How to choose your startup market
Since startups have limited resources and manpower, they should be very specific when defining their target market. If you’re a marketing manager in your startup, you can’t afford to play a loose marketing game. Efforts should be focused from the very beginning to target areas where the probability of a hit is high.
But why is there a need to define a target audience? When you develop a product and end up selling it to anybody and everybody possible, it creates unlimited flexibility. This can pose a huge strategic problem in the long run. This is the litmus test for the entrepreneur and the marketing manager. The way this problem is tackled decides the fate of a startup. This is because consumers, in general, whether they are institutional buyers or retail customers, are a little resistant towards buying a product from a startup. They are scared the company might run out of money sooner or later.
An unambiguous market makes it difficult for startup CEOs to pitch their product to VC and PE firms, thus making capital raising difficult. So unless a target audience is chosen well, it will be difficult to sell the product or even to raise sufficient funding to sell the product.
Here are a few factors that you should consider while defining the target market:
Knowing your customer
The STP (segmentation, targeting and positioning) process is one that is often discussed in marketing theory. Kotler and other marketing geniuses have often asked the marketers to visualize how they would want their customers to look. This is an exercise which startup marketers should also practice, as it will help them understand various factors including personality factors, demographic factors and lifestyle factors, among others, of the desired target audience.
Knowing what you have to offer
Startups are all about making things easier for customers. Simply put, your product should provide a solution to a problem faced by your customer. Most startups were formed because they identified a problem and had a solution available for it.
Getting the business model right
It is said that an effective business model is the secret sauce to a startup’s success. When a product is innovative, more people want to try it out. Targeting the right people is not enough; making them use the product is equally essential. For example, this has led to what Forbes calls the ‘Freemium business model’ wherein companies give customers the feel of a product by providing it to them for free or for very nominal charge. If people really like the product, they wouldn’t mind paying more for it.
Internal resource mapping
All startups should take the time to find their area of expertise. Marketers need to understand the internal position and capacity of the company. Either an audience should be chosen as per the current working capacity of the company or the working capacity should be improved to match the target segment being catered.
Continuous market research
Using KPIs (Key Performance Indicators) and marketing metrics, entrepreneurs should be able to update their marketing strategies and target audience needs. Identifiers of these trends can foresee how the market is likely to behave in the near future. Smart marketers are those who exploit this more than their competitors do.
Setting budgets and conversion rates
At the end of the day, it is all about the money. Therefore, a smart entrepreneur aims to get a maximum conversion with a minimum budget. At least that’s the dream. Marketing strategies should be carefully planned and executed. ROMI is a useful tool for budget analysis.
If you think you have any other pointers for companies to follow, list them down in the comments below.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)