Focus & Market Segmentation

Focus: Segment your Market, and pick the Low Hanging Fruit

At the start of your marketing process, you will be dealing with the issue of who to target – people that you suspect represent potential buyers. A big mistake that I see with startups is that they don’t take the trouble to segment their target market, and identify the low hanging fruit. Much has been written about the importance of Focus, and I am yet another strong believer in this. Particularly in the early days of a startup, when you have very few resources, and when everything you do has to pay off.

If you are not convinced of this, I strongly recommend reading Crossing the Chasm, by Geoffrey Moore, which remains to this day one of the most important books for startups. Inevitably there will be some sub-segment of your market that is most likely to buy from you. It may be a particular vertical, or it could be picking a particular size of customer, or some other characteristic such as experience with IP networking. Look for buyers that are feeling extreme pain (where their hair is on fire), and who also have money, a sense of urgency, and a good fit with the features of your current version of your product.

This will also allow you to develop very specific focused marketing messages that will likely appeal far more strongly than broad general messaging. It will also make it easier to decide what product features to build next, as you will be driven to complete those needed to fully satisfy that one segment. A common mistake is a product that meets 80% of many different segments, because management didn’t have the discipline to focus. 80% is enough to get them interested, but not enough to get them over the bar to purchase.

The reason that management teams don’t focus is because focus is hard. Focus means saying no to highly attractive opportunities that may be knocking on your door. As an example, when I first started working with one of my portfolio companies, they had been approached by one of the top global banks that loved their software and wanted to put it into 2,500 branches. The customer was consuming tons of the company resources, with sales and product people flying everywhere. The problem was the bank needed on-site global support, and there was no way that a tiny startup was in a position to provide that. However because the opportunity was so big, no one was willing to say no to it. It took some outside help to make them realize they couldn’t win the deal, and that they were far better off focusing on the SMB market where their products and ability to service them were ideally suited.

Don’t fall into that trap: you will win by having a product that is over the bar for one sub-segment, and well targeted focused messaging that resonates clearly with that segment.

This market segmentation will drive the first part of your funnel: figuring out who to target.

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  • Mike T

    This is seriously great Dave.

    Is there a vertical market segmentation comparison (market size, perceived need, opportunity, etc) that you would recommend?

  • http://www.forentrepreneurs.com David Skok

    Mike, I would score them based on who is the most likely to buy (with a reasonably large deal size). To figure that out, you might want to start by looking at who has the highest pain, greatest ability to make a decision fast, least need for you to change your product, etc. Best, David

  • Mike T

    Thanks David, 

    Retail business (especially internationally) is a beautifully complex, extremely fragmented, but equally as opportunistic market. 

    I firmly agree with you when you say the driver of innovation for startups is moving from technology to the business model.

  • Andy Dey

    What is a focus group? Very informative article though ! Great work !

  • http://www.forentrepreneurs.com David Skok

    I am not sure I am answering the right question, but I will try:

    A focus group is a small set of customers that are usually brought in to test out a product/business idea.

    That isn’t quite the same use of the word focus as in the article above. The article refers to focus as being the picking of a single customer segment to work on, as opposed to trying to serve too many different customer types that have differing needs, messaging, etc.

    Let me know if I didn’t answer the question, and I will try again.

  • Hulya Aksu

    David, I recently came across your blogs, very impressed. Great advice. The focus piece resonated very well with me. We came out in the marketplace really cast a big net to catch what we could. But it was counteractive. It took so much time and we lost focus. Once we came across information about the changes that were going to take place in the healthcare industry, the light bulb went off. We put our energy in the healthcare industry with wellness as a close vertical. I can’t tell you, my life changed. Every movement we make is now calculated, measured. I wish I saw this post earlier. Anyway, thank you! If you want to see what we are doing, it is CriticMania (www.criticmania.com). We would love your feedback!

  • http://www.forentrepreneurs.com David Skok

    Great to hear of another success story. Focus means saying no to opportunities, and that is a hard thing to do for an entrepreneur. The product looks very interesting. I wish you the best of luck with the business!

  • bristy

    Really grate, here is also more information about market sub segment you Read More