So What? Who Cares? Why You?

Filet-O-Fish! or Carving Out the Market

I came across this article by Clayton Christensen entitled, "Finding the Right Job for Your Product" . It presents a perspective of carving out the market by thinking about the job your idea performs for customers.  I'm a fan of the market carving a la "market fishbone" exercise, but I must admit I don't see the uniqueness in this approach.  Is this not simply segmentation by context/application, or simply stated, "how will the customer use the product?" 

Even so, the strength of the article is not lost.  It reminds us how important it is to dive into the details by asking and examining the customer environment .  In doing so, you expand the market potential beyond your product category. 

Have a read through the article - if you prefer, you can access the full length version through innovationtools.com  (link at the end of the article).

I'd love to hear your thoughts.

Wendy
author/advisor/lady with the flipcharts
www.wendykennedy.com

For Pete's Sake...Get Some Bloody Customers

Okay so at the risk of getting on my high horse again, I have to point to Rick Segal's posts over the weekend.  There's some great food for thought on some of the most common mistakes entrepreneurs make:

1. The Eyeballs vs. Customers Trap -- So true.  I thought we had moved past this notion of eyeballs, but Rick's down at the Microsoft VC Summit talking with all kinds of startups, so obviously he's seeing this again.  His post on the need to focus on paying customers sounds elementary, but it's actually not.  When you start to focus on customers with money to spend vs. early adopters that love technology, everyone in your startup starts to gain clarity about what's important.  You get off the hamster wheel of building it because you can.  Choices get weighed against the value to the person out there who cares about what you do enough to part with their hard earned dollars.  That's the acid test.

2.  The Delicate Balance between Build vs. Buzz - Rick also posted about the dangers of the rubber chicken circuit and startups spending too much time building buzz.  I agree with this but with one caveat.  I always encourage inventors and entrepreneurs to get out and talk to the market.  But you've got to be careful not to make it your primary job -- you're not running for office, you're building a business.  It's the same danger that exists when founders become consumed with raising money, at the expense of building the business -- nothing whets a VC appetite like paying customers, strong partner relationships, and a product that's finished.  So enough said on that.

The point I wanted to focus on here is the need for going out to get the customer input and then going back to the shop to build the product. I see a lot of inventors and entrepreneurs that don't get out to seek input from their prospective target customers -- the old "we know what they want mentality" or "we're going to build the first version and then show it to customers".  So I find myself always encouraging and prodding these folks to hit the road sooner rather than later.

So I encourage a delicate balance - spend time with customers and if you can get a few folks to be advisors.  Stay focused on the real game -- the game of customers with money to spend and willingness to spend it on what you've got.  That says you've got something that's real.  And a future that's bright.

Enjoy your day!
Wendy
author/advisor/lady with the flipcharts!
www.wendykennedy.com

What's Your "Out of Box Experience?"

I was meeting yesterday with the executive team of a $15M software company.  We were talking product "readiness".  How ready are we to play to play the game -- btw, they've been playing the game for 10+ years already, but we were having a Jim Collins type discussion of "confronting the brutal facts of our current reality".  I  like to have this discussion to uncover and discover the true whole product.  Very often we think we've got it, but when you take a critical eye to what you do -- by critical I mean how your customers look at you, it can become an eye opener.

When you can't traction, or you can't scale, you've got to have this discussion.  And you've GOT to park your ego at the door. And it can't be a like-minds love-in...it's got to be a mix of different folks with different stakes in the product, some of whom are touching customers.

Here's a few questions I like to ask:

1.  What would we have to offer that our customers couldn't say "NO" to?

2.  How easy is it for our customer to deploy?  Walk step by step, piece by piece through the customer "out of the box" experience.  This moment of truth is the all important rubber hits the road question.  We can find a lot of answers about our traction and scalability challenges in my opinion if we look under the hood at this all important tactical execution details. 

3.  How would our customers prefer to buy from us? (interesting enough, the answer here is often not the same as the way we are selling to them)

4.  What are the customer's "must-have" vs. "nice to have".  We often get the laundry list of features vs. the critical "win the business" product requirements. 

5.  Who does it better than we do?  why is that?  how can we be different?

If you think you might be in this situation with your own traction/scalability, try digging in with some of these questions to diagnose what's going on.

Enjoy your day!

Wendy
author/advisor/lady with the flipcharts!
So what? who cares? why you?
www.wendykennedy.com

You say Tomayto and I say Tamahto!

Mental Floss for Today!

Are You Speaking Your Customer's Language?

Take a look at your customer facing materials - things like web sites, brochures, presentations, demonstration tools - really look closely - every word.

Are you speaking like your customer or talking all about yourself.

Take for example your web site - is it written touting your product and all it's features or is it written as if your customer is talking - you know what I mean - the vocabulary, lingo, and the mental imagery that the customer's world speaks most about.

This is where you want to be - speaking to your customers in the language they use.  They need to see themselves in your marketing materials.  Clearly. 

There's only a very small percentage of customers that will translate your materials into their own language - we call them early adopters - they like to do this - they find it fun.  But the problem is there's only a small % of these folks - the rest of your potential customers expect you to do the translation.

So take a close up look at your web site, collateral, and brochures.  How often do you talk like your customer and how often are you spelling out features and company capabilities?  My guess is, if you're like most, it's a 10-90 ratio.  We need to turn that around to 90-10.

~~~Wendy Kennedy
advisor/author/lady with the flipcharts
So What? Who Cares? Why You?

I'm Choking - You Must Be Too!

Way too much info in these last few posts and definitely not my style. 

I'm going back to my "cut to the chase" roots.

Let's focus on who's doing it well and give up on the tutorial. 

If you want help with markets and segments, I'll put on a webinar or a podcast in the Fall where we can get up close and personal on this topic. 

Text just ain't cutting it for me.

Stay tuned.

Shaping Segments – Fishing for Customers

Segmenting a market is perhaps as much an art as it is a science.   There are obviously an enormous number of different ways you can “slice and dice” a market into segments -- the trick is to do this in a way that makes real business sense.

If you haven’t already, go to my web site and read my "how-to" on brainstorming segments. I use a fishbone as a tool to begin this process.  It’s a great way to get the juices flowing to include all the potential segments that might exist for your product or idea. You should really start here before jumping down below.

In shaping segments, consider these 3 questions:

1.      What types of problems does your product solve for the customer – if it solves several problems, this may indicate several different customer segments are emerging.

2.      What is a common problem/need customers have that you can solve with your product. For example, they are all from the banking industry and want to give the sight-impaired access to electronic banking.

3.      Who does the customer reference when making a decision?  These people should be grouped together.

At the highest level, segmenting the market by industry type is a good starting point.  We call these vertical markets.  The only problem is that segmenting by vertical is not specific enough.  All banks are not the same, nor are all hotels, or hospitals, educational institutions, etc.  So defining a vertical can be useful, but there’s much more to do beyond this to make segmentation work for you.

Also keep in mind, your product may have horizontal application and therefore segmenting by vertical may not be relevant. 

Here’s how I go about it.

I think of slicing on two levels:  Definers and Descriptors.

Definers are those things that actual carve out customers into groups with similar needs – you can actual measure the number of customers when you shape your segment using definers.  Definers would be things like: size of organization:  for example, dividing the hospital market by # of hospital beds – 200, 400, etc. (you could divide hotels using something like this too) or metropolitan police forces vs. rural.   

Other examples of definers:

·         Geographic location,

·         # of locations,

·         Decision making unit,

·         Hardware and/or software requirements (ie.  must have XP, Sun Solaris, etc.)  you could even define the market based upon platforms and/or legacy systems, 

·         Company sales,

·         Number of employees

One definer I find particularly useful to divide up the market is application – ie.  How the customer uses the product.  A simple example here is airlines – segmenting by business travellers, vacation travellers, families etc.  Application or how the customer uses the product is a very effective way to divide up a market into groups of similar customers.

My rule of thumb is to use at least 2 definers for each segment.  I want to shape the segment into meaningful groups that can be measured quantitatively when it comes to forecasting market size.  So I look closely for at least two definers for each.

Descriptors

Descriptors are just that – details that paint a picture of your segment but you can’t quantitatively measure using them.  An example would be if you describe the segment as being innovative, risk-takers with new products.  It’s an important descriptor to profile the segment, but you can’t measure against it.   .

Other descriptors include things like: 

·         Buying process – and familiarity with the product category

·         Brand loyalty level,

·         Motivation of the customer,

·         Benefit sought,

·         Usage

Descriptors are equally important in the shaping of segments.  My rule of thumb is 2:1 – two definers to one descriptor.

Try to think about shaping your segments using definers and descriptors.  It takes some effort, but the results can be a more meaningful view of the differences between buyers in your market and a better understanding of how to appeal to them. 

In my next post, I’ll show you a tool I use to make this task a bit more visual and concrete.

First things First – What is a Market Segment?

When discussing markets and segments, I often hear people say things like “we target the medical segment”, or “we’re going after SME’s (small and medium sized enterprises).  Statements like this are indicators that market segmentation is NOT at work in these organizations.  First of all, these are large, broad markets with many different needs and wants, purchase behaviours, product requirements, and motivations. You cannot possible paint them all with the same brush – it's just not that simple.

So markets vs. segments – what’s the difference?

A market is …

the total set of potential buyers for a given product/service,

A segment is …

an identifiable sub-group within the market, with similar needs/wants, and who naturally tend to reference each other when considering what to buy – for example, all teachers don’t reference all teachers, or doctors to doctors, or even hotels to hotels.  So you need to look closely here at who your target buyer would see as credible when seeking advice on your product. 

A lead customer is …

a representative member of the target segment (who is ready to work with you now).  I quite often see people select lead customers based upon whoever comes through the door – what’s important is to identify and pursue lead customers who are representative of the market segment you plan to target.

In all cases, these potential customers must have a burning need or want, money to spend, and be willing to spend it.  Otherwise, there’s no viable market or segment that exists for what you offer.  If you apply these 3 conditions to every market or segment you’re considering, you’ll save yourself a lot of agony.

Kodak - A 116 Year Old Segment Strategy

It’s a Kodak moment. Kodak’s has built a supremely successful business by targeting women.  While other camera makers have been busy targeting techies with the latest gadgets, Kodak built a strong relationship with women by focusing on simple, easy to use features.  This strategy has worked.  And even as cameras have shifted from film-based to digital, Kodak has reinvented itself for its segment, delivering digital cameras that have simple controls with compact stand-alone photo printers that allow you to make prints without the need of a computer. 

It’s not that women can’t handle technical cameras downloaded to a PC, it’s just that they don’t want to.  So Kodak revamped its cameras to fit the needs/wants of this segment. The Post-Gazette reports that Kodak is now the #1 seller of digital cameras in the

USA

(according to an IDC Corp), and remains tops in stand-alone photo printers. And we all know the cash cow printer inks and photo paper can be for these companies.

3M Red Dot Electrodes

My favourite example of segmentation in the medical market is 3M defining segments for its Red Dot Electrodes.  You know those things they stick on the ends of medical devices and then place on your body to monitor your vital signs.  3M recognized that in hospitals alone there were many different sub-segments that would have different needs/wants, product requirements, and purchase behaviours for a product like a red-dot electrode.

When 3M looked at how hospital staff used red dot electrodes, they found very different applications, urgency, and product requirements.  For example, operating rooms, emergency departments, and Neo-Natal ICU, each were very different in their needs/wants, product criteria, and purchase motivations.  It’s easy to see how the red dot electrode for an infant in NICU would be unique.  But also, emergency departments had different purchase motivations than their operating room counterparts.

Segmenting is simply good business

Attacking your market segment by segment gives your entire organization a focus and the ability for everyone to put their shoulder to the same wheel. Product teams debating features and releases, sales teams chasing opportunities, marketing program investments – all of this becomes clearer with a segment focus. It’s easy to get distracted and flounder about if you’re chasing markets – everything appears on the surface to be attractive.

So today, take a close look at your target segment – is it really a segment or is it a market? And is the target segment specific enough (ie. 3M’s) to include only buyers with similar needs/wants. Do you need to do more shaping of your segment to help your team get their shoulders to the same wheel? 

Tomorrow I’ll offer some tips to help you shape the best possible segments.

Until then,

Wendy

author/advisor/lady with the flipcharts

www.wendykennedy.com

Market Segmentation is NOT a marketing issue.

I believe market segmentation is one of the most powerful business tools a growing company can take advantage of. Yet when I discuss strategy with companies, I often hear  them say, "yes, and marketing’s handling that”…

A classic mistake we make is to dismiss market segmentation as solely a “marketing issue”.  Market segmentation is not about creating custom collateral for different industries, and it’s not about building web pages with different messages, although this is helpful. 

Market segmentation lies at the heart of the defining the company’s core business strategy.  It is the process of answering 2 fundamental questions:

1.  What markets to serve, and

2.  What products to offer.

Engaging the management team to explore the best possible answers to these questions in light of timing, trends, and business conditions helps to discover the where the REAL opportunity lies for the company. 

In the next few posts I’m going to share with you examples, tips, myths, and lessons I’ve learned from helping companies adopt this discipline. 

Hope you find them helpful.

Wendy

author/advisor/lady with the flipcharts!

www.wendykennedy.com

Casting for Customers

Want to get a better grasp of "Who REALLY Cares" about what you've got.

Check out my HOW-TO guide on Casting for Customers, posted under Growth Tools.  I promise you it's a great way to think beyond your first instincts about who your customer is.  Often the people who care "most" and offer the most potential for $$$, are not the ones we first identify.

Print it out and take it to the cottage this weekend for some mental floss.

Wendy K. - author/advisor/lady with the flipcharts

So What? Who Cares? Why You?

www.wendykennedy.com

What’s Your Business Model?

Curiously this question often evokes many different reactions and responses.  I often find that depending upon who I’m speaking with, it inspires a discussion of channel partners, product roadmap, F1000 accounts, etc.

And ALL of this is important….but in my experience, I believe it clouds the importance of the question. 

When someone asks about your business model, I think we should have a very clear answer – and in that answer must be details of:

1.  How do you make money?

2.  What form does it come in?  Licensing in volume deals, per seat pricing, royalties, revenue-sharing, subscription, etc. – spell this out.

3.  Show how it grows – that famous scalability question.   This can be from new products, ancillary services, follow-on products and markets.

Business people, particularly investors, want to “do the math” between what you say is your addressable market and how you plan to go after capturing it.  You should spell this out by doing the math yourself.  Look at what you’re promising in the market sizing area of your business proposition and the path to revenue. 

It’s a great sanity check on whether your business model has a backbone.

In my experience, this is an area of weakness for many early stage businesses – we are unrealistic in how we will capture the market or, alternatively, our chosen strategy to make money cannot produce the results in the window that the stakeholders are looking for.

So this week:  Crack open an excel spreadsheet and take a hard look at your model. Challenge the assumptions and the timing.

 

Try to be crystal clear on the 3 questions above when you are describing your business model.  Leave the other points about your channels etc. for another time.