Who is Your Customer Workshop One – The Market Your Product? – February 21 ... Theme One – Who is Your Customer Five ... Three Tactics 1.Walk in your customers shoes ...

Workshop One – The Market Who is Your Customer

Our Text and Reference

Disciplined Entrepreneurship 24 Steps to a Successful StartupBill Aulet - ©2013

Six Themes within the 24 Steps• Who is Your Customer? –

January 24• What Can You Do for Your

Customer? – February 7• How Does Your Customer

Acquire Your Product? – February 21

• How Do You Make Money? – March 7

• How Do You Design & Build? – March 21

• How do You Scale Your Business? – April 11

Concluding Event – April 25

• Saturday afternoon, April 25• Five minute presentations including

a unique and team specific deliverable

• Produce something tangible that will enhance your resume/portfolio

• Other assessments include a participation rubric and work shop self assessments

• Celebrate your success with a party

Theme One – Who is Your Customer Five Initial Steps

1. Market Segmentation2. Select a Beachhead Market3. Build an End User Profile4. Calculate the Total Addressable Market Size

(TAM) for the Beachhead Market5. Profile the Persona for the Beachhead

Market

What Should We Be?

Market-Driven

Target Customer-Driven

Customer-Driven

What is the Single Necessary and Sufficient Condition for a

Business?

A Paying Customer!

Breakthrough Scenario*Technology - After a year of challenging lab work, Koshi and Roberta finally cracked it. They were now sure they could manufacture artificial down feathers cost effectively!

Dream – To transform the quality of people’s sleep through the invention of a better pillow

Technical Advantage – Their artificial down had heightened levels of insulation, a better resilience / resistance quotient and was kinder to both animals and the environment

But, do they have a business?

Step #1 – Market Segmentation

An idea or technology can serve a variety of potential end users. Start your primary market research and complete a market segment matrix.

WHY? It is crucial to start the process with the

customer in mind and work back from there.

The Market Segmentation Matrix

How to Do a Market SegmentationStep 1A – Brainstorm • There are probably a large number of

industries that could benefit from your product

• Focus on end users not customers• Be broad and expansive

Group Exercise - Brainstorm

• Break up into groups and brainstorm three possible market segments for the new pillows

• Fill in what rows of the matrix you can, but leave blank any areas where no data exists yet

• Start by going online and “buy” a pillow• We’ll get back together in about 20 minutes to

collate ideas on target markets

Normally the matrix is filled in from Primary Market Research – not by you sitting in the

Commons or library debating or doing internet searches and reading reports

Let’s Pick the Best Target Markets

How to Do a Market SegmentationStep 1B – Narrow • Is the target customer well funded?• Is the target customer readily accessible to your sales

force?• Does the target customer have a compelling reason to buy?• Can you today, with the help of partners, deliver a whole

product?• Is there entrenched competition that could block you?

If you win this segment, can you leverage it to additional segments?

• Is the market consistent with the values, passions and goals of the founding team?

Avoid Common Market PitfallsSelling to Everyone• You can make a product that fits the

needs of anyone you run intoThe China Syndrome• Rather than create a new market; choose

a huge existing market

Apply your limited resources to a narrow and carefully defined market

How to Do a Market SegmentationStep 1C – Do primary market research • Talk directly to customers and observe customer behaviors

Actions speak louder than words• Don’t rely on Google searches

If you find a market report it’s too late for your venture• Don’t sell – you are asking questions to learn• Be open minded and unbiased, never presuppose a

solution (inquiry, not advocacy)• Take the time and be patient

Understanding Your Market

•How does your customer buy?

•When do they buy?•Why do they buy?•Where do they buy?

Attacking the ProblemThree Tactics

1. Walk in your customers shoes – go out and buy a pillow

2. Observe people in the process of buying a pillow

3. Talk directly to people buying pillows

Taken together you will learn a ton

Koshi and Roberta’s Market Assumptions

1. People care about sleep quality when making a pillow purchase decision.

2. We believe we can sell online directly to customers.3. We believe that our customers will be young urban professionals.4. We believe that our very first customers will be new graduates who

need to outfit their apartments.5. We believe we can sell our pillows at a high enough price to cover

costs.6. We believe we can raise enough capital to cover investments in

manufacturing.

Primary Research QuestionsHello, I’m a student at ____ and I’m researching sleep quality. I’m asking people about the last time they bought a pillow. Do you mind if I ask you a few questions?

• When was the last time you bought a pillow?• Why were you looking for a pillow?• How did you start shopping for a pillow?• Why did you choose the one you bought?• After you bought, how did you feel about the purchase?• Will you be in the market for another pillow anytime soon?

How to Do a Market SegmentationOrganize your research• End User – who specifically will be using the product? • Application – What will be dramatically improved by

your new product?• Benefits – What value will the end user derive from

your product? Time or cost savings?• Market characteristics – what about the market will

help or hinder the adoption of your new product• Lead customers – influential customers; “lighthouse” or

early adopters

How to Do a Market SegmentationOrganize your research• Partners/Players – What companies will you need to

work with to provide a solution that integrates into their workflow

• Size of the market – roughly, how many potential customers if you achieve 100% share

• Competition – who is making a similar product• Complementary assets required – what else does your

customer need to get the full solution. Will you need to bundle with products from other manufacturers?

The Market Segmentation Matrix

Collect Primary Research from Your Team Members

Koshi and Roberta’s Market Assumptions*

1. People care about sleep quality when making a pillow purchase decision.

2. We believe we can sell online directly to customers.3. We believe that our customers will be young urban professionals.4. We believe that our very first customers will be new graduates who

need to outfit their apartments.5. We believe we can sell our pillows at a high enough price to cover

costs.6. We believe we can raise enough capital to cover investments in

manufacturing.*Excerpted from: Talking to Humans, Gabe Constable - © 2014

Analyzing the Data Collected*• 24% of shoppers knew what they wanted when they

walked in• 52% looked up information on their phone in the

store• 45% purchased a mid or high priced pillow• 68% of shoppers interviewed indicated that better

sleep was a major driver of their choice• 37% of interviewees were reacting to a life change• 37% of interviewees were in replacement mode

Key Takeaways• Customer discovery is about gaining much deeper

insight into your customer, or market• Being told your ideal is cool is not useful; seeing

behavior that validates a customer’s willingness to buy is very useful

• Prepare an interview guide before you get out of the building

• To ask the right questions you need to understand your risks and assumptions

Key Takeaways• Get creative when trying to recruit people• Sometimes observation is as powerful as interviews• Take good notes, especially on key risks, so you can

calculate metrics later• Bring learning back and analyze the patterns as a

team• Never stop asking hard questions about your business

Step #2: Select One Beach Head Market

Select One Beach Head Market

Step #3 – Build an End User Profile

Step #3: Target Customer Profile

Step #3: Target Customer Profile

Step #4: TAM Sizing for 1st MarketMake a first pass TAM (Total Addressable Market) calculation for your beachhead market. This is how much annual revenue there is available to you for your product if you achieved 100% market share. This is only for your first market which you should be able to do with some clarity. The strong preference is for a bottoms up type of analysis where you can show from your primary market research how many of the potential customer you have identified and then extrapolate this to the broader market. Complementary to this but much less compelling on its own, is a tops down analysis where you are working with market analysis reports and extrapolating without direct interaction and validation. Often, very important subtleties are missed in tops down analysis.

Step #4: TAM for BHM

Women in the US

157 M

Pregnant Annually

6 M

First Time Moms

2 M

Photo: visualphotos.com

Share via social media

Technology Savvy

Want convenience

Connect with family and friends

Extend her excitement

Share monthly pregnancy photos

IntuitiveComfortable to wear

Update her care network

Capture pregnancy experienceUse mobile “apps” to track health

Indications

Low maintenance

Real-time feedback

Easy to use

TAM Sizing Example: inTouch

In the US, there are 2 Million women like Michelle

Connecting mommies with their babies

inTouch

BUT NOT ENOUGH…NEED TO GET TO $’S PER YEAR!

Step #5: Persona

Step #5: Persona

15.390 NEWENTERPRISES

DISCIPLINEDENTREPRENEURSHIP

18-40 years old

Urban (Europe, Russia)

Middle manager

Single

Brand conscious

OutgoingWeekend traveler

Open minded

University degree

Adventurous

Persona Example: Good enough?

Budget Boutique Accommodation

anotel ANSWER: WAY TOO GENERAL

15.390 NEWENTERPRISES

DISCIPLINEDENTREPRENEURSHIP

33 years oldMale

Lives on Kutuzovskiy Prospect in Moscow

Recently moved into his new flat with his girlfriend

Works at VTBInvestment Banking

Current salary is USD 10.000/ month

Loves Strelka and Ginza Projects

In winter he loves skiing in Austria or France

In summer he travels around the whole world

Loves esquire,Forbes, afisha, pop, GQ

“I am Vlad”

Vlad needs some paintings for his new apartment.

Little time

He likes to try out new things and talk about it

He wants to be unique

Persona Example: eGallary – Better?

Timeless art. Less time, more art.

ANSWER: BETTER BUT NOT GOOD ENOUGH

Persona Example - Best

15.390 NEWENTERPRISES

DISCIPLINEDENTREPRENEURSHIP

Meet Carolina37 Year Old, Cuban American

Has two children: Maria and Esteban

Moved to the U.S. 10 years ago

Lives in Milwaukee, WI with her family

Works part-time in a coffee shop

15.390 NEWENTERPRISES

DISCIPLINEDENTREPRENEURSHIP

Carolina’s PrioritiesMy family is the most important

thing for me I want a better future for my

children

How can I help my children to get into college, when I

never went?

Key to Persona Development

Questions?