Startup From Scratch VI: Your Market Entry Strategy
Startups create jobs, new products and disruption. Agreed. We all love startups and we know that many in Iraq work hard to make ideas ‘happen’, with stories of Iraqi entrepreneurs inspiring us everyday. At the same time, around the world and particularly in Iraq, the process is far from easy.
Our Startup from Scratch articles are a new series written for entrepreneurs looking to start a venture, or for those already in the process of building one. We will be summarising resources and providing food for thought in the hope of being a part of your startup learning journey. We’re far from knowing all the answers but we know that this series will provoke thinking on important aspects of your business and help avoid obstacles. A work in progress, we’re always curious to know your thoughts and experiences too, what you find helpful or what you may simply disagree with.
We last spoke about understanding your customer persona and trying to understand what resonates with them. We’re still talking about what keeps customers coming back but specifically, we’ll take a quick look at how to design that market strategy. Our team has also been lately craving ‘Kahi’ so we’ve also found a way to include Kahi in the conversation. So before we start, here’s a picture of Kahi – an Iraqi dessert that is traditionally served for breakfast; a mouth-watering filo pastry that’s served with clotted cream and honey. Ok, now that that’s out of the way, back to the main point of this article.
Two Ways to Get Your Share of ‘Kahi’
In our last article, we talked about how to get closer to your customer’s likes and dislikes, behaviours, and pain points. But we also need to know where to find your customers and how many there are. One way of doing this, or in other words, calculating your market size, is taking a top-down approach. Here, you start by calculating the entire total market you’ll be entering and then estimating your share of that market.
Let’s say you’re launching this ride-hailing app for female passengers in Iraq that was mentioned in our last article. You’d first look at the taxi services market and take into account the estimated number of females that use taxi services. The problem with this approach is that when data available is scarce or not specific enough, we may get a bit too optimistic. The awesome tray of Kahi is brought in, but you’re not sure how much you’ll be allocated or how many others are looking at the same slices.
Another approach is more work but the final figure is likely to be more accurate. That is a bottom-up analysis where you begin by estimating your potential sales in order to calculate an overall sales figure. It takes into account where products can be sold, the sales of comparable products, and the slice of current sales you can carve out. Instead of starting with the full tray, you begin with focusing on one slice that you’re almost certain you’ll get, and then work your way up to the rest of the tray once the first slice has been eaten.
This is a step that most founders overlook. Thinking big is good, but a plan to attack the whole market or tray, rather than the smaller slice that represents people who are most likely to be buy your offering, can lead to lots of disappointment.
Which Slice of Kahi Are You Attacking?
You’ve identified your slice of Kahi and now you want to make sure you’ll get to eat it. Through understanding your specific customer’s journey in using your service or product and the challenges they face that you can resolve, you’ll then identify a specific kind of customer that comes from a segment of a particular age group, gender, residence or work location. You can think about other types of customers later, but you first want to start by identifying who is most likely to want your offering.
If you’re that ride-hailing app for female passengers, you want to find out where you’re almost sure female passengers will sign up. Are they 25-30 year old female students in Karrada? Are they female employees in their 40s in Zayouna? This will involve talking to people, knocking on doors, asking questions and finding out the most you can about this slice of Kahi. The slice of Kahi you’re attacking is also called your Initial Target Market Segment. Your aim is to make sure the majority of this segment are signing up to your service if you were to launch tomorrow.
Where is your Initial Target Segment? Can you reach them easily? We’re talking about what their communication preferences are, whether they want you talking to them by phone or Facebook, when they’re most likely to respond and what their lingo is. You also want to make sure that your slice of Kahi is edible, i.e. will it get you the profit you’re after? The Initial Target Segment should be people that either have the money, access to the money needed to purchase your service, or whether they’re even interested or able to spend on new products and services.
You want to make sure you ask the right questions to understand their activities, values, attitudes, or usage rates and whether these point to your offering. Listening to your customers that represent your Kahi slice is key. Secondary research, such as knowing their age group or gender is of course important, but you’ll find out much more about their spending habits when they tell you their opinions about something. Combining this with less personal approaches is useful too, like investigating your website analytics. People might not tell you they’re always looking for promotion codes, but you’re likely to know this through their use of discount codes on your website.
Who Else has Their Eye on your Slice of Kahi?
As great as your offering or value proposition may be, it’s likely that there are others targeting the same people as you. That’s why understanding your competitors is crucial for estimating the size of the market and the share you’re likely to get of that market.
You’re lucky if your competitors turn out to be overpriced, offering poor services, or have negative feedback. At the same time, you may find out that your potential competitors are doing great on many fronts, and they’re getting through the Kahi tray to the slice you want. Here, extensive research is needed to find the niche that you can target.
This means both understanding your potential competitors but also looking at other failed startups in your field and why they failed. This is crucial to truly understand the key assets and skills needed to survive in your industry.
Special thanks and shoutout to Dr. Nettra Pan, entrepreneurship researcher and educator, for her help in providing input and ideas for this series!