Not everyone wants to buy what you’re selling. But while this sounds obvious, a worryingly high percentage of start-ups fail because they don’t identify a target market or find and connect with a market that actively wants what they offer.
Without a clear target audience, your marketing campaigns are going to cost you a fortune, you’ll have low conversion rates, and your customer acquisition costs will be through the roof.
Cash in the bank is, of course, important for every business, but for start-ups it’s your lifeline. If you’re marketing to everyone and anyone, your new business is going to bleed money.
It’s no surprise then that the top two reasons start-ups fail are:
- 42% of start-up businesses fail because there’s no market need for their services or products.
Identifying your target market therefore needs to be one of your first steps when thinking about creating your business. If you discover there isn’t a market for what you have to offer, head back to the drawing board and try something else before you invest too much time and money.
- 29% of start-ups fail because they run out of cash.
Spending your valuable start-up budget on the wrong target audience could be financially crippling. With limited cash in the bank, you may not be able to recover from this.
So, whether you’re B2B or B2C, this basic rule always applies: if you want to connect with your prospects and succeed at selling, start by identifying and gaining a deep understanding of your market segments and select those that give you the very best chance of generating customers and revenue.
As you set a goal to engage with a specific group, you’ll adjust your value proposition, marketing messages, and channels according to the market segment you target.
Through this customer-centric approach you’ll engage meaningfully with your chosen segment, which will kickstart your early momentum. Awareness and word of mouth builds faster across like-minded groups, and success stories resonate well across a segment of similar prospects.
But how do you select your target market?
A key element of your business’s positioning is “Who are we selling to?”. That’s an easy question to answer, right? Yet often for start-ups, poorly considered and underdeveloped market segmentation is the root of a lot of marketing – and ultimately sales – problems.
When we ask businesses “What’s your target market?” we often get an answer like, “SMEs”. But that’s just too big to be a practical target market for a start-up. You aren’t going to close business with every single SME, are you? Of course not.
You are, though, going to close business with a certain, magical kind of SME – the kind of SME that gets what you do, loves what you do, and will pay good money for it. And they’re also willing to ignore the fact that you’re new, small, resource poor and have never really done this before.
What makes those customers so strange and awesome? The answer to that question is the key to your segmentation.
So, how do you find your magic market? Here are some ideas to get you moving in the right direction:
Can you meet the needs of a target market?
You need to be fully aware of the needs of the target – their desire to find a solution. And more importantly, you should be in a position to offer features or a solution that is superior to the solutions commonly available.
What are your key differentiators?
Your prospects have a range of alternatives to choose from. What makes your offering uniquely different? What can you do that none of your competitors can?
What value does your differentiators bring to your target customers?
You have features that make you different — so what? What’s the benefit that users get from those features? How do you measure the value that you deliver? Why do people care about the things that make your offering unique?
Which prospective customers care about your differentiators the most?
Look across the broader market and ask yourself, ‘Who cares about our value more than the average prospect?” Some prospects will say “Yeah, your product is great”, but others will jump out of their chair and yell “It’s AMAZING! I need it now!”. You’re going for that second group. Put a different way — these are the people that are the easiest to sell to right now.
Which prospects have a high affinity for your offering?
Are they in a certain size of company, in a certain vertical market, in a certain geography? Maybe they’re consumers that already own certain products or have particular hobbies. This is where you need to get super specific.
If you are targeting SMEs, for example, start asking questions: What’s the smallest business that really loves what we offer? What’s the largest? Do product businesses love it more that services businesses? Are there locations (urban vs rural) that love it more? Is there a certain type of small business owner that loves it more? Why?
Your segmentation relies on you being able to identify the characteristics of ideal, easy to close prospects.
What market can you dominate?
Like all start-ups, you dream of making a splash and securing a healthy market share. The secret to this kind of impact is therefore not to launch into a very large market that’s dominated by others with similar products. Successful start-ups find and drop into niche markets that have either no or few solutions, with space and demand for better options.
Is the segment big enough – or small enough?
Keeping in mind that you aren’t going to close everyone in your target segment, can you realistically meet your sales goals with just this segment?
On the other hand, is the target so massive you’ll be lucky to get noticed?
The smaller and tighter you can get on your segmentation, the easier it is to get early traction. You can always go broader later.
Can the target prospects buy from you?
Can your target prospects afford what you are charging? Are you trying to sell Champagne to prospects who are on a beer budget? When you’re identifying your target markets, it’s crucial to choose markets who will have the means to pay you what you’re worth.
If the people you are attracting genuinely cannot afford to pay what you’re worth and what you need to charge in order to be profitable, you need to identify niche markets who can.
Or Is it time to re-evaluate your price point?
Many young businesses charge less than they should because they think that “saving their clients money” is going to be the thing that wins the game, and because the people they are calling on can’t afford to spend any more.
If you selling to other businesses, does your target persona have budget authority and if not, who do they have to go to for approval? Can they champion your solution inside their business and make a deal happen?
What are the factors that influence decision-making among customers?
Be aware of the factors that will front of mind for your target market when they’re arriving at purchase decision. If the target market is looking at the features of a product, then focus on creating superior products and make the right pitch. If your target market is only looking at the price point, be prepared for the cut and thrust of a highly competitive market.
To wrap up
By focusing your efforts on a specific market segment, you automatically counter the risk and costs of expanding across the entire market. More importantly, when you specifically cater to the needs of one market segment, your prospective customers are very likely to notice you.
Does a focused market segmentation approach mean that your business must change its strategy and direction? Not at all! This targeted approach based on market segmentation must always remain aligned with your business goals.
Your business can benefit from the better use of time and team efforts, besides an enhanced customer experience and an increase in profitability. And remember, the decision whether to focus on one market segment or another must always be based on data.
Businesses that focus their efforts in niche market segments can experience the following advantages:
- They can dominate a market that is overlooked by other competitors.
- They have better chances to become the go-to expert.
- Niche markets are less sensitive to pricing.
The key? Identify the market segments that give you the very best chance of generating customers and revenue and focus your attention and efforts there. They may be a niches – but they’re niches you can own.