does not know which customers are profitable; - marketing costs grow faster than customer value; - the product works, but customers never reach its value; - the team cannot clearly explain why a customer should buy; - the company serves target groups that are too different from one another; - sales, product, and delivery promise the customer different things.
These signs do not mean the entire company must be rebuilt at once.
They show that the business model’s core assumptions must be examined before the market is abandoned.
The right diagnosis requires experiments, not opinions
Management can argue endlessly about whether the problem lies in the market, price, sales, or product.
Opinions will not resolve it.
Every assumption must be turned into a testable question.
If we believe the price is too high, we must test different pricing without destroying value.
If we believe the target group is wrong, we must test the same problem with a different customer segment.
If we believe the message does not work, we must test a more specific problem and outcome.
If we believe the sales channel is wrong, we must compare the cost and quality of customer acquisition through another channel.
If we believe the product does not create enough value, we must measure usage, time to outcome, and reasons for churn.
An experiment must produce information that changes the next decision.
Running a marketing activity is not yet an experiment. Changing the price without a clear expectation is not an experiment. Entering a new market without decision criteria is not an experiment.
A good experiment states:
- which assumption is being tested; - what outcome is expected; - how long the experiment will run; - how much the company is prepared to spend; - which result will validate the assumption; - which result will trigger a change of direction.
The company does not need more opinions about the market.
It needs better evidence.
The most important question: where does value break down?
A business model can be viewed as a sequence:
- The right customer has an important problem.
- The company can find that customer.
- The customer understands the offer.
- The customer trusts the solution enough to buy.
- The price and purchasing method fit their circumstances.
- The company can deliver the promised outcome.
- The customer perceives the value received.
- Serving the customer is profitable for the company.
- The same process can be repeated.
Management’s task is to find the point where this chain breaks.
If the right customer does not have a sufficiently important problem, the market may be the problem.
If the problem exists but the company cannot reach the customer, the channel may be the problem.
If the customer listens but does not buy, the problem may lie in the value proposition, trust, price, or purchasing risk.
If the customer buys but leaves, the problem may lie in the product or delivery.
If the customer is satisfied but the company loses money, the problem lies in the economics.
“The market is bad” does not identify which of these links is failing.
It therefore does not help choose a solution.
Do not wait for a better market with the wrong model
A bad market makes a good business model harder to manage.
The wrong business model makes even a good market look bad.
A company cannot control the economy, interest rates, competitors, or overall customer confidence.
It can control:
- whom it sells to; - which problem it solves; - which outcome it promises; - how customers reach it; - how risk and price are allocated; - how value is created; - how many resources this requires; - which customers and activities it chooses to abandon.
Before concluding that the market offers no opportunity, the company must honestly assess whether its current model can capture that opportunity at all.
Perhaps there are not too few customers.
Perhaps the right customer has not been defined.
Perhaps the price is not too high.
Perhaps the value is too unclear.
Perhaps sales are not too slow.
Perhaps the company is trying to sell a solution to a problem that is not important enough to the customer.
The market may indeed have changed.
But if the company is not prepared to change with it, the market is no longer its biggest problem.
Its business model is.
Mikk OrglaanChalleng.ist