Bridging the difference between Marketers and Start-ups
YCombinator teaches in one of its whitepapers:
“It’s better to have 100 people who love your product than to have 10,000 people who kinda like it”.
This statement alone showcases, probably the biggest delta between what Marketing Scientists have espoused over the last few decades and what the startup scene thinks.
Marketing scientists would say this quote goes against everything that research of decades has shown, however, maybe for a small company, the principles need to be tweaked a bit? As a route to take first steps in building your start-up, the quote makes sense.
Crossing the Chasm
There is a lot of similarity in Geoffrey Moore’s work on Crossing the Chasm — focus on the 10 often leads to the chasm between what motivates them vs what motivates the bigger population. Moore’s metaphor suggests, you find smaller markets you can dominate, then accumulate them.
He likens this to pins in a bowling alley. First you knock down one pin, then an adjacent pin, and eventually you are big enough to get a strike.
The reason YCombinator says this to people in early stages of their ventures, is to use it as a constraint when designing a product, people want. They posit, its easier to go from 10 people that love something to 1000 people that love it, than it is to go from 100 people that like it to 1,000 people that love it.
Bringing Marketers into the conversation
All of this sounds like segmentation right?
The general advice given by marketers is, to reach all buyers of a category. However, on a limited budget you have to zoom in to a small enough category where that’s achievable. Then, by making yourself distinctive in relation to this category you can dominate that micro-market.
Now, segmentation has been widely discredited by top Marketing Scientists. It is more of a wishful thinking, with no proof showing that it actually works. Many marketers do not believe in segmentation. They usually think in terms of categories, and their respective needs.
But, I would say, it is not about believing whether segmentation exists or not. To me, the fundamental idea of segmentation is about understanding the meaningful differences. Don’t create differences where there aren’t any. Marketers need to realize, resources are often so limited in small and early-stage start-ups — by their very nature, segmentation becomes a requirement.
Think about it.
Small businesses only exist thanks to meaningful differences in segments. Take the example of a local dairy brand and a national dairy brand like Amul. Amul is aimed at everyone therefore, it is prudent for them to generalise, reach mass buyers. Whereas, the local dairy brand has a small edge in catering just to that local area with select products in a more authentic way.
For the local market, “reach the whole category” means “be somewhere with high foot traffic”. For Amul, their category is bigger so it means “do TV advertising”.
Searching for a gold nugget in an ocean
A lot of start-up advice is given within the specific framework of limited resources and runway, with additional financing dependent on VC funding rounds instead of actual sales/ profit. Quite a lot of fundamentals of marketing science have a better application when a start-up matures beyond that phase. The priority in early stages of a venture, is to close the funding rounds successfully — an issue entirely unrelated to what it takes to succeed in the market.
Today, a lot of marketing science relies on large company and large industry data because
- That’s where the [easy] data is
- That’s where the money is
Startups do not have the luxury of this. For them, the mantra is simple.
- Pick a specific audience
- Do your research
- Identify pain points
- Offer a solution
- If it doesn’t work, rinse and repeat.
Here are 4 quotes that sum up this week’s newsletter:
“If you want to build a big business, you don’t go after the big market first, because those people only buy based on references and already built mental availability, and you have neither. You need to create a beachhead, a niche you can dominate. Through references, you grow from that niche of early adopters.” — Andy Rachleff
“Usually your initial group of users is small, for the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably exist” — Paul Graham
“There is likely a wide range of buyers that care about that value, but certain customers care a lot more than others. What are characteristics of a customer that make them care a lot about your differentiated value? That gives us an idea of who our best-fit customers are. Your best-fit target customers are customers that really care a lot about your unique value” — April Dunford
“The high expectation customer is the most discerning person within your target demographic. It’s someone who will acknowledge — and enjoy — your product or service for its greatest benefit.” — Julie Supan
