“Beautiful product development in an ugly market segment simply makes no sense.” ~ Dan Adams
Have you ever imagined how to sell a minimum viable product of an air conditioner in Antarctica? You will definitely have trouble selling it. The same rule applies for all the minimum viable products — no matter how good it is, it will fail if you are unable to solve the other half of the equation i.e. finding the ideal target market for your MVP.
Most startups begin to build an MVP with a sweet assumption that “everyone” will rush to buy their products or sign up for their services. But soon, they become one of the references for various studies and researches, for, e.g. this one from HBR that reveals that 85% of 30,000 new product launches failed because of poor market segmentation.
The Importance of Target Market
Imagine that you are recruited as a teacher and the only thing your employer explains to you in your job profile is to teach ‘students’. However, it is a very vague statement and there would be a plethora of questions that may arise in your mind at that time — the subject you will be teaching; the timings of the class; the grade you will be teaching, etc.
‘Students’ is a very generic term for you if you do not ask these questions. You will end up having no idea of who you have to teach and what you have to teach.
Most startups face the same issue. They dodge an important factor in the MVP development process — Market Segmentation. And they end up shackling themselves in queries like whom they have to sell and what they have to sell.
It is important to understand that choosing segments intelligently allows tailoring the marketing mix to more focused customer needs. Geoffery Moore, in his book, Crossing The Chasm, presents the Innovation Adoption Lifecycle, in which he explains the importance of targeting market while building and selling an MVP to gain consistent feedback. This, in turn, can help in product development.
Captivating the early market within the niche of your business can help you to establish a robust position in the market, thereby outsmarting the cut-throat competition.
Now, after finding the piece of the market that you would want to capture, the next question that would arise is who the most willing to try your product or service would be and how to find them.
The following points answer your ‘how to’ query.
Analyze Your Competition
It is important to dive deep into the competitor research to find out what you are up against. It’s nearly impossible to launch a product or an MVP that doesn’t already exist in the market. Maybe, you have some unique ideas in your kitty. But, honestly, you will still be a part of an existing competitive industry.
You have to figure out how to place your Minimum Viable Product within your industry, where competitors are already doing what you are trying to do.
To find this out, you will need to conduct research on your competitors. Evaluate their strong points and weaknesses. Figure out their target audience and what they are offering to them. You can go ahead with the same target market your competitors’ or you can concentrate on a group that your competitors might have overlooked.
Look at the image above as a reference. There are 4 basic options for any startup in entering and successfully competing in a given industry — cost leadership, differentiation, cost focus, and differentiation focus.
Will your MVP or product target a niche audience or are you going to sell for the masses? Are you planning to target cost-sensitive customers or plan to come up with high-quality products/services? These are some questions that need to be answered before launching your MVP.
It will be easier to answer these questions after you research the competition.
For instance, Zara has used ‘Cost Leadership’ as its generic strategy, which has provided it with a competitive advantage. And to some extent, it has also used differentiation for advantage over other brands.
Zara offers high-end fashion at affordable prices, with their design and styles running along the same lines as those offered by designer labels. And this is what makes Zara a favorite brand of the millennials.
Hence, Zara has made effective use of generic strategy to analyze its competition and find its target market and audience accordingly to give wings to its business.
Geographically Segment Your Customer Base
Once you are done with finding the right customer base for your MVP, the next task is to focus on geographical segmentation. It is an effective strategy used by businesses to get familiarized with the location-based attributes that comprise a specific target market. Analyzing the location of your ideal customer base can be a real game-changer in the success route of your MVP.
For instance, what’s the purpose of initiating the search from Southern California if your minimum viable product is a winter jacket. The winter varies between moderate to warm at this place.
Target consumers that live in different geographic regions have different needs and cultural characteristics that can be individually targeted for better and efficient marketing. Once you become aware of the geographical location of your target customer, you can learn a lot about your MVP by finding answers to key questions:
It is evident from the picture above that there are various factors, dependent upon geographical location, which play a vital role in the success of your MVP and product development.
Find the Motivation Behind a Purchase
After geographically segmenting your customer base, the next task is to understand their motivation behind the purchase. It will help you perfectly balance your MVP positioning.
It is important to figure out the priorities of the target customers to understand where to invest your valuable resources. If a customer has a tilt towards cheap yet decent products, your aim might change to improve the feel of the product at a low price. But, if they are more keen towards a luxurious status item, you get the liberty to do the whole nine yards, and still, mark up the price point after that.
However, to find out the buyers’ motivation, you will need to figure out what your target audience most cares about.
The easiest way to achieve this is to run a survey. Keeping your Minimum Viable Product in mind, come up with relevant questions, that circle around the points that we have discussed above. Once you are ready with your survey, you can run it in a number of ways depending upon your budget.
For example, one of the notable pieces of work done by Dichter was focused on getting acquainted with customer motivations to serve as the foundation of a marketing campaign for Ivory Soap, a P&G product.
To achieve this, Dichter held in-depth interviews with an aim to understand the true motivation of consumers to buy soap, as well as their thoughts on the ritual of bathing.
From his survey, he concluded that bathing was a cleansing ritual that was motivated by a need for purification from the taints of the world. Therefore, the purchase of soap was motivated by this need for spiritual purity.
Minimum Viable Product Success and Targeting the Right Market Goes Hand-In-Hand
Most startups do not understand their target customers well enough and that’s okay. Admitting this point is winning half the battle. As you involve yourself more in building a minimum viable product, you will be able to learn more about your target customer base and analyze the segments that look most attractive for your business.
As Steve Jobs said, “deciding what not to do is as important as deciding what to do.” The same stands true for customers and market segments. It is important to build an Minimum Viable Product for a specific customer base, solving their certain pain points.