Startups Can Only Launch When They Have Targets to Aim For…
To help define your Serviceable Obtainable Market (SOM), the importance of having an Ideal Customer Profile (ICP) written down first cannot be understated. This is worth reiterating, as without this understanding, it will be hard to define and quantify a target market of businesses to focus on that you can realistically turn into customers. Once you have established a well-defined target market that you can reach and service cost-effectively, you will need to become familiar with every prospect company in this segment and target them directly. Improved knowledge of your market will help in crafting meaningful campaigns that resonate with the audience, resulting in maximum impact.
Common Mistakes When Defining a Market
It’s easy to get carried away and overestimate the size of the market, which is why having a well-defined ICP at the start will help you to understand which prospects have a higher propensity to buy from you. In this way, you can calculate the size of the market you can realistically capture using the three-step process. Anything that falls outside this audience could easily drain your resources for little or no return if it is not a good fit. It’s for this reason that investing time and resources to stimulate demand must be completely focused on your defined target market (SOM).
Stay in Reality
When building your go-to-market strategy and talking to investors, it’s better to start small, use real data, build from the bottom up and prove penetration. From time to time, outlier opportunities may present themselves to you, which you will need to make a case-by-case decision on whether to pursue or not. In many cases, a no-bid decision will save you from wasting time and resources entertaining something you were never going to win. This is where the rigour, discipline and focus will really help your strategy and translate into effective go-to-market execution.
Importance of Knowing Your Customer
Do not ignore market trends and changes, as this could impact, either positively or negatively, the number of companies you can capture. Your ICP is important because it will help you segment the market and focus with accuracy on the types of businesses that represent a good match for your offering. If you fail to segment the market in this way, you will never have a proper and accurate view of what a target prospect looks like that you can serve and make money from. Looking at market data is also important, and you must leverage as many sources as possible to help establish an accurate market size for your solution. Don’t just rely on secondary sources of information, and you may need to acquire company data from a broker so you can interrogate it in detail and use it in your marketing.
Establish Your Beachhead
In his book, Crossing the Chasm, Geoffrey A. Moore uses the metaphor of establishing a “beachhead” to describe the strategy B2B tech startups must use to secure a strong position in a specific market segment before expanding. This may appear counterintuitive, but the more specific you can be about who your customer is, the higher your chances of success. Being highly targeted at the beginning does not stop you from broadening your offering with new products or entering adjacent market segments later, when you have the benefit of market validation, scale and additional resources. You may have a long-term addressable market that is more significantly sized, but your strategy needs to be broken down into achievable targets at every stage of your startup’s development.
How a Clear Target Audience Helps Your Strategy
Focusing on a well-defined target audience allows you to adopt a tailored approach that provides high levels of relevance and accelerates the process of engaging with prospects. This means product and marketing strategies are designed to communicate your expertise in the unique needs and pain points of a specific market. By understanding the industry challenges in detail, you can develop solutions that offer greater value and differentiation compared to more generalist providers. This not only enhances the appeal of your solution but also positions your startup as the experts in that domain, which builds the trust and credibility you need to achieve sales success and grow your customer base.
Better Use of Resources
A highly targeted strategy means you are not wasting time and resources trying to market and sell to the wrong businesses that are not a good fit. Now you can use your resources more efficiently for better returns, which is critical for the survival of any new business. Limited budgets and human capital make it essential to focus everyone’s efforts where they can achieve the highest impact. By concentrating on a defined niche, you can streamline successful marketing and sales efforts into repeatable processes, reducing the cost of customer acquisition by increasing the effectiveness of marketing campaigns.
Focus is the Essential Ingredient
A focused strategy is the only strategy. This helps you gather more precise and actionable customer feedback, which can drive continuous product improvement and innovation. Defining a specific market niche makes it possible to build stronger and long-lasting customer relationships, with higher market penetration and establish a solid foundation for accelerated growth. This is the starting point for any startup to establish itself, but discipline must be applied to stick to the strategy and not allow unnecessary and potentially costly distractions. Being focused does not mean you cannot adapt as you learn or in response to market changes; it means you know who your potential customers are, so you engage them in a meaningful and productive way.
Real Life Examples of Niche Market Focus
Here are examples of successful tech startups that began by focusing on a specific niche before growing into significant successes:
- Square
Square initially targeted small businesses and independent vendors with its mobile payment processing solutions. This niche focus allowed them to address a specific market need and build a strong user base. As they expanded, Square introduced additional financial services and tools, catering to larger businesses and different market segments.
- Dropbox
Dropbox started by targeting individuals and small teams with a simple, user-friendly solution for file storage and sharing. This focus on a specific need allowed them to build a robust and reliable service that gained a strong user base. As they grew, they expanded their offerings to include more advanced collaboration tools and enterprise solutions.
Strategy, Planning and Execution
By setting clear goals and targets, you can then establish a roadmap of where you are going, that everyone in the team can focus on. Execution of the plan then becomes systematic and part of a winning and repeatable process. This helps everyone stick to the strategy, avoiding dangerous diversions or knee-jerk reactions to situations. Setting your North star in this way is fundamental and helps your performance to be more predictable, measurable and remain on track. By not overextending your resources too early on the journey, you are better placed to accelerate and scale your growth when the time comes.
You may want to read: “How to Define Your Target Market.”
