Be An Executioner, Part 1: Who’s Your Market?
The first part of executing your idea is figuring out your market. What people, anywhere and any kind, need my product or service? Who exactly is your market? And more importantly, why do they need this?
When I pitched Howard Lindzon my Gen Y mutual fund idea a few months ago that I was working on with Ross, his application provided some quality pointers on market validity:
Investors fund pain killers, not vitamin pills. What critical customer need does your company address? If you are a web company, you may need to make a hard decision here on whether to talk about your audience or the people who will ultimately pay you (like your advertisers).
When defining your market, it’s important to differentiate between your target audience (especially if it’s a free application) versus the people that will pay you for your product, such as the advertisers that want to get their ads in front of your target audience.
You should be able to ask yourself, who is your market? Early in your venture, chances are you aren’t being specific enough. If you are too broad, it will seem that you haven’t done the proper analysis regarding the demand of your product or service. If you are too niche, investors will be skeptical on the overall purchasing potential of your target audience (this depends; sometimes really niche is good, other times it’s not). There needs to be balance, but I’d recommend leaning towards the niche-end of things.
Again, to quote Howard’s application:
Define your SPECIFIC market. “Males between the ages of 18-30″ is not specific enough and shows a lack of analysis. Include market size data, growth rate, customer segmentation, and market structure where applicable.
Developing a niche, target market can be difficult, but a useful exercise, especially in the early stage of your venture. It forces you to question the purpose, use and demand of your business solution.
To quote the business plan I developed for the Gen Y mutual fund, we answered the key questions as specifically as we could in the market analysis section (these are just bits and pieces I pulled out; if you want to see more, email me):
The Y Fund’s target market are college-educated, middle to upper-class consumers born between 1980 through 1990. The complete Generation Y demographic, at 78 million individuals strong, earns an annual income of approximately $211 billion per year, with disposable income levels close to $172 billion per year.
The Bureau of Labor Statistics recently published that total college-level job openings between 1998 and 2008 will nearly equal the number of college-educated entrants to the labor force. Recent data shows that the number of bachelor’s degrees conferred between 1998 and 2008 is expected to grow from 1.16 million to 1.24 million, an increase of 7%.
The target customers of the Y Fund are not necessarily your typical people checking their portfolios monthly or calling their investment adviser once a quarter; instead, our fund and respective community is aimed at the specific group of young, internet driven and community prone individuals who plan to have daily interaction with their investments and other investors.
The Y Fund will differentiate itself by not being labeled as a financial institution, but instead will serve as an engaging, user driven financial community that provides a transparent investment product.
The first paragraph answers the market size data, the best we could. The second paragraph clearly answers growth rate, as it was applicable to our specific market. The third paragraph discusses customer segmentation, and the fourth paragraph touches on market structure. Not only did we explain clearly who are market was, but we left room for questions. Keep in mind, you want to encourage your reader to ask certain questions, but don’t leave holes to be plugged. There is a difference.
Tomorrow, we’ll look at executing as it relates to your management team.
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