When I ask small business owners and aspiring entrepreneurs, “Who is your target market?”, many answer with one word…“everyone”. While many may think everyone could benefit from their product/service offering, they soon begin to realize that everyone is not their customer. Initially, it is critical that entrepreneurs identify a big market that has underserved customers.This group of customers has its own demands and preferences that are not being met. Because they are unhappy or underserved, then this group will be looking for a solution to their pain. Startups that focus on these niche markets are better able to cater to a specific consumer’s needs and pain-points than existing competitors who are targeting the broad market.
There are benefits to targeting and establishing a company in a niche market. First, there will be reduced competition initially. Second, it will add focus to the business and marketing efforts. Third, it provides a way to add product/service differentiation and expertise. Finally, it provides the time to build brand loyalty. Targeting a narrower audience allows the business to focus efforts on catering to specific customer needs. So, where should an entrepreneur start?
The key to finding and establishing a niche market is research. By diligently researching niche markets, you can determine what unique segments already exist, and explore where new ones could be successfully developed based on industry or customers trends. Once a potential niche market is found, it’s essential to think about whether it can become profitable via your current business model or is a new one called for. Remember, don’t be a solution looking for a problem. This is all part of the “vetting” process…asking the niche customers the right questions, interpreting their feedback properly, then acting on that feedback is a well-tested recipe for business and market growth.
The major mistake many companies make, and it isn’t exclusive to startups, is trying to find out everything they can about who their customer is, what they want, how much they’ll pay for it, and how they want it delivered. This is too much to answer at first. Care should be taken to design proactive target market research that you can act upon.
When designing target market research using a survey or an interview, the goals aren’t all about the customer. They need to be about the company. Focus the research on these three areas:
- How should the company define the target market (ideal customer profile)?
- How will the company reach the target market?
- How can the company expand the target market?
The research questions should directly relate to one of the three company questions. They should be tied to an action that can be taken or decision the company can make based on the answers. If the question doesn’t relate back, don’t ask it because you will just create process noise and waste time.
Now, think about the buyer’s journey and what is needed to help the prospect to the next sales funnel stage. Group the questions into those three categories and ask them in that order. This will give results that allow you to take action. When research questions are not grouped into something resembling a journey, it’s like asking for directions without first stating where you want to go. Know when to limit customer answers to a set of responses that you define ahead of time by drawing those lines backwards from action items you can take.
At this vetting research stage, you don’t need individualized input, because selling to each customer as an individual is far too time-consuming and costly, especially at the top of the sales funnel. Use assumptions and experiential knowledge, paired with responses that are multiple choice (scales of 1 to 10, scales of strongly disagree to strongly agree). When you’re done, you’ll have buckets of data to help identify the ideal market target. Of course, you can still ask open-ended questions, but save those for when you want anecdotal evidence, not hard data about your customer base and your target market.
No matter what research method you use, be sure the questions that are asked result in answers that relate to the business growth, not just a reflection of a singular customer’s point of view. Conducting due diligence research is how many successful company started, unless of course they raised a huge amount of money to gain broad awareness. So focus on a niche market of customers in a large or growing industry. It’s the best way to enter an industry, establish your company and gain the niche customers who will help build your brand as third-party-endorsers.
For more thoughts on market niches, view the micro-learning video “How To Vet Your Startup Business Model Concept”.
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