Yesterday I had the privilege of speaking to Mike Moyer’s class at Chicago Booth. It was pretty free wheeling. Being the University of Chicago, the students were incredibly smart and capable.
One of the things Mike does in his class is assign teams to work on a startup business. It’s a consulting type relationship that gives the students real world experience-and hopefully gives the startup some good plans of action.
I met with each of the teams. There was one similar question that came up and I thought I would share it with you. I would love your input.
One of the hardest things for startups to figure out is who their initial target market is. Who is it? Entrepreneurs, and often times investors (guilty) get so excited about the product they can’t imagine anyone NOT using it. It works here, it works there, this person can use it, that can use it.
I have watched a lot of startups struggle with this early stage. When they find it, it’s like nirvana. Sales increase and life seems good. It’s a lot more fun to run and build a company than struggle in the early stages. This is especially true in consumer products. I am in one consumer deal, Simple Mills. It’s been fun to watch their progress. Check them out. I think they found their wheelhouse.
My friend Arnold Waldstein has started many brands from scratch. He has started a new one called Lulitonix. They struggled early but have also started to find their form. It looks like to me they have first world problems which is a good thing.
The problem is startups are constrained by capital. Limited resources force them to find a target. This is the classic early stage product-market fit problem. Not finding product-market fit kills most startups.
At a seed/early stage, it’s very important to hone in on your target market and dominate it. Heck, even Facebook started with only the Ivy League. Then you needed a .edu email address. In a weird way, that gave Facebook cache.
Instead of offering a bunch of answers to the question, I asked questions. Startups should be doing this too. Here are some questions to find your initial target market.
- Is there an age demographic? Be specific. Ages 25-45 is too broad. 35 year olds are generally not like 25 year olds. Ages 20-27 might be a good target to hone in on.
- Is there a demographic based on occupation? Based on where they live? Interest? Race? Gender? One of the companies that I was talking to figured out that Executive MBA programs might be a good target and fit their demographic. On the spot, the figured out an A/B test with different codes to see which programs the business resonated with.
- Are there channel partners that you can use to get to that market? Can you spend marketing dollars in partnership to acquire customers.
- Once you figure out your target, don’t sell features. SELL THE WHY. I cannot stress this enough. Simon Sinek has an incredible video about it. Case and point the Republican debates. If you listen to a candidate like Senator Lindsey Graham, he doesn’t sell the why. He drones on about this and that. The message doesn’t pull you in. Neither does candidate Clinton. But, both Obama and Reagan sold the crap out of the why. Republicans still get a tear in their eye over Reagan and I think Democrats will over Obama in twenty years.
- After you figure out your target, and your why; the next step is finding where your customers live. Where are they on the internet? Where are they on mobile? What’s the best message to get them to act? A Vine? A YouTube video? Instagram campaign? Facebook? Twitter? LinkedIN? Pinterest? Coupons? Ads? Billboards? Email? This is where the creativity in advertising comes in.
All this is highly dependent on your company, and your market niche. A person or VC with a lot of domain expertise can help you here. That’s also why early money in a company is better off not being commodity money.
At the very beginning, you don’t have a brand. You have a product and you are building a brand. There is zero value in your brand at the beginning. Sure, you have lofty ideas about what could happen-but until you get repeat sales and stickiness, you don’t have anything.
Some of this can be done by looking at data. But, sometimes, you have to trust your gut. That’s what makes the marketing part of the startup equation really really hard.