Category Archives: Marketing

Most early sales people at startups are becoming more marketers than closers

Over the last 6-7 months I have been helping #napkinStage companies hire their first few sales people to grow from the founders selling the product to growing a sustainable team to help sell.

The most important thing I have noticed is that most of the sales people are learning the science and art of marketing – building an email list, engaging on social media, writing short opinion pieces on trends, etc.

The primary reason is that most of the sales folks at startups have to build their funnel first, and most of them have few relationships or existing customers to get referral customers from.

10 years ago, or even 20 years ago, most of the techniques sales people used to fill their funnel was “cold calling” or “smile and dial”. There were few emails as well, but largely attending events to network and cold calling were the prevalent strategies.

Now targeted emails have replaced cold calling. Initial connection on social media – Twitter, LinkedIn have replaced connecting at an event. Writing a blog post or participating on a podcast have replaced sending PDF files of marketing collateral.

The role of the sales person as a closer is becoming less relevant now, and their role as a facilitator is becoming more important. The effective sales professionals I know are learning the art and science of coordinating a concerted campaign to get access to individuals within an account who can help become champions at a prospect.

Changing Role of the SaaS Sales Professional
Changing Role of the SaaS Sales Professional

Sales people are becoming more “industry experts” and learning about events prospects should be attending, having an opinion on current trends and curating content that they believe will be useful for their prospects.

That used to be the role of the marketing person.

In tomorrow’s post I will examine the changed role of the marketing person. Their roles are moving from more being more art and creative to science and data driven.

How the 6 digit Apple passcode requirement wastes $6.551 Billion annually

Apple this week announced that they are going to require 6 digit passcodes instead of 4 digit passcodes for the lock screen.

Newer ipads and iphones will require the 6 digit passcodes. That’s apparently more secure than 4 digit passcodes.

The only reason to go to 6 digits is when your phone gets stolen by someone who can brute force 10,000 codes (with 4 digits). Well, apparently, most people use pretty common passwords, so if you only try 27 known passcodes (such as 1111) then your chances of unlocking the phone are at 67%. That means only a third of the people actually use complicated passcodes that will take more than 15 minutes to crack.

If however, you have 6 digits, then the combinations are a million (versus 10,000+) so, it should take longer and more effort to crack your password.

I doubt that. 90% of people will go with 111111 instead of 1111 is my guess, or 123456 instead of 1234. Now, your stolen phone will take 22 minutes to be unlocked instead of 15. Yay!

Apple has sold 512 Iphones to date and about 200 million iPads. Of those, about 75% or 534 Million devices are still in active use. 83% of them run the latest version of iOS.

I am going to assume that most people will upgrade to the new OS version so about 500 million (534 million to be exact) iOS devices will be upgraded to 6 digit passcodes.

The median salary in the US is about $42,000 and the median iPhone users salary worldwide is higher – $53,000.

90% of the iPhone users move to 6 digit passcodes and each user actually unlocks their phone 50 times a day (given that most users glance or unlock their phone 150 – 500 times a day, it is a reasonable assumption).

The extra two digits will cause 1 second more to unlock is also a fair assumption to make.

This equates to $6,551,388,888.89 in productivity loss every year.

iPhone 6 digit passcode Migration Wasted Productivity
iPhone 6 digit passcode Migration Wasted Productivity

With no discernible added security. All for a feature going from 4 digit passcodes to 6 digits.

There were 1.6 Million phones stolen in 2014. The average price of the stolen iPhone was $250, equating to a $400 Million market.

End note: I know the value of a stolen iPhone to a user (especially if there is a loss of life tragically in some cases) is much more than $250, but a 6 digit passcode is not going to change that for the better.

The ultimate list of sources for competitive analysis on your #startup rivals

After doing a competitive analysis of your market landscape the next level of detail most people want to perform is a key competitor analysis.

When I was a product manager, I tended to focus only on the product features, user experience, design and technology during my competitive analysis of a company.

That’s usually what most CEO’s do – after all product is the #1 thing that most customers see, touch and feel that matters to the most.

Turns out that’s an incomplete view of competition. I had a chance to see a complete view when we did a comprehensive audit of the top 2 competitors before we sold our company.

It is pretty obvious now, but you can get so much information from external sources such as social networks, email newsletters and blogs that to get a comprehensive 360 degree view of the competition, you can clearly understand where they came from, and where they are headed.

Comprehensive Competitor Analysis
Comprehensive Competitor Analysis

I put a partial list of sources that you might want to consider to get competitive information from in the chart above.

Here are the top questions you might want to consider getting answers to understand your competitors strategy overall.

  • What events are they attending? Speaking? Presenting?
  • What are they announcing? Investors? Management? Customers?
  • What are their open job positions? Who have their hired?
  • What is the segment of customers they are going after?
  • Who have their hired? What’s their background likely to tell you about their plan?
  • How do they price? What are the tiers?
  • What have they learned about their customer needs?
  • What are they sharing about their company?
  • Where are they looking to start new offices?
  • Where are they looking for talent / customers?
  • Who reports to who? How many people in the company? Background?
  • Promotional Plans? Who is following them?
  • Who likes their page? Who are their customers?
  • What questions come up? What are customers complaining about?
  • What messages are they pushing?
  • What keywords do they rank for? What are they bidding for?

While these are tactical questions, the key parts of your competitors strategy you are trying to understand are:

1. Who are their customers – what segment of the market are they going after?

2. How are they targeting customers?

3. What is the problem for their customers they are solving?

4. How are they solving the problem? What features in the product support that?

5. How do they plan to scale and grow?

Typically after this detailed analysis you will get a clear idea of what your competitor is doing beyond their product to help differentiate from others.

The ultimate list of competitive analysis landscape charts with 7 complete examples

Depending on the audience you will be asked to show a “competitive landscape chart” of your domain and the major players in the market. The main purpose of the competitive landscape chart is to position your company or product against others in the market. You need not to go into details, but, will be required to provide enough clarity for the audience to make out the differences between you and others in the market.

There are 2 important things you need to consider when putting together the competitive landscape analysis chart –

What you show (Features, Customer Segments, Market Requirements, etc.) and

How you show it (Visualizations such as Venn Diagrams, Harvey Ball Table, Process Map, etc.)

I follow a 3 step process to come up with the competitive analysis landscape:

Step 1: Identify: List all potential and possible competitors on a spreadsheet – one for each row

Step 2: Analyze (What you show): Start putting a list of features that you can claim you have they don’t, or segments of market which are market determined or a list of capabilities you intend to build which your customers care about or any other set of capabilities you can distinctly and objectively bucket each offering by.

Step 3: Visualize (How you show it): Look for patterns to showcase a small subset, (2-3) of the key dimensions you can differentiate and then choose the right visualization.

From the many hundreds of competitive analysis charts I have seen, here are the 7 most frequent.

  1. Market Size – Dimensional Bubble

Market size analysis is typically good for early stage investors (institutional). The size of market tends to be a big determinant for many investors, so if you can show the potential size on a chart featuring bottoms up numbers in the X and Y axis and the cumulative size of the market as the size of the ball, you will end up giving them a sense for the potential of your company. In the example below I have shown the # of users and Price per user in the X and Y axis. The size of the bubble is (not to size) will then indicate size of the market.


Market Size Competitive Analysis Dimensional Bubble
Market Size Competitive Analysis Dimensional Bubble
  1. Customer Segments – Multi Tier Axes

A good way to differentiate if you don’t have a different product is to differentiate by segment of market. You can segment markets by any number of ways, and the type of company / user / customer you are going after is a good way to show your competitive landscape. Most consumer companies tend to do this. As an example, Twitter is good for 30-45 year old males, Pinterest is good for 25-40 year-old women, Snapchat is for 20-30 year olds, etc.

It is okay to have an overlap of companies across multiple segments and the other twist I have seen is to show the value proposition to your customer on the other axis. In this example the key 3 capabilities of Price, Ease of Use and Integration is what I have showcased.


Customer Segment Multi Axes Competitive Analysis Chart
Customer Segment Multi Axes Competitive Analysis Chart
  1. Customers Process and Systems – Process Map

The Process map is best used when you have a lot of companies in the “space” but they all do different things for the customer in terms of their usage and solve different portions of the same larger problem. For example, when I was starting BuzzGain, the listening solutions were good to get an understanding of what was being talked about a brand on social media, but engagement products were used by customers to interact and respond and analysis solutions were used for market research.

This chart could be a double-edged sword. One on hand a customer or investor could see this as clear positioning of where you stand in the process map, but on the other hand they could see the other products wanting to build the different capabilities across the process, which leads to consolidation, which to them indicates, they should wait until the market settles, or buy from a “large vendor, who has a significant but not best of breed products across the spectrum of their process”.


Customer Process Competitive Analysis Chart
Customer Process Competitive Analysis Chart
  1. Feature Capability – Venn Diagram

Best used when you want to convey that customers need the best of 3 (or 2/4/5) different capabilities or features which all make the product unique. For example the fact that you have not he lowest price or the easiest to use product or integration alone will not rule your product out in the customers’ mind, but the fact that you have all 3 covered in the perfect blend makes it appealing to customers or investors.

The Venn diagram is best used when you can show that you have the capability to showcase you in the center and competitors on other intersections.


Venn Diagram Feature Competitive Analysis Chart
Venn Diagram Feature Competitive Analysis Chart
  1. Key Features – Quadrant by axis

The simple McKinsey quadrant is actually the most used in investor presentations. This shows 2 axes with opposite ends of the axis values for e.g. simple vs. complex and fast vs. slow on the implementation speed.

You want your company to be on the top right ideally and others to be at the other quadrants. The way this sometimes backfires is that investors believe that the person in the center will win because they have the “perfect blend”.


Feature Quadrant Competitive Analysis Chart
Feature Quadrant Competitive Analysis Chart
  1. Feature Spectrum – Silo Systems

Silos are best when you have a short list of 3-5 features alone to compare competitors with, and you have more than 3-5 competitors to show. That means a market where there are many competitors but few things to differentiate them by. Most used in rapidly growing markets, they tend to show why and how you can build a product or company quickly if you focus on a set of features that spans multiple silos.

Feature spectrum Silos are also very useful if you expect the number of competitors to increase. That way your investors don’t get alarmed when a new post shows up on a tech blog which has them sending you emails asking if we have a good plan “to compete against this new startup”.


Feature Spectrum Silos Competitive Analysis Chart
Feature Spectrum Silos Competitive Analysis Chart
  1. Feature details – Harvey Ball analysis

Customers prefer this landscape analysis best on the website. Sometimes if you are talking to corporate venture teams, they tend to like this level of detail as well. The Harvey balls indicate the “feature completeness” of each of your competitors versus your feature set. Typically you want to highlight features where you will be “complete” and those where others are “less complete”. I have found though, that if you do a more objective analysis and focus on which features your customers really want and show a ball or two where you are less complete than others, it will give you more credibility.

The other way to do Harvey Ball analysis is to provide a list of key scenarios where the customer has to choose one product vs. another. In this situation, you will find customers self-selecting one product because of their own situation.

The table format is the most detailed and most useful only if your audience is potential customers. Most investors prefer a high level analysis of direct competitors, potential threats and incumbents. Your customers are currently using some solution (even if it is manual) or an incumbent (old dinosaur company) as a solution possibly, but they are competitors as well, which you must acknowledge.

Feature Detail Harvey Ball Competitive Analysis Chart
Feature Detail Harvey Ball Competitive Analysis Chart

What to do if you notice another #startup that launched with the same idea a few months before yours?

Short answer – there’s nothing much you can do, but a lot you need to think about – positioning, differentiation, pricing, advisors, funding, etc.

There are many times when you find a new idea and after a lot of customer validation framework for your ideas,you decide, “this is the idea to go with” and you decide to plunge and build.

Then a month (or a few weeks, or days) before your launch, a competitor launches. With the exact same features you expected to launch with, with the same problem statement, going after the same customers.

I put together a framework that I used with BuzzGain. A month before launch, Radian6 launched and a week after was the launch of Techrigy, and a few weeks later, Scout Labs launched as well.

While we were all launching “different products” at different price points, the market was the same was what investors told me. Well, they were wrong. Turns out we all got exits – Radian 6 raised the most money and was sold to Salesforce for > $200 Million, Techrigy and Scoutlabs sold as well, and I did exit as well.

Just do your startup already
Just do your startup already

Here are the 5 questions I asked myself when I saw the Radian 6 launch:

1. Was I still passionate about the idea? That was the first question I should have asked, but unfortunately it was not. So, in retrospect I am suggesting you do this instead. Think about if you still are curious – intellectually and enjoy learning about the market for a long time – 5-7 years at the minimum.

The answer to this question wont come to you in an hour, a day or a week, it might come to you after multiple discussions over a month or so.

If the answer is no, I’d recommend you go do something else.

2. Was the problem the customers I had been talking to real and a huge pain? I had shortlisted about 35 beta customers after talking to over 1000 potential targets over 6 months. What I realized later was that MOST of them knew about my competitors and were still willing to try my product because a) they knew me b) they thought I was solving a different problem for them than my competitors c) I had taken time to build a relationship with them.

If the answer to the question is that you have not done customer development yet, then I’d suggest you go and do that first, or do something else if you dont like the market.

3. Was the “market” large? Large is relative. Investors (who were largely clueless), thought this was going to be a small market for 1-3 “marketing automation” products and that HubSpot and others were going to come into the listening platform business. Turns out 10 years later, they still have not.

If you believe the market is large, it is not sufficient to internalize it. If you want to build a large company, you have to build a convincing case to help your investors understand that.

If the answer is the market is relatively small, you can still build a good business, but it wont attract investors given that one competitor was already in the market. The surprising thing is that sometimes (thanks to the herd mentality) many investors now will be interested if one company was funded in the space and they need to “check the box”.

4. Would I be able to differentiate my offering? If you were going to build a similar product aimed at the same market, then I’d advice you to rethink. If not, then spend time honing in on your differentiation.

BuzzGain was aimed at SMB, Radian6 started with agencies and others were focused on mid-market companies.

We focused on building tools that a marketing consultant could use for their clients, as opposed to agencies use for their larger clients.

In fact, you can see from my day-in-the-life analysis that we started out aiming a the same market – mid-sized agencies, but we changed based on Radian6’s launch.

Bonus: 5. Why was I wasting my time thinking about the competition?

Rule #1 – Dont care what they do. Rule #2 – There are no other rules. Rule #3 – What? Are you still looking for more rules? Go back and read Rule #1.

You will still have to do a comprehensive competitive landscape analysis (and then a competitor analysis, which is different), which I will cover the next 2 days.

What’s working for B2B startup blogs and what’s not working as well? #entrepreneur #marketing

Content Marketing is being touted as the way to educate your customers and create your brand. For both startups and individuals trying to build a personal brand, content marketing is always being pushed as a means to engage with your audience.

Even though blogging has been the staple of most content marketing efforts on the small startup side for the SMB prospect, and the whitepaper as the staple for the B2B marketer in the enterprise, the rules of the game have dramatically changed for “quality” of content. The bar is much higher given the amount of content and the need to fight through the clutter and noise.

The primary changes are thanks to the mobile phone and the reducing attention span that most folks have.

The things that I think are not going to work anymore:

1. 0-1000 word blog posts. Most folks dont have the time to read a lot of text. On the phone text is being swiped faster than photos.

2. Infographics – most infographics are pretty useless and the bar for what constitutes a good infographic is great analysis and visualization, not just a bunch of numbers.

3. Anything blog post hthat’s not topical, since the shelf life of any blog post is now heading to minutes, not hours. If your blog post is something you are looking to create a book (for personal branding) out of your blog post, you might want to rethink that strategy. Books are being read solely by older audiences now and video trumps reading thanks to shorter attention spans.

What works then to draw an audience and help build a brand?

1 Content Marketing that works
Content Marketing that works

1. Blog posts that are data rich, visually attractive or long form – CB Insights, Crew and Buffer are proving that there’s still a place for great content in the traditional blog post. If you are into writing long form (1500+ words, choose to host and publish on medium instead of your own domain).

2. Video: Short, 3-5 min produced how to videos, interviews are still working well.

3. Podcasts: This has taken off more than most people anticipated. If you are starting a new company, I’d recommend you to go podcasting instead of text based blogs.

4. Slideshare presentations: Visually attractive, with high quality images, and tons of data in a simple PowerPoint slide is still drawing a lot of attention.

5. Great images and photos that can be shared on Instagram or Pinterest (even if you are a B2B company).

6. Real time video streaming – Periscope and Meerkat are two platforms you should consider.

7. Blog posts with very little text, but a lot of animated gifs: Thanks to BuzzFeed, these are extremely popular if your target audience is younger workers just joining the workforce.

How to conduct and document a “day in the life” audit of your customers? #startup

Once you understand how to segment your startups customers and the 3 most important steps to segmenting your customers, most people start to put a framework for validating customer segments. I tend to use the the Kanban method for Continuous Visible Customer development, which allows me to keep iterating on customer’s problems, pain points, and validating key assumptions we made.

One of the most important challenges that startups face is one of getting their users time or attention. For B2B startups besides the time,they also have to help save money or increase revenues, etc.

Time, for most people is rather hard to convince people to find. Even if you believe they do have it, users are unlikely to commit unless it entertains them (games, media) or it saves them more time (apps, eCommerce, etc).

The best way to understand how a product will add value to your users is to do a time and activity audit of your customers.

The output of your time and activity audit is to come up with your a) product value proposition, roadmap and be the north star for new features b) be the guide to help target your marketing efforts and c) help your sales persona mapping.

Day in the Life of a PR Associate
Day in the Life of a PR Associate

Here is the final output of the day in the life audit for BuzzGain, and the visualization I used to talk about the day in the life.

Day in the Life Audit Drives Product Direction
Day in the Life Audit Drives Product Direction

While the final output of the day in the life looks pretty, the process to gather the data and come up with the analysis is anything but.

There are 3 possible ways for you to collect and organize the day in the life data:

1. The increment method: In this approach, you have to “shadow” your users for a day and document every 15 / 30 minute increments. I used this for 3 users on 3 different days and did it in 30 minute increments. This was done so I could understand where they ate, who they worked with, when they had meetings, what “activity” they performed, etc. I would color code the activities into 3 (meetings, work and other – red, black and blue worked for me on a simple print out that I got from Outlook.

Daily Calendar
Daily Calendar

2. The mini-milestone method: In this approach, you are unable to shadow the customer, but you meet them 3 times – early before they start their day, afternoon at lunch and late afternoon before they leave for home. You are trying to get a highlight of the key time “blocks” and activities they spent time on. Do this with at least 5-7 users, instead of 3 if you are adopting the previous method, since users either forget or lie to make themselves sound more busy and important than they actually are.

3. The prioritized activity method: In this technique, you ask your users for their top goals, priorities or objectives for the period they are measure – monthly, quarterly or annually and the amount of time they have to spend to achieve those priorities. Then you can check in for 3-4 weeks, every week to see if the major “buckets of their time” are being spent towards achieving those priorities and what activities are contributing towards achieving those. This is typically done when your users are senior-level executives.

3 bonus tips for you during this process:

1. Your audit helps recruit your users as well (they can be beta customers later), so think of this process and the exercise as a value-added pursuit that you can offer for busy people to help them get control of their time.

2. Most “business” users spend a lot of time in meetings. In fact I wont be surprised if over 30% of folks tell you they go from meeting to meeting and only get work done late at night or early morning when “they have time for themselves”. Document the person(s) they meet with. It will help you with possibly “adjacent” markets later.

3. Documenting this helps your targeting and marketing efforts as well, so to ensure you can action it, document the “outside” the lines time-spent such as where they eat, when they take a break (to check FB, Twitter, etc.)

How to put together a customer validation framework for your ideas?

Like most people, some days I have a hundred ideas and other times I go for 100 days without a single idea that I think is worth spending time on.

The difficult part of these ideas is that many most of them are practically useless. They are not grounded in real problems, and are likely a means for the mind to play some games where it feels good to have some exercise for that moment.

Over the years, I have put together many frameworks for thinking about problems and ideas and categorizing them –

a) throw it away (meaning dont think about it any more),

b) file for later (meaning document it on my notepad, to review in a few years or so),

c) do some research (document the market findings) or

d) pursue it for validation (talk to people).

There are 5 steps that I take to understand whether the idea is worth pursuing.

The elapsed time for these 5 steps, in my experience lasts from a 4 weeks to 3 months on average.

Customer validation framework and process
Customer validation framework and process

1. The first step almost always is doing secondary research on the web using available resources. I have found that it is fairly easy to get a ton of “expensive paid research reports” by just typing the name of the market, followed by keywords like market, landscape, overview and then filetype:pdf in Google.

There seems to be someone always who has uploaded a recent report from a key investment bank or a analyst report that’s available for free.

During this step I try to document with the intent to publish my learning as a blog post. That’s key, I have found, to ensure that I do as comprehensive a job as possible. It also helps you in steps 2 and 3, as I will share later.

The best way to document is to be honest and write down a bunch of questions you might have about the market, problem etc. Summarize as much as you can, in your own words, instead of cutting and pasting.

2. The second step is actually having a discussion with at least 10+ “industry insiders” to help understand the questions where the data is inconsistent. It is important to have insider discussion before customers only because they will tend to see and know “trends”, whereas customers tend to give you their current problem or their sense of the workarounds, which they seem to think work “fairly well”.

To get to talk to 10+ insiders, you will need to offer them something in exchange for their time. Most insiders are fairly busy and tend to not want to help teach a new person the in’s and out’s of a new market. Here is where you assessment of the market and the 4-5 reports come useful from step 1.

I am consistently surprised at how many insiders have not read (they have head of it, but wont have read) a recent industry report on the space. The fact that I read them in entirety and can provide a Cliff notes summary is very valuable to them.

3. The third step is to get a good sense of the market size. Since most of the research reports will give you a total market estimate, top down, as opposed to an addressable market, bottoms up, number, I find it valuable to do some empirical evidence gathering for the bottoms up analysis.

The best ways I have tried to do this is getting proxies for the market size – Google search volume is a good indicator for certain types of markets, or in other cases, create a series of blog post on LinkedIn and see the traffic volume, try segmentation numbers with Facebook ads etc.

If you are up to spending some money to recruit potential customers and get some email conversations, I’d recommend Google Ads as well.

4. The fourth step in my process is to clarify and crystallize the problem and solution and get primary feedback online – I have found Launch rock for consumer applications work well for this. Create a simple page and drive traffic – either with ads or social and get a sense for interest.

For B2B, just offering your summary of the research on the market as an eBook (from step 1) will suffice to get emails of potential prospects. This also helps you build a target list of customers.

5. The step five is actual customer interviews. This is the most time consuming step and takes a lot of effort, which is why I end up doing it last. I would recommend doing it earlier, if you want to get a quick sense of the market, and maybe you might end up doing it all along, but this is a very intensive process, so I end up breaking it up into chunks and doing it all along while I am going over the steps 1 through 4.

For customer interviews, I try to address the problem question and the adoption question. 

  • Is this a real problem? Is is a big enough problem for them to look for a solution?
  • What will it take for them to adopt a solution? Adopt my solution?
  • How much will they be willing to pay to adopt?

These questions help me address both the solution and the go to market problems of marketing and pricing.

There are some caveats to my process and methodology:

1. This does not have to be a waterfall approach. The agile version will ask you to keep doing these 5 steps in parallel and keep doing them consistently. Just because you are following an agile process though, does not mean you dont have a list of steps to follow.

2. These steps work very well for software. What I found for IoT hardware is that a Kickstarter campaign works better for a hardware idea to supplement step 4.

3. For consumer facing applications and eCommerce companies, there is no substitute for putting a framework page and putting a buy button (instead of LaunchRock, use Shopify – free version).

4. Document, document, document. The more you write the more your thoughts get clarified and you have new insights. Only listening to customers and insiders is useless. Thoughts come, you process them, and you forget more than 50% of the insights.

5. Be very cautious and deliberate when you go from one step to the next. 90% of ideas and problems are really not worth pursuing, unfortunately. You are better off discarding your half baked, insolvent ideas, instead of wasting 6-12 months pursing it, only to realize you dont quite have a real market need.

The 3 most important questions you will need to answer about customer segmentation

Customer segmentation for entrepreneurs is a tool to reduce distractions, focus your product roadmap towards your Minimum Viable product and create personas that can help your marketing, sales and development efforts.

I am often asked 3 questions associated with customer segments, which I thought I’d address in this post. I am going to use an example of a company building a new age mobile Patient Records Management solution (or EMR – Electronic Medical Records) for the tablet as an example.

1. What are the steps to a good segmentation strategy?

The first thing you need to do to ensure a good segmentation approach is to write down your ideal customer attributes. You dont need any framework to do this, just a list of attributes will suffice. Your attributes need to be specific, numerical and descriptive.

(I) Specific means, you will have to outline their environment. What are they using currently? How specific is their problem? Do they have alternatives? If your target is doctors in our above example,. that’s too large a segment. Instead there are different types of doctors:

a) Those that practice independently vs. those that are attached to a hospital

b) Those that are general physicians vs. those that are specialists.

c) Those that see < 10 patients a day vs. those that see more, etc.

(II) Numerical means there has to be a set number of customers that fall into this segment. It has to be a number much less than your entire target market, and not more than 2.5% of 2.5% of your target market. Why 2.5% of 2.5%? That’s usually the second question.

(III) Descriptive means, you have to outline their current day-in-the-life scenario without your product. Explain how they are currently solving the problem (if it does exist) and how they are solving it without your product. It cannot be that they are not solving it. They may be used pen and paper to keep medical records, but a system does exist.

2. How many customers is enough to build a segment for? Is there a minimum number?

Innovators - theory of diffusion
Innovators – theory of diffusion

According to the theory of diffusion, we have 2.5% of customers who are innovators. These are your earliest of early customers and your initial targets. What I have found with most of the startups I am helping is that 2.5% of those innovators are truly the engaged, early influencers who will be willing to have the discretionary time and budget to try truly innovative products and then be willing to evangelize them to the rest of the innovators.

To be clear, you dont need all of the 312 to be your early customers. These are your early segment of potential customers. Typically 10% of them being early customers tends to show “traction” for an investor.

Lets say the total number of doctors in the US is 500K. Then your Innovators are 12.5K. Of them, 2.5% should be the first segment, which is about  312. That’s the ideal target for you to have as a start.

3. What if most of the target customers dont have the pain point or dont want the product? Does that mean the segment is incorrect or there is no market need for this segment?

If you have targeted 312 doctors who are primary physicians (segment by practice type), in the Texas area (segment by location) who work in a multi-use work location (segment by work area) and are currently using paper based medical records (segment by current product usage) theny you now have a segment of customers who you want to go after.

Google Adwords Segments
Google Adwords Segments

A trick that I have seen most people use is to segment based on Google Adwords segments (see diagram above) or segment by Facebook targeting options.

Facebook Targeting Options
Facebook Targeting Options

Once you have your segment at 2.5% of 2.5%, then you are doing a combination of ads, conversions, focus groups and interviews to understand if they have the pain point.

If you end up finding out that customers dont have the pain point or the conversion rates on your ads is low it is indicative of either poor targeting, poor messaging (your message did not resonate), incorrect framing of the problem or lack of the problem in the first place.

What I have found in my experience with over 300 startups is that the number one problem is poor targeting, followed by lack of the problem existing for the prospect in the first place.

What is customer segmentation and why is it important for the #startup #entrepreneur?

One of the first things you will realize as an entrepreneur is that you will need to be absolutely clear about your customer’s problems and envision your product solving their most important pain point. This realization results in an appreciation for the “micro” problem for a “small set of customers” to begin with.

That in essence is customer segmentation.

The discipline of finding the factors that differentiate one set of your potential customers from another based on a set of characteristics.

First, segmentation is a discipline.

The output of that discipline is a) a way to make it easier to identify your customers via a known name or persona b) a means to target them more effectively and c) a language to explain their problems / pain points and d) an ontology to express your solution to help them solve the problem.

Second, you will have to find factors that help you differentiate customers.

The idea behind the factors it to help you focus on those customers who have the highest pain, and hence the most propensity to buy, or the most desire to solve the pain and eliminate (during that period) than those that dont have the need immediately.

Third is to identify and document the characteristics that help you find the patterns or a set of questions to help guide your segmentation.

The best way I have found you can document the characteristics is to write down a set of interview questions that can help you during a discussion with potential customers. Others have used the buyer persona canvas or a simple tool to document thinking, feeling, seeing into maps.

Buyer Persona Canvas
Buyer Persona Canvas
Persona Map VP Sales
Persona Map VP Sales]

The empathy map is more relevant for design, but it can be made very relevant for you to leverage as a founder to understand the sales cycle, buying process, marketing criteria or service design.

Lets take an example. Assume that you are building a CRM system for SMB, to help them track their sales and allow sales reps to directly provide a quote and contract using just their mobile phone.

Most entrepreneur’s state that all SMB are their customers. This is usually done to prove that the market is very large and hence deserves attention.

The goal of the segmentation exercise is to make the market extremely small (a set of customer you can get in front of, collect feedback and test your hypothesis in as short a time as possible).

In most B2B scenarios there are 3 major and many minor characteristics that define segments of customers.

1. Size of the customer: Some people define size by revenues, others by # of employees, still others by # of sales people within the organization, still others by # of quotes the company delivers in a year, etc.

2. Industry vertical: In industries where speed to quoting and contract delivery makes a difference in the sales process, your solution might be more valuable, (e.g. some insurance verticals) than others were the contract process involves multiple rounds of competitive bids.

3. Title of the buyer: Titles (VP of Sales, Director of sales, Sales Manager, etc.) are usually an indicator of spending authority. In our case the VP of sales at a small company in the insurance brokerage is likely to have the ability to try and purchase the solution to help his sales professionals be more productive, than a Sales manager, who, is likely going to focus on trying the solution to offer feedback, but may not have the authority to buy. They will end up being a user, but not the economic buyer.

It used to be that location was the 4th characteristic, but with the Internet, is highly possible that your customers are in a different location (physically) than you are.

For B2C companies, most segmentation is done by demographics or psychographics. The 3 most frequently used characteristics are age, gender and income. There are many others as well, but these are the primary. I will share the B2C example in the next post.