Identifying their target market is a challenge with which many early-stage startups grapple. Having accelerated over 60 startups to date, our team at the AtomLeap High-Tech Accelerator has been witness to numerous companies’ efforts to scope down the market to the niche that would most value their solution or product. We therefore decided to devote this week’s post to the topic of market research and to recommend one approach to market research that your B2B startup could undertake.
In order to define their target market, startups need to identify who can derive value from their output.To get an idea of who their potential customers are, B2B startups can carry out market segmentation by aggregating prospective clients into groups that share common needs and respond similarly to a given marketing action.
One way to start this process is by looking at the competitors’ target market in order to identify potential niches whose needs they may have overlooked. Once you identify those niches, it is time to work on classifying them. While there are several frameworks for B2B market segmentation, target clients can be generally classified based on the following features:
- Who they are—company features like revenue or number of employees;
- What they do—purchasing or use behaviors, as well as industry sector or activity;
- What they want—needs, preferences; and desired relationships;
- What they think—attitudes.
By profiling the customer base in this manner, startups can have a clearer understanding of the main target groups that are relevant to them. The market segmentation for a typical B2B-oriented business tends to have four or five segments. However, according to Circle Research, most B2B businesses generate 80% of their revenue from just 20% of customers. Therefore, prioritizing market segments by mapping out their revenue and profitability, based either on third-party statistics or on information from existing customers, can prove very useful. This can also help startups better understand the specific needs of each main segment. Furthermore, this information about their target market can be used to put together an action plan to help them improve their market strategy and their marketing efforts (e.g.: website experience, customer service, and, most importantly, sales).
We hope you found today’s post informative. If you need more help with your marketing strategy or more broadly with growing your startup, feel free to reach out to us using the contact form on our website.