Three tips on selecting your target market
With examples from last week's mentoring
After mentoring hundreds of founders, the most frequent question I get is:
“Jeroen, I’ve got three potential market segments to target, how do I select the right one?”
Here are three questions to ask yourself that often speed up your process.
1️⃣ Can we eliminate some markets just by reasoning?
A fitness startup I was mentoring sold over 100 hardware products across five segments. One of the segments was professional athlete trainers. Should they target those, as they had some very positive feedback?
My Advice
We could reason, by simple calculation, that the market was not big enough given their product revenue. Even though, for PR reasons, saying your tool is used by the national sports team is cool, as a beachhead segment its not great. The startup eliminated that segment for now.
Do you need a sanity check on your beachhead segment or go-to-market strategy?
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2️⃣ Is there a segment you already have decent traction in?
A travel startup began selling its immersive history walks to boutique hotels. Talks are going great, and outreach converts almost 40%. But what about other segments, like museums and other tourist organisations?
My Advice
Well, there’s a reason you’ve got early traction, and you need a good reason to abandon it. Keep 80% focused on your current segment while it grows revenue, but use 10%-20% to do explorative outreach/sales on new segments to see if you get traction more easily—and more lucrative. If the data doesn’t convince you that the new market is better, just stay in your initial lane for now.
3️⃣ Do you have any outreach or sales feedback yet?
This SaaS tool for innovators who want to validate ideas had three segments in mind. They built a full product and had a few paying customers from one segment. The other two segments were still promising. What to do?
My Advice
Manually do outreach for all three segments—no time to automate yet. Aim for 20 sales calls per segment. The data will tell you which segment has the most pull. You will feel it.
⚠️ Warning
Don’t focus too much on shiny validation methods. A/B testing and landing pages sound cool, but generating traffic is harder than you think. Creating good ad campaigns often takes much longer than you think—likely, this is your first time.
Just doing manual outreach to land 10 calls is way faster. You are doing this to learn about market demands, not to validate if you can build a scalable sales funnel. Don’t try to achieve too many things at once.
Interesting read! The inclusion of actionable steps is helpful.
Recently, I was working with one of the founders excited to launch in multiple markets... We developed a step-by-step strategy to identify SOM and then go further.
Interesting!