I started off this three-part B2B series with an article about B2B Sales. Now, let’s talk about identifying the right customer base.
I can hear you going, “Huh?” Many start-up businesses think they know their customers, and thus, end up spending scarce resources and limited funds in poorly conceived market-creation initiatives. If that happens to you, it can be fatal for your start-up.
So here are three questions you need to ask yourself:
- What kind of industry sector am I targeting?
- What is the specific segment within that industry that I want to position my offering to?
- Who is/are the specific individual(s) within companies in that segment that I need to reach?
Why is it important that you understand this as the founder of your start-up?
You need to know that your product or offering addresses a genuine need for a target audience, and you want to be pitching to the right person in that organization. The more narrow the definition of the target market, the better the focus. Start-ups don’t have the luxury of addressing a vast community of enterprises. The enterprise world is also full of people who will waste your time, when they shouldn’t be wasting their time talking to you if you aren’t the right potential customer.
As an example, take a look at the simple chart above for targeting the healthcare market.
I see a lot of start-ups targeting “healthcare”. If you look at this simplified view of the market, you will see two distinct segments at the third level of classification. For the same offering (e.g. EMR software), these two segments work in very different ways when making their buying decisions.
Which is better: A million customers and a dollar each from them, or a single customer worth a million dollars?
Someone asked me this question the other day. The answer is: it depends. What is your offering? To continue with the example of healthcare – is it a calorie counter for your daily run or is it licensed software for managing electronic medical records?
Regardless of what your offering is, it is key to understand who you are targeting, and how that audience is likely to buy what you’re selling. Individuals may make impulse purchase decisions when paying $ 4.99 to download an iPhone app for counting calories, however they will likely not be willing to store personal medical information on a secure server, even if the service were provided to them free of charge. However, large enterprises will go through complex and long, drawn out processes to spend tens of millions of dollars on installing EMR software, and will not be deterred by the need to store patient medical info in secure servers.
So, choose the battle you want to fight.
Don’t confuse the person who signs off on a buying decision with who your customer is.
Very often, senior executives who have signing authority don’t really involve themselves in the decision-making process. This is especially true if the transaction is below a certain threshold in terms of dollar value. However, corporate policy may require their signature on deals above a certain threshold value. So, back to the important question: who should you be targeting with your offering?
Of course, this gets complicated if you’re selling something no one has seen before, or if there are several layers of consumers for what you’re selling. An example of this is analytics software. The consumer of analytics is invariably a business executive, but the group that is responsible for delivering analytic insights to the executive may be a combination of technical and analytical people with different reporting chains of command. This gets really complicated in large organizations.
Don’t be a nail looking for a hammer.
Implicit in all of this is the assumption that your product was not developed in a vacuum.
Find out who in your target market or company is interested in solving the problem you’re product or service addresses. If you’re selling a hot new analytics tool that helps make sense of the retail market for consumer products, try the marketing function of the companies selling into the market. If your product is a solution that helps gain insights into delinquency rates for credit card debt, start with the credit risk organizations in consumer banks.
For others who are trying to address some perceived gap in the marketplace, there is a concept known as “pain point” when it comes to product marketing. It refers to a problem that a company, and specifically, an executive within the company, feels on a day to basis in the performance of his or her work. Knowing the owner of the pain gives you a place to start.
If you have 8 hours to cut down a tree, spend the first seven sharpening the axe.
This quote can be attributed to Lincoln. Give a lot of thought to the question of who your customer is. It’s not just enough to know who may be interested in the solution you’re offering, but also whether the solution is something he or she can and will buy – and whether they can help you build your case and get to the individual who will eventually sign the check. If the person you’re talking to doesn’t meet either of these criteria, you are likely wasting your time.
It is well known that enterprise sales efforts take months, sometimes years. You will save yourselves precious time and resources by identifying the right market for your offering early on, and more importantly, whether you’re talking to the right person. You may actually save your company if you follow these basic principles.
In my final piece in this series, I will talk about architecting the customer experience to successfully make a market for your offering.