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Start-Ups: How To Find Your Route To Market

Posted in Insights by Jon on 5 May 2015 at 10:51 BST :369

how_to_find_your_route_to_market_(low_res).jpg

 

Lets start this post with a reality check.

 

Being a UK start-up is a risky business. The odds of success are slim. Only one percent of start-ups pitching to venture capitalists will end up receiving funding. Even the most optimistic predictions indicate that over 80% of start-ups will fail inside two years of operation. Depressingly these start-up statistics are the more conservative estimates of why nearly all start-ups tend to fail.

 

All of which leads me to stress the importance to any start-up founder of figuring out how to find your route to market.

 

What's Your Big Idea?

 

In my opinion the best way to kick start researching your route to market for all start-ups is to:

 

Forget about focusing on 'ideas'. Never believe the lies we tell our ideas.

 

Instead change your mindset and start looking for 'problems' to solve and take the route to market Start-up Problem Challenge:

 

- find the biggest problem

- figure out how to fix the biggest problem

- repeat

 

Please refer to previous post: Start-up: What's your big idea

 

Why?

To stand any chance of success all start-ups have to serve their customers by solving a problem or delivering value. Successful start-up ideas originate from identifying customer demands, identifying inefficient processes and figuring out how to solve important customer problems.

 

The chances of future success are higher if you make quality decisions based on informed, adaptive and customer-led problems.

 

What Do Your Customers WANT or THINK

 

Over the last five years I have advised start-up founders to avoid taking the secondary market research plunge and instead opt to figure out what their customers want or think.

 

Why? 

 It is important to remember the lion's share of public secondary market research is often very speculative. Instead valuable business insights can be obtained whilst reviewing various route to market opportunities by applying some of the following tips.

 

- Customer Data
If you have any customer data, audit it against the monetary value for each customer segment of your technology product or service.
which one of your customer problems are you helping solve?
which bundle of products or services are you offering each customer segment?

 

- Customer Segment Profile Development
Begin to develop a demographic profile of your start-up's existing customer segments. Such as:


- location

- economic needs

- community or conditions

 

This will help inform logic, strategy and experience-based scenarios if in the future you opt to conduct more focus led customer led primary research initiatives.

 

- Consult An Expert
Speak to your internal team and canvas opinion from experts who have developed hypotheses or models related to your start-up customer problem. Ask yourself what can you discover and learn from an expert opinion on related experimental technology product / service prototypes.

 

- Macro Market 
All start-ups need to quickly ascertain their potential market size, ideally using both top down and bottom up approach. Dependent on the market, you should be able to get a feel for existing and future demand projections for similar product or service from publicly available statistics. I go into a little more detail on how to do this and flag some of the possible pitfalls to be aware of later on in this post

 

Re-visit Route to Market Start-up Problem Challenge

 

- find the biggest problem

- figure out how to fix the biggest problem

- repeat

 

Take a deep breath and ask yourself do you need to further

 

- revise / pivot your original start-up problem statement

- revisit who may benefit from your product or service

- define again why each customer segment will benefit buying product or service

- update how your start-up plans to make money from fixing customer problems or satisfying their needs.

 

Harness the Power of Google

 

Looking at your route to market start-up problem challenge by now you should have a rough idea of the different groups of people or businesses your start-up aims to:

 

- reach

- serve

 

Your next challenge is make an informed decision about which customer segments to serve and which to avoid. My next tip is to access Google or any other major search engine and seek to:

 

- identify some blogs and forums which are actively discussing a common problem your start-up will solve

 

- jot down who these people are and exactly why they are complaining

 

Does this prove or disprove any assumptions you may have made in your start-up route to market problem challenge?

 

- Keyword Strategy
As already mentioned, the lion's share of public secondary market research is often very speculative. Finding the right report on either your market or your customers is a challenge. This may mean changing your mindset from a technical orientation to business perspective. If you intend using major search engines I recommend you preface keywords followed by words identifying your product-service:

 

- market trends
- market data
- sales and revenue
- anticipated revenue
- future market
- industry forecast

 

- Google Tools
I find the following Google tools can be very useful when looking to gain more business insights when trying to find our route to market:

 

- Google Trends
Explore Google trending search topics and keywords in relation to your startups product or service

 

- Think Insights
Get insights, trends and research in digital marketing to help shape some possible conclusions for your startup plan and marketing strategy

 

- Google Adwords
Test your startup problem challenge against possible keywords for your startup product or service

 

Market Sizing

 

Never forget all commercial market places are made up of buyers. Market sizing is critically important for when pinpointing how to find your route to market for a start-up. Every start-up needs to understand which customer segments they are creating value for and estimate how many of those customers they can realistically capture.

 

Why? 

A start-up might have an innovative technology product / service which solves customers' problems. But if the marketplace is price-competitive or just too small, the start-up will often fail to make money.

 

At Khemeia Consulting, as part of our route to market process we collaborate with start-up founders to:


- search and validate their business model

- identify target customer segments

- determine pricing

- shape both the product / service offer and supporting marketing strategy

- apprise operational and technological capabilities required to service the expected market

 

Two simple market sizing methods are 'top down' or 'bottom up' approaches can be used to do this.

 

Top Down Approach

 

Calculated by determining the total market, then estimating the start-up's share of that market. This approach commonly uses a STP (Segmentation, Targeting, Positioning) analysis.

 

- Segmentation
Accomplished by segmenting a start-up market into definite customer segments of buyers with varying needs, characteristics or behaviours who might require separate products / services.

 

- Targeting
Evaluating various market segment attractiveness and targeting which market segments to ideally penetrate. This can be accomplished by positioning the start-up's market offering within the chosen customer segment.

 

- Positioning
Spelling out a clear, distinctive and desirable positioning relative to competing products or services.

 

In summary, the top down approach is great to help estimate the amount of potential sales by defining customer segments, market size, and forecasting obtainable market share. Yet, what if a start-up is unable to obtain any market intelligence and fails to crunch the figures using quantitative market research?

 

A common problem with the top down approach is that it does not enable the start-up business founder to:

 

- Understand more about how their 'first' customers think

- Learn and adopt the value proposition of the product / service around the first customer

- Develop the 'first' customer segment based on initial feedback

 

In this instance a more qualitative research approach is clearly needed. This takes more time and should include contrasting the sales of comparable products / services against the startup's first twelve months of projected sales.

 

Bottom Up Approach


Calculated by determining potential startup sales of the product / service to reach a total sales figure. Steve Blanks, successful author and technology entrepreneur, applies his 'Customer Development Framework' using a micro bottom up market sizing technique.

 

Steve expands on his customer development process in his book. “The Four Steps to the Epiphany” - Successful strategies for products that win.

 

His four step Customer Development Framework:


- Customer Discovery

- Customer Validation

- Customer Creation

- Company Building

 

This framework helps to determine and validate if the market for the product / service exists, check the product / service solves the customer's problem, whether the start-up has the best strategy to acquire and convert customers and if the start-up has the necessary resources to scale their business.

 

Don't Be A Victim

 

All sounds great, but what if you fall into the route to market bear pit and are unable to escape?

 

- determine which market segments to focus on

- quantify the overall market size or forecast the attainable market share

 

Often this boils down to not having or failing to obtain the right data / information to gain any meaningful business insights into:

 

- Buyer behaviour
Developing the start-up's first customer segment is an arduous task and as unpredictable as Yorkshire weather over last weekend's inaugural Tour de Yorkshire.

 

- Uptake for innovative technology products / services
This is often the case if the start-up's 'first' customer has no or little exposure to their concept.

 

In such scenarios why not try the following hints and tips:

 

- Forecast Market Sizing Ranges Only
The key to market sizing is to ensure all forecasted calculations are based on asking the right questions.

 

When quantitative data is available, it may be possible to extrapolate the start-up's customer growth rates, product usage / service take up and attrition rates. Always opt to forecast and present market sizing ranges as opposed to point estimates when denoting market sizes and expected profit

 

Why?

 In short, applying and multiplying different data points and associated uncertainties is very subjective.

 

- Government Reports
Are an often untapped and overlooked source of information for national and regional population data to capture a wealth of information about the general public.

 

- Take the Primary Research Plunge
Yes, this may well mean getting out of the building...

 

All shrewd start-up founders understand the importance of interviewing a selective sample size of 'first' customers. Steve Blanks highlights the importance of 'customer discovery' when applying his 'Customer Development Framework' using qualitative market research.

 

If you are conducting interviews, why not use this as another opportunity to either estimate or revise your initial market sizing projections?

 

 

Summary Key Takeaways

 

The key to researching your route to market for start-ups is to:

 

Forget about focusing on 'ideas', never believe the lies we tell our ideas

 

Instead change your mindset and start looking for 'problems' to solve and take the route to market start-up problem challenge:

 

- find the biggest problem

- figure out how to fix the biggest problem

- repeat

Secondly determine and validate if the market for the product / service exists now or in the future. To stand any chance of success all start-ups have to serve their customers by solving a problem or delivering value. Successful start-up ideas originate from identifying customer demands, identifying inefficient processes and figuring out how to solve important customer problems.

 

The chances of future success are higher if you make quality decisions based on informed, adaptive and customer-led problems.

 

 

Blog Image Credit - Cameron Almas, Khemeia Consulting 

About the Author

Jon

This post was written by Jon Stephenson - our Head of Business Insights

SUPER POWERS: Business Modelling, Business Analysis, Business Intelligence, Market Research, Marketing Strategy, Bicycle Repair Man

CONNECT: Twitter | LinkedIn | Google+ | MovyEmail

 

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