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How Startups Can Focus on a Small Target Market

This post is written by one of Thinktomi’s thought leaders, Joan Wrabetz who is an experienced engineer, entrepreneur, and venture capitalist. You can read more about her in her introduction post and read her full series here.

Why is it that you can clearly see the issues with other companies and their focus, but trying to get that same level of focus in your own company is so much harder?

The answer is simple, and it has everything to do with defining your target markets carefully. When it is your company, you either 1) don't know what the right focus should be, or (more likely) 2) you can't face the idea of walking away from a potentially lucrative market that would be outside of your focus area.

In this blog post, we are going to focus on the second answer. We are going to take a deep dive into what it means to stay focused on your target market, in the face of temptations that could make you want to serve multiple market segments at the very beginning. Stay tuned for an in-depth review of the first answer, i.e. how to determine the key focus, in an upcoming post..

Think Small First, to Think Big Ahead

So, let's talk about why you REALLY SHOULD limit your initial target market to as small a market as possible.

Example: Defining Target Markets for a Wearable GPS Locator

Let's take a simple example. Suppose that you have invented a GPS location device that is very small and can be put on a collar or in clothing. Let's identify some target markets that might take advantage of such a device:

Dog Owners - it could be made into a dog collar with a mobile phone based receiver that you would use to find your dog if it wandered off.

Parents - it could be made into a cloth attachment to children's clothing. The receiver could be either on a mobile phone or even located at the local police station. Parents could use it to quickly locate their children when they are out of sight, or locate their child if he or she wandered outside of a periphery of the house.

Caregivers - it could be made into a cloth attachment or bracelet for memory impaired older adults. Caregivers could have the receiver on a mobile phone or in the house, and use it to find a missing patient, or set off an alarm if patients wander outside of a pre-determined area.

Why Not Pursue All 3 Markets At Once?

Clearly the technology is the same in all three market segments. In fact, the product could be very similar with a predominance of common features in all three markets. So, why not pursue all three markets at once?

Well, let's look beyond the obvious and consider the entire process of taking the product to market. We need to have a way to distribute this product, right? Where would the dog owner be likely to look for a product like ours? Maybe at Petsmart or Petco. Would a parent or a caregiver be shopping at Petsmart for a solution to their problem? Probably not, except by accident. This means that while you might have only one product, you will two very different distribution channels.

Consider for a moment how you would position the product. Do you think that a parent who is concerned about the safety of their children will believe that a product also sold for dogs is sufficient for their needs? Would they be likely to pay the same price for protecting their children as they would for protecting their dogs?

For the same reasons as above, your marketing activities will be completely separate. So, let's summarize:

You Can Always Broaden Your Markets Later

In this example, we looked at the importance of focusing on a small initial target market.

But, don't worry -- if you are very successful with your first target market segment, you can take that technology, make the slight modifications to the product and go after other market segments. When you do that, you will do with a conscious eye to the differences.

I hope this example has given you tools for your startup to look critically at your initial target market---and how to avoid the temptation of pursuing multiple markets when you are just getting started.

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