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Who are your customers?
Well that’s obvious, isn’t it? Of course you need to know who your customers are. Every entrepreneur has, in the back of her mind, a mental picture of the prototypical customer. The question is whether or not this image is based in reality. Does this idealized customer exist? What if she does, but it turns out that she doesn’t want to buy your product?
You may find, as you learn more about your market, that you need to be flexible, and willing to change your image both of the customer, and of the product itself. Professor Kathleen Siders of Babson College says, “Entrepreneurs think they have divine intuition, which is fine if you’re part of the audience you are trying to reach. But when you move outside that market, your gut instinct can let you down.”
Basic market identification
Tom Loper, founder of Post Road Ventures, a venture consulting firm, says that when reviewing business proposals, he looks for two important features. “I want to know first if they’ve fully identified their market, and then if they have the management team to follow through. The team should have idea people, marketing people, operations people who deliver the goods, and finance people.”
The end user
Teams start with an idea, or a value proposition. It’s from here that the most important work starts. The team has to be able to answer “to whom is this proposition of value?” The end user might be the consumer, operations, or development. The proposition might be valuable to industry, education, or government. Companies intending to make a profit need to ask themselves:
- Will the proposition reduce costs?
- Will it improve efficiency?
- Will it add value to what’s already out there?
- Will it eliminate waste?
- Will it serve as a replacement technology, or eliminate the need for something?
- What is the potential market value of the proposition to investors?
Listen to customer feedback
Ask the right questions
Stay in touch with customers
This line of questioning also has to address the scale of the market. Will it be a family-owned business or a lifestyle business with limited growth? Or does the team have an appetite to think bigger--regional, national or global?
Distribution
The second part of marketing is the part that teams most often neglect: the question of distribution, or how the product will get to the end user. To develop a complete marketing plan, the team must determine what the revenue scale and cost structure will be over five years.
The second part of distribution is secondary expenses, or selling costs. What will it cost you to get the product to the end user? Relevant questions include: What threats or opportunities does this proposition offer to the industry? Will the product use a similar technology to one already in existence, or will it replace current technologies?
Complete awareness of the market is crucial to new businesses that want to convince investors that they have an opportunity worth funding. And the only way to gather this information is through thorough market research.
Several approaches to marketing
Here are a few possible marketing approaches to consider.
Niche marketing divides customers into distinctive demographic groups. To garner a niche market, start by targeting a very specific, carefully defined segment of the population, and eventually expand to target the greatest number of people possible within that market.
Faces of niche marketing
One-to-one marketing, also called relationship marketing, “customerized” marketing, or pinpoint marketing, focuses on the individual consumer, securing the greatest possible share of the individual’s purchases. Airline frequent-flyer programs are an example.
Traditionally known as word-of-mouth marketing, viral marketing uses non-marketing channels for marketing purposes. Hotmail offers free e-mail and tags an ad for their services to every message sent.
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