Target Market: A specific group of consumers at which a company aims its products and services. Your target customers are those who are most likely to buy from you. Resist the temptation to be too general in the hopes of getting a larger slice of the market. That’s like firing 10 bullets in random directions instead of aiming just one dead center of the mark–expensive and dangerous. – Entrepreneur.com
In my last post titled Start-up CEOs: When Should You Hire a CMO? I talked about several demand generation tactics start-up leaders should avoid. There is no ‘free lunch’ despite the allure of such tactics as hiring a sales leader with an existing Rolodex®, buying email lists, outsourcing your lead generation to telemarketing or “appointment setting” firms. These seemingly quicker and easier routes to creating a robust pipeline can waste sales and marketing bandwidth, harm your email deliverability and reputation, as well as lead to sales and marketing staff burnout.
The proven alternative is to hire a modern marketing leader that can build you your own demand generation machine. In a series of posts, I will outline the key steps, so that company leaders will understand the process at a high level. This will enable start-up CEOs, CSOs and other company leaders to better align with their marketing teams and be better prepared to hire a CMO or other marketing staff.
Lack of Focus is the Most Common Start-up Disease
In my experience, start-up companies typically have difficulty picking a single target customer or market, or defining it adequately. It often surprises CEOs, as well as sales and marketing leaders, how poorly their employees understand the company’s target market and how poorly this understanding is aligned across the company’s sales and marketing staff.
A broad target market definition impedes demand and revenue generation, because it leads to:
- Too many target customers to easily target with existing resources
- Buyer Personas that are too vague
- Reduced effectiveness of market programs due to dilution or generalization of messages
How Could Everyone Not Be On The Same Page?
If you and other senior leaders are talking about your target customer all day long—in meetings, emails, hallway chats, etc.—then you’re probably asking how could everyone not be on the same page? Here are two examples:
- Your hot new salesperson has an old contact he or she has sold to in the past and is spending time and resources to close a ‘easy’ sale and show you made the right decision hiring him/her.
- To quickly get enough contacts to which to send the new newsletter, your new marketer conveniently uses a file of ‘good’ email addresses from his or her last company, uses a free sample list from a list broker, or (heaven forbid) buys a list from a publication that looks like it’s aimed at your target customer, but contains subscribers from a wide range of market segments.
These are just a few bottom-up examples of how your sales and marketing can stray off target based on the desire of individual employees to get results quickly. Next, let’s talk about another common one that comes from the top down.
External Pressure To ‘Think Big’ Can Make Things Worse
Another source of de-focusing is the pressure imposed on a start-up company’s founders by existing, as well as potential investors. Whether venture capitalists or angels, investors are looking for a sufficiently large potential return on their capital to justify the risk of their investment. This creates a pressure on company founders to expand the definition of their target market in order to increase its potential size.
The problem arises when founders—who need to tote around their continually evolving investor deck and pitch it more frequently than they’d like—allow this expanding target market definition to bleed into their internal sales and marketing discussions. Start-up CEOs should understand this: the broad definition of your target market that you include in your investor pitch is actually an impediment to your sales and marketing efforts in general and, more specifically, to demand generation.
To cure this condition and get your demand generation machine rapidly turning, make sure that everyone is aiming at a single, well-defined target. Here are three easy steps to make it happen:
1. Assess Your Target Customer’s Needs Versus Your Solution’s Benefits
A start-up’s first customers (the early adopters) typically won’t share a common set of needs. To create demand and scale your startup, it will be necessary to focus on a subset of customers whose needs best resonate with your solution’s benefits. You need to separate out your early adopters’ love of new technology by listening closely and observing how and why they use your solution.
What if you’re launching a new product and don’t yet have enough customers to help you with this research? Don’t worry, all is not lost. Here are some easy ways to obtain the information:
- Create an offer for a piece of content relevant to your general market and follow up with respondents by email or phone
- Attend a conference or meet-up focused on your general market. Network with attendees and follow up with suitable contacts afterwards by email or phone
- Work with key influencers in your general market. Tap their expertise and pitch creating an online chat session to explore your area of interest
- And, of course, you can always cold call into companies in your general market and ask to speak to people in specific positions of interest
2. Carefully Evaluate Your Chosen Target Market
Once you’ve collected enough real feedback to better understand the needs and motivations of your early adopters and your general market, you can use them to refine your target definition. Here’s an example of the level of detail that is needed to help focus your demand generation efforts:
Let’s assume you’re developing or launching a product or service aimed at helping marketers generate demand. This is a huge market, but which marketers have the specific needs that best resonate with your solution’s benefits? Here are a few questions you should be asking as you evaluate the data you’ve collected:
- Company size (number of employees, revenue, number of locations, geographic coverage, etc.) – This traditional B2B segmentation approach is the most common set of variables to start with. How does company size or location influence the need for your solution and its fit?
- Industry – Since our hypothetical solution is aimed at a function that exists across industries, another important dimension to assess is how it fits the unique needs of marketers in different industries.
- Product Usage – What existing or related products or solutions exist? Which target markets have adopted existing or related products and to what extent? Are there complementary products that increase the likelihood that a particular target market will want to purchase your solution?
- Pain Level – Assess the relative pain level across the various target market candidates. The need for your solution, as well as the ability to pay for it, will likely vary from one market segment to another.
- Motives and Behaviors – How do the target buyers’ motives and desired benefits (i.e., low price, high quality, high availability, vendor reputation) potentially vary from one market segment to another?
3. Communicate, Measure and Repeat
It should now be clear how a poorly defined target market can negatively impact your sales and marketing efforts. Now that you’ve more precisely defined your target market, how should you ensure that your company doesn’t re-catch this revenue-sapping disease?
The first step is to document and internally communicate your refined target market definition to your sales and marketing team. Ask each team to think about the impact of a more precisely defined target on their individual plans and activities and then report back how they will modify their actions going forward.
Your marketing team, for example, should reflect your more precisely defined target market definition in messaging, campaign strategy, content strategy, ad buying, event strategy, etc. Your sales team should reflect it in more precise lead acceptance and prospect qualification criteria.
As you implement your more precisely defined target market definition, make sure to measure the impact on all stages of the sales funnel. While shear numbers at the top of the funnel will likely decrease in the short term, your conversion rates should begin to increase and your revenue generation efficiency should increase over time. Finally, make sure to repeat the process periodically to ward against expansion of your target market definition and, as your business expands to encompass multiple target markets, repeat the process for each individual segment to ensure it is sharply defined.
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For more on this topic check out the following SlideShare: