Although it may seem obvious, choosing the right target market is something that many organizations overlook in their haste and excitement to get their product or service out to potential buyers. Of course they know who their basic customer will be: Companies like X, with Pain Y, Net Revenue Z, etc.; but they haven’t taken the time to really challenge themselves to look beyond the basics to ensure they’re going after the right people in the right corners of their market.
When considering who will make up your ideal and high-probability customers, you need to put your main market through five key filters:
- The Need Filter. Again, it may sound obvious, but many organizations don’t really think about who needs them. If you’re selling in healthcare, a small practice will have very different needs than a hospital or a franchise holding with 10 locations. Where is the greatest likelihood of finding companies that need to address the pain you cure?
- The Flush-with-Cash Filter. Are you addressing a space that’s hurting financially or is flush with cash? Always go after the latter. Solving a problem for an industry segment that is going through a tough financial time (due to changing consumer demands or government regulations for example) is going to make selling cycles long and arduous.
- The “Just Right” Size Filter. Much like Goldilocks, you need to find a target market that offers you just the right opportunity to become a market leader. You want a space that’s small enough that you can become the market leader in a relatively short amount of time but large enough that it’ll carry significant value (to your investors, partners, etc.) when you do.
- The Competition Filter. Don’t beat your head against the wall trying to crack into a very mature or overly competitive space unless you are 100% confident your offering is a game changer that is heads and shoulders above everyone else (and even if this is the case, tread carefully and carry a big stick in the shape of industry and thought leaders supporting you). Competition is a good thing on many levels, but don’t let pride talk you into a no-win situation.
- The Partner Filter. Now may not be the right time, but eventually you may look for partners to either help you sell/market your offering or to somehow complement/supplement your product. Are there potential partners in your product’s ecosystem that afford you this opportunity or will you always be going it alone?
Once you’ve addressed the five filters, you’ll be ready to look at the core attributes of your ideal client. These are the typical criteria you think of when you list off who fits in your market (more on defining your Total Addressable Market in a previous post). These attributes, combined with the filters above, act like a bulls-eye—the center is your perfect customer and the subsequent layers are your additional, but not ideal, opportunities. We all know it’s unlikely you’ll snag a perfect customer every time, so consider the following when evaluating an opportunity:
- Is this opportunity meeting all your ideal attributes? If yes, do whatever you have to do in order to win the deal (T&C concessions, pricing augmentations, etc.). Securing them will be worth it in the long run and any offers you make will be leverage-able down the road.
- Is this opportunity meeting some or most of your ideal attributes? If yes, don’t undercut too much just to get the deal done. It won’t be leverage-able across future deals and you’ll start an internal environment of acquiescing to one-off changes.
Selling is hard. There’s no two ways about it. But setting yourself up for success is well worth the investment of your time and resources. Thinking through the filters you can put on your market as well as how you’ll handle different situations with different levels of opportunities will help you get the customers you need—and want.