Seven Questions for Choosing a Market and Target Customer

Seven Questions for Choosing a Market and Target Customer 1. Is the target customer well funded? If customers have no money, the market is unattractive: it is hard to sustain and cannot provide the ongoing cash flow needed to grow the business. 2. Can your sales team readily reach the target customer? When you start the company, you should prefer selling directly to customers rather than through third parties. Your product needs rapid iteration, and direct customer feedback is crucial. If the product is entirely new, or even disruptive, third-party sellers may not know how to generate demand for it. 3. Does the target customer have a compelling reason to buy your product? Will customers give up other options for it, or are they indifferent among the available solutions? Often the real problem is that customers do not care about any of the products or solutions. (Robin: The differences may be too small, or all the options may already be good enough.) 4. With the help of necessary partners, can you quickly deliver a complete product? Nobody wants to buy a new alternator and install it in their own car, even if it is much better than the one already in the car. They want to buy a car—that is the point. Customers want a complete solution, not a pile of parts to assemble themselves. You therefore need to work with other suppliers to incorporate your product into that solution. In other words, you must persuade other manufacturers and distributors that adding your product is worthwhile. 5. Are there powerful competitors that could block your progress? Few markets are free of competitors and let you persuade customers to buy without resistance. How strong do those competitors appear to customers—not from your own or a technical perspective? Can they prevent you from establishing customer relationships? As a new option, how will you stand out? 6. After winning the current segment, can you successfully enter other markets? Once you control this opportunity, can modest changes to your product or sales strategy take you into adjacent markets? Or would entering them require major changes? Focusing on a beachhead market matters, but an inability to scale can ultimately undo the effort. Think of bowling: winning the beachhead is like knocking down the head pin; the pins it knocks over represent adjacent markets or new applications of the product. 7. Is the market consistent with the founding team’s values, passions, and goals? You must ensure that the founders’ personal goals do not conflict with the other criteria. For example, if two other founders have clear career plans, whichever market we choose, it becomes important to achieve the agreed goals promptly within a time frame acceptable to everyone, including investors. Consider these questions from the industry’s perspective, then reconsider them from the product’s end users’ perspective. If you have divided potential end users in an industry into many categories, apply the questions to each category. In education, for example, consider teachers, parents, administrators, and students; then higher education versus elementary education; then national, public, and private education. Time is a very limited resource for an entrepreneur. Each market deserves thorough research, but you cannot consider an endless set of options. It is enough to identify markets you can realistically win and that offer sufficient growth potential. #DisciplinedEntrepreneurship_24Steps ---- Robin: “Fish where the fish are: customers have a need, a willingness to pay, the ability to pay, and sufficient numbers. Choose a battlefield you can win and where you have an advantage.”