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We have seen that nobody really cares for you unless you are able to connect your offering with them and their lives. That is a great place to start but we need to move ahead. The next big question is “Whom do you want to serve?”
Many startups (and some established businesses too) believe that the entire universe is their prospect. While it is wonderful to have such a massive idea, it distorts reality because not everybody can be your customer, even in your chosen segment.
Let me share a fascinating conversation I had with a POS (Point of Sale) software product developer to illustrate this caveat better.
When I asked him who his target is, Pat came his response “Every retailer”. A truly grandiose statement, considering that he is a first-time entrepreneur and was bootstrapping his venture with limited loans from friends and family.
Committed to help him get his initial customers and concerned that he may dilute his limited resources, I posed him the next question. “Would Ram stores at the corner of this street be your customer?”. He thought for a while and said “No because he cannot afford the infrastructure”.
Happy that he is on the right path, I asked him “Well, then what about Big Bazaar?”. He took more time to respond and said “Not a chance! They would want more sophisticated systems to monitor multiple departments”
I was now pleased that this person is well grounded and asked “If the corner retailer and a big chain cannot be your customers, then who is more likely to be?”
I think he got the point because he did not respond immediately. After a while he said “I need to think about this. But I am now clear that every retailer is not and cannot be my customer, at least at this point of time”
I saluted his wisdom and willingness to learn rather than be stuck with an impractical notion.
Why is this impractical? Allow me to give you a preview
Product is neither here nor there
Assume for a moment that this person remained glued to his guns with the assumption that every retailer is his customer. How can one product work well with someone who has no staff as well as with someone who has multiple departments?
Remember that I am not even going into the selling part yet. The product will therefore be a compromise between the two ends of the spectrum. For example, it will have a multiple department feature that is not powerful enough but would still need a setup process that will be too complicated for a small user.
Reaching the potential customers
Now assume that the product is ready for launch (it’s not but let’s not argue). To sell the product to the grocery stores, you can do with a few people with basic selling skills but to sell to the big chains you need sales people who are well versed with enterprise selling because they will have to meet the CTO, CIO etc.
And because your target segment is every retailer, you will be tempted to go after both but sadly cannot afford either of these approaches because each costs money. The founder himself becomes the sales person but cannot be doing it full time because he has other responsibilities like product development as well.
The customer reaction
Now let’s assume that the sales approach problem has been satisfactorily resolved. When the prospect being a chain is evaluating your product, he will find that it is very basic and does not meet up with his requirements.
The product will also be pooh poohed by the competition who will show how superior their offering is compared to this product. At the other end, the small retailer will find it very daunting and hence will be closed to it even if he can afford. He will see most features as irrelevant for him and that it is a white elephant.
If you think that I am exaggerating, please be rest assured that I have done just the opposite. The outcome of treating everyone as a customer is far more gruesome than what I have stated here.
People have lost their shirts and more because they believed that ‘every restaurant, every retailer, every chronic patient, every xxxxx is my customer”
I rest my case
Also Read: The Missing Link in your Market Data: Know Your Customers Better
(Disclaimer: This post was published in LinkedIn by Badri Narayanan V S. of Idea2IPO and has been reproduced with permission. Techstory is not responsible or liable for any content in this article.)