Two weeks ago, we covered the 4 key aspects of your startup’s financials that you should fully understand before moving forward with your idea. The topics spanned the initial investment needed, financial management, economics of the business, and the exit strategy. For an in depth look, read here and catch up on the Four Pillars of Startup.
The Fourth Pillar of Startup
Today, we’ll cover the fourth and final pillar of startup: the customer market. In the first three pillars, we dissected the people, the product, and the financials. We understand who we need, how our idea adds value, and the cost associated with our idea.
Now, it is time to tie it all together and discuss how we identify the perfect customer and best practices for reaching the end customer. I break it down into two key categories:
- The target market
- Reaching the end customer
The Target Market
What is a target market?
A target market is a specific group of people for whom your product/service solves a problem. When we talked about the value proposition in the 2nd pillar of startup, I mentioned the importance of using your value prop to identify your target market.
When understood correctly, you target market are the people that are most in need of your product/service. They’re the ones willing to spend money on your product/service because you are solving a true problem that they have in their life.
It is important to be as specific as possible when initially defining your target market. You do not want a broad target market because it causes you to lose focus. When you are attempting to address a market too large for the start of your product/service, you tend to create a product that can’t please everyone and doesn’t end up pleasing even a specific niche of people.
When starting eCommetize, we spent weeks talking about our target market before initiating the sales process. Given the many verticles in the online influencer space, we had to spend extra time identifying exactly who would benefit most from our product.
As we learned more, we were able to narrow it down. We realized that our ideal customer had over 100,000 followers on social media, had been influencing for at least 3 years, and was generating traffic of at least 100,000 page views per month. Each day, we continue to develop a full picture of our target market by speaking with potential customers.
Jack Dorsey and Customer Profiles
Jack Dorsey, owner and founder of Twitter and Square, spends hours conducting customer market profiling with his team to inspire the creation of the Square product line. The team places themselves into the shoes of hundreds of different profiles to understand how Square would impact their life. If you don’t want to trust my word, take Jack Dorsey’s. Understanding your target market is key to your product’s ultimate success.
- Self-reflect on the makeup of your target customer.
- Attempt to put yourself in their shoes and explain why they will be interested by your product/service.
- How are you solving a problem for them?
- Define the demographics –> demographics are statistics about the target market that you can use to narrow down their exact characteristics.
- For a consumer, use these guiding terms: age, sex, location, income, spending habits, marital status, etc.
- For a business, use these: revenue per year, # of products, # of employees, location, niche, industry, etc.
- As you work your way through the activity, your ultimate goal is to create a profile of your target customer. Once you have arrived at your profile, you can use it for further research, testing, and learning.
Reaching the End Customer
In the book Zero to One written by Peter Thiel, there is a specific section focused on the distribution strategy of the startup. Thiel expounds on the importance of how the startup will get its product out to the masses and expresses that it is an aspect of the business plan that many technical founders overlook.
The second aspect of fully understanding your customer market is determining how you will get the word out to the target customer that you identified above. One of the biggest mistakes that entrepreneurs make in the beginning stages of a startup is thinking that “if we build a great product, the customers will come.”
There’s nothing father from the truth. The greatest minds of business understand this very well and focus deeply on reaching their end customer. They hone in on the channels that they have available and create innovative ways to reach and engage those people better than their competition.
Other than a distribution strategy, this aspect of your startup can also be referred to as the strategic marketing plan. In today’s digital landscape, online marketing and advertising have become the king to finding and communicating your company’s message. Depending on where your target customers are, you can use a variety of strategies.
1. Social Media
Most companies will have potential customers on social media. It’s the difficulty of making your message stand out amongst all of the other digital content fighting for screen time.
2. Pay per click
If your company’s product fills a specific need that internet users may be searching for, you can invest money into appearing on search engines.
3. SEO best practices
When developing your website and creating content, you should always be thinking of keywords that apply to your business that are popular on search engines. The trick is to find long tail keywords that are highly searched, but are not highly competitive by companies with larger budgets.
4. Traditional sales research and contacting
With the Internet around, it’s become extremely easy to research and locate the contact information of your potential customers. Once you’ve collected their information, it’s time to craft the perfect sales pitch.
These are just four options of marketing and distribution strategies that you may utilize to reach your end customer.
A good friend and fellow Orlando entrepreneur, Gregg Pollack, argues that you should even go as far as creating your own community before creating and launching your product. Gregg is the founder and owner of CodeSchool and has had a ton of success building a community around his educational product. But which came first? His experience and takeaways from growing his businesses has taught me a lot about the power of building a brand.
- Self-reflect on the marketing and distribution strategy that you’ll use to reach your customer market.
- How will you utilize the means that I communicated as well as others?
- Where do your customers congregate and interact? How can you get involved in those groups?
- How can you encourage word of moth from your first customers?
- Once you’ve answered these questions, put it all together and find out who you need on your team to get it done.
Be Cognizant of Your Actions
One of the most important factors to consider when identifying your customer market is you. When first starting a company, your brand and personal reputation is the first impression that outsiders get of your company. Keep that in mind as you are attempting to turn your idea into a profitable business. Over time, your personal values and reputation will guide the culture of the company and attract people of a similar caliber. As the founder, you are responsible for being on top of your game at all times…especially in the early days when reaching your first customers.
What’s Up Next
This column officially wraps up the 4 Pillars of Startup. We’ve covered the major aspects of building a business that I’ve found to be most important throughout my entrepreneurial journey. Getting to know each aspect of your business will allow you to create a foundation for future growth and prosperity.
The next step in starting your business is creating a strategic plan and developing belief in your idea. In my upcoming columns, I will break both down and give you action steps for how you can get started. Stay tuned.