eoincostello

Choosing your market and route to market

In Advice for Start-ups on June 7, 2011 at 4:31 pm

‘advertise it on googleadwords and the world will beat a path to the door’

A friend said the other day that this was one of the biggest misconceptions that he faced in talking to start up businesses. The hype associated with the old “information superhighway” lives on to some extent in the minds of non web practitioners. The problem this creates is that the start-up then creates a business model around the mass market approach and when challenged will quote how “Twitter” did it.

Inaccurate assumptions

1. That “putting it up there” will attract traffic, this takes work, time and can cost a lot of money unless you are lucky enough to go viral.

2. Mass market doesn’t work unless you are Microsoft – niche does for a SME. Trying to be all things to all people on the web is a recipie for disaster in marketing and technology terms for an SME. All the available literature recommends that SMEs adopt niche strategies in their approach to the market place. Choose your niche and own it. You can always build out from there later.

3. Someone saying we are building our “Solution for the SME market” causes me concern – the SME market is not a “market” per se, it is a huge mass much like the population of China but again like the population of China is made up of many unique eco-systems. VCs will always say that an SME play will normally cost too much in cost to acquire each customer.

Also never underestimate the inertia of SMEs and the degree of dysfunctional systems that they will put up with rather than make a move to a better system such as yours. It is important to be very clear in your own mind is the problem that you are solving a commercial opportunity (i.e. will people pay and go through the hassle of learning to use your app and migrate their data to it) or just a good idea.

Avoid underestimating the hidden transaction costs (time needed to learn how to use your system, time to populate it with their data etc) because these form part of the ultimate cost of buying your solution for their business and can be another contributor to SME inertia.

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