We work with a lot of technology start-ups. Pretty often these start-ups are looking at launching a new product into a new market – one in which they don’t have previous experience of selling their technology. Sometimes it is not obvious which market to go for first, particularly if the product can potentially be used in a number of sectors.
So, we usually have these questions to answer:
- Why can’t I market the product to all potential buyers?
- Which market should I choose first?
- How do I promote my product in that market?
In this post we look at why you should pick a first target sector, how you pick that sector, and then how you can promote your product. We’ll be using some ideas from the technology marketing classic “Crossing the Chasm” and combining them with digital marketing tools to quickly identify the sectors with the best fit.
Why can’t I market my new product to everybody?
- If you have a product that could be used in a lot of different ways, startups are often tempted to try to market to all potential users.
- You worry that if you focus on one group you will exclude the others.
- This is wrong for a couple of reasons:
- Limited promotional budget – you have a fixed amount of money to spend on promotion. Concentrating that spend on a clearly defined target group will produce better results than spreading it thinly across multiple potential target groups.
- Trying to be all things to all people generally doesn’t work when launching a new product. If you designed a car that tried to appeal to young families, men in their 20s and elderly women, you would end up with a mishmash that appeals to no-one. The same is usually true with technology products. You should focus your product and promotion on one or two sectors for your launch.
What is a target market segment?
- A market segment is a group of potential buyers for a product or service that share some characteristics.
- According to “Crossing the Chasm” the most important characteristic is that they think of themselves as being in a particular group and that they reference each other.
- For example, information security officers in large enterprises constitute a market segment if they think of themselves as working in the same sector, attend the same industry events and communicate regularly with their peers when evaluating solutions or services
- A sector can be ‘horizontal’ if it crosses a number of different industries e.g. the information security sector is horizontal because IT security is deployed in multiple industries including finance, defence and healthcare.
- A sector is ‘vertical’ if it is restricted to one industry e.g. ATM transaction processing systems are only sold to the retail banking sector.
How do you pick a target market?
- You want to choose an initial target sector that is most likely to adopt your product.
- Our suggested approach is adapted from “Crossing the Chasm”.
The approach is:
- Generate ideas for different market sectors where your product could be used.
- Filter those different ideas using a simple scoring approach to remove the weaker options.
- Do some test marketing online for the top 3 or 4 ideas to gauge the reaction.
- Filter again based on the feedback you get from this test market.
- Go to market with the top 1 or 2 ideas.
Generate Ideas for Sectors Where You Can Use Your Product
- Ask your team to identify up to 10 sectors where you could sell your product.
- Get them to write up each of those potential uses in the following format (again based on a format from “Crossing the Chasm”):
- Target customer – who do we think would buy this solution – their role, type of organisation, geographic location.
- Industry sector – what sector are they in?
- Compelling reason to buy – why would they consider buying your new product as opposed to sticking with whatever they have (usually cost, speed or ease of use or entirely new capabilities)
- “Whole product” – what else is needed apart from your technology to get a ‘whole solution’ to the customer – do you need system integration, a distribution network, are there any 3rd party technologies required?
- Partners and allies – do you need others to help bring the solution to the target customer, or are there companies who already have good access to your target customers that might act as your ‘channel’
- Distribution – is this direct, via a partner reseller, via retail outlets….
- Competition – what other solutions are there, how much do they cost, what advantages and disadvantages do they have?
- Positioning – how would you position your solution in the minds of target customers; who do you say you compete against; how do you characterise your company and technology (fastest, newest, cheapest, technically superior, uniquely valuable innovation etc.)
Score The Potential New Market Sectors
- Now you numerically score your 10 scenarios using quick “finger in the air” scoring to filter out some of the ideas.
- Take a table and score each idea for market size (10 is good, 1 is bad), level of competition, your credibility in that market and the product fit for that market.
- Add up the scores and select the top 3 ideas.
Develop a Pitch / Value Proposition for the Top 3 Ideas
So we have our top 3 potential market sectors to target. Now we develop a short pitch statement for each of the candidate sectors. The statement for your final selected scenarios should quickly describe the solution to a new audience, in one or two minutes – the elevator pitch. You can use this format from “Crossing the Chasm” to get started:
For (target customers)
Who are dissatisfied with (current market alternative)
Our product is a (new product category)
That provides (key problem-solving capacity)
Unlike (the main product alternative)
Writing these short pitching statements is the first step in thinking through and describing the value proposition for the product in each target market.
Do a Quick Market Test of Your Product
- You can test market a product early and at low cost using digital marketing.
- When you have identified a potential application of your technology that shows real promise, prepare and execute a test launch – i.e. a launch where you are not committing all your resources
- Use your website, email, pay-per-click ads and social media.
- Create a “landing page” on your website that describes the proposition and proposed pricing in a compelling way – check out other SaaS or high tech product launch pages for comparison.
- Your landing pages should emphasise the benefits, make the pricing clear, and describe how the product can be used e.g. with a video or storyboard slidedeck
- Drive traffic to your landing page (using pay-per-click ads, social media and email initially, later SEO) and monitor the reaction
- If you have lots of visitor signing-up and expressing an interest in your beta launch then this is pretty good validation – proceed to the next phase of a full launch
- If there are no registrations, think about what might be wrong and test some hypotheses. For example, test some alternative landing pages with a different pricing model to see if that works, or try highlighting different benefits and features. If nothing works, switch to the next potential application of the technology and do a test launch for it too.
Filter again, based on feedback
- At this stage you have identified potential target markets, prioritised them based on a rough score and test marketed your products in the top 3 most promising market sectors.
- Filter your choices again based on what you have learned from the short test marketing campaigns.
- If one of the test sectors shows real promise then throw all your resources into promoting the product in that sector.
- If none of the sectors are working out then go back to the drawing board, using what you have learned to identify the next set of candidate sectors OR using what you have learned to make adjustments to your product.