In the previous blog in the KOI TIPS SERIES we talked about positioning your product in people’s mind. In this blog we’re going to look at finding the best market for your product.
“But everyone is the market for my product”, is what many startups tell me. And, “our market is 50m people, and if we can capture just 1% of the market…”.
Wrong approach!
Trying to mass-market your offering from the beginning is doomed to failure because
- you need to market to 50 million people to capture that 1% - and you can’t afford this…
- the best marketing for startups is by word-of-mouth - but if you are marketing indiscriminately to everyone, you won’t build a critical mass of people who are hearing about your product from lots of other people
“But it seems to be working,” I hear you say, “we’re signing up lots of people!”. Hmmm… let’s take a closer look at what is really happening.
Crossing the Chasm
In his classic book Crossing the Chasm the famous Silicon Valley strategist Geoffrey Moore explained how new products get adopted:
First a few “early adopters” buy the product. Then it moves into the “early majority” market, and from there to the “late majority”, and maybe much later to “laggards”.
So your upwards sales graph is the take-up amongst “early adopters”. The problem is that there is a massive “chasm” between early adopters and the mass market:
Why? Well, many types of early adopters (like techies) do not mix much with the rest of society. They’re a closed group, so news and referrals don’t get out. And, these people like playing with new things - so you may have your “fifteen minutes of fame” with them, but next month they’ll be playing with the next new thing…
So how do we get to the mass market? The answer: niche by niche by niche…
The most effective way to break into a mass market is to find one niche area, and market only into that area for now. This means you can tailor your product, marketing and sales for just one group of customers, making them very happy users who will cross-refer your product within their space, helping drive up your sales and marketing presence. Your goal is to own this space. Once you have dominated one space, then (and only then) you tackle the next small space.
The ideal (starting) niche
You want to start with one small, well-defined niche market - perhaps cross-dressing, pipe-smoking nuns.
Seriously though, choosing your niche areas well, especially the first one, is crucial for success. Here are some things you should be looking for in a niche
small enough to dominate - but with enough money in it to sustain you
short sales cycles (and without lots of regulatory red tape)
close to you (you don’t want to incur huge travel costs)
high word-of-mouth potential (if all your cross-dressing nuns are in the closet, you won’t get many referrals…)
You also want to choose a niche market that will lead naturally to the next one. So if you start with B&B’s, you could move on to lodges and then hotels. Whereas starting with funeral parlours could prove a dead end…
Finally, think very carefully about the choice of your first niche - because your first set of users will set the scene for all those who follow. Why is Facebook such a massive success compared to Google+ ? Because Facebook began with college students, a naturally hip and gregarious group of people. Facebook started with “cool” people and grew from there. Whereas Google+ began with techies, possibly not the best niche for seeding a mass market offering…
I hope this helps you as you work…
Neil Hinrichsen is the founder of Koi. An entrepreneur all his life, Neil has cofounded two startups both of which were acquired, and is now working to develop the next generation of entrepreneurs in SA through his Koi platform, comprising a methodology for startups, classes, coffee sessions, mentoring, the KoiTips newsletters and a thriving online group. He loves working with young entrepreneurs who want to change the world. Neil also helps Microsoft with their BizSpark programme for top startups, provides mentoring at the Innovation Hub and other incubators, consults with corporates, advises the CSIR in South Africa on commercialising research, is an accredited specialist with the University of Pretoria and serves on the advisory board for Stellenbosch University's LaunchLab incubator. On the personal side he's involved in youth ministry and mentoring township teenagers. Learn more about Koi: KOI GUIDE | EMAIL neil@koistrategy.com
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