Updated: Aug 11, 2020
I’ve been building up to this blog for a few weeks now, and I have to get something off my chest. I can’t tell you how many B2B tech companies I’ve met with that get this wrong. Deadly wrong. So wrong that it can - and in many cases has killed companies. How do you pick a target market?
Here are three common high-risk approaches that we run into all the time:
First-Past-The-Post: Try a few different segments in parallel based on gut feel. See which one gets traction. Then double down on that segment.
Trial and Error: Try one segment. See if it gets any traction. If that doesn’t work, try a different segment.
Come One, Come All: Go after all segments at once because, after all, everyone will want our product.
All these approaches consume a lot of precious time, brain-power and money, undermining the confidence of your employees, Board and investors.
Instead, I encourage you to take an evidence-based approach supported by a structured decision-making framework. This doesn’t have to be heavy-weight, but I assure you that investing in a well-informed decision up-front will pay dividends down the road. Let’s explore how to use the SPADE framework that we introduced in our last blog and overlay Evidology’s evidence-based framework.
We need to decide which market segment to target with company resources
We need to decide two months from today
We want to select a segment that is friendly to new technology adoption and has similar technical requirements to adjacent industry segments. We don’t have any year-1 revenue targets from our first segment but we do want to: (a) learn, (b) harden our product in a real-world environment, and (c) secure good reference customers. We want revenues of at least $1M in year 2 from that lead segment. (Note that it doesn’t have to be a big market, just an accessible market at this stage.)
Responsible: VP Product Management
Consulted: Marketing Manager, CTO, VP Engineering, CEO, Advisor/Mentor
Informed: All staff, Board of Directors.
Hold a brainstorming meeting to lay out possible target markets and a description of each segment. List examples of possible friendly companies that are representative of each segment
Define the assessment criteria you’ll use to evaluate each segment
Complete the Customer Canvas and Conversation Plan
Collect real-world evidence for each segment via customer interviews.
Regroup the Responsible and Consulted individuals to summarize findings and make a decision based on the assessment criteria
Bring the recommendation to the Approver and walk through the approach and findings.
Communicate the methodology and conclusion to the Informed parties.
It could take anywhere between one and three months to collect the necessary input from stakeholders across the various market segments. The customer conversation process will help create a relationship with potential lead customers which, in turn, will help propel your sales/partnership journey and the validation you need for your next financing round.
For more on our Evidence-Based methodology and help securing your lead customer, please contact the Evidology Group.