Are you starting a business without taking into account the type of market? Do you think all startups are the same?
Many of us make the mistake of assuming that the keys that have led to the success of a previous adventure or third-party ventures can be extrapolated to our new startup. This is a big basic error that can lead us to the most resounding failure.
Startups are surrounded by a lot of uncertainty and chaos , which leads us to try to look at patterns of other companies that have been successful, thinking that it will also work with ours, what we do not realize is that each startup is a world and Above all, it must be developed with a clear understanding of the type of market we are targeting.
When we do a market study in our business plan we observe the behavior of the market we are targeting and 4 things can happen:
As we can see, there are 4 different proposals that will completely determine how to proceed when creating our company. Something that seems like common sense, (like the fact that creating a new market is not the same as entering an existing market), seems to go over our heads when developing most startups.
The type of market determines the attitude of customers, the way of creating demand, the size of the market, the process of launching the product, how to scale the company... so many factors that it becomes extremely important to know very well the type of market that we are going to to tackle.
The good news of entering an existing market is that the customers and the competition are known, the bad news is that the competition determines the market.
To compete in an existing market, our product must focus on its characteristics, improving the existing offer, whether in terms of quality, speed... in general, it must represent a step forward over the products of the competition.
When entering this type of market we must be very clear about who the participants are and what their market share is. Unseating a company that forms a monopoly is not the same as competing in a highly fragmented market. In any case, our commitment goes through the positioning of the company and the product and a large investment in marketing to gain market share .
If we are going to enter an existing market but repositioning a product to a specific niche or if we are going to compete on price, we differentiate it from this case since it is a re-segmentation of the market and the way of proceeding is different.
Many technology companies find themselves in this dilemma, they have in mind a totally innovative product for which there is no defined market . We are usually filling an unmet need or solving a problem that no one has addressed, but we may also be putting an existing concept to a completely new use.
As is normal, as there is no market for our product, it would not make sense to compete for features since there are no other products with which to compare. However, the fundamental thing is to launch a product that is good enough to solve the problem that we are addressing.
It is true that we do not have direct competition, apart from other startups that are developing similar products, but we do not know the clients we want to target either . This presents a problem since we need to convince future clients that our proposal is not a hypothetical solution but something that is really going to solve their problems.
For companies that are in this situation, the essential thing is to educate potential customers about the benefits of our product and how it solves their problem , to gradually start selling to early adopters , and later to the mass market .
The commitment to marketing is much less, since it is not about selling to a large market, but about starting to publicize the solution that we present and that little by little the market will grow.
We understand by market segmentation to find a group of customers that is not well served by presenting a unique proposal for something that these customers need to solve as soon as possible .
This segmentation can occur by betting on low-cost or creating a niche. As for low-cost, the intention is to cover a need with a low-cost proposal to be able to serve customers with less purchasing power but who also require a solution to their problems.
Normally, the market can be re-segmented in this way, since large companies do not consider it a business to serve this type of client and prefer to focus on those with greater purchasing power.
Retargeting by looking for a niche is different from low-cost, in this case we look for ordinary customers who are willing to pay even more for a product that offers a totally innovative feature that is focused on meeting their needs .
The 2 types of re-segmentation break with the mindsets of customers to gain a foothold in the market.
The segmentation of an existing market may be the most attractive alternative for a large number of startups, but it combines the difficulties of the other 2 types of launches. On the one hand we have to educate customers about the novelty we want to introduce , as if it were a new market, and on the other hand we have to compete with other similar proposals , since it is an existing market.
As we have been able to see, the type of market a startup is targeting is critical for its development, as it has to work with different processes and balance the budget differently.
What do you think? Have you taken them into account in your projects?
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