CUSTOMER TARGETING 101: The basics to achieve the Product-Market Fit

In our previous article, we opened a discussion about achieving the Product-Market Fit, and we have managed to go through the steps that are needed to achieve the Product-Market Fit with the help of Dan Olsen’s pyramid. That pyramid has 5 steps which are Target customer, Underserved needs, Value proposition, Feature set, and User experience. They are grouped into 2 main parts which are the “Market” and the “Product”. We will start discussing the “Market” part in detail.

The “Market” part has 2 parts which are “Customer targeting” and “Underserved needs”. Today we are going to discuss the basics that can help you understand the customer targeting part in a way that will help you to proceed with other steps of achieving the Product-Market Fit.

Customer Targeting

Customer targeting is defined as a process of segmenting, selecting, learning, and making contacts with your customers. This process is an ongoing process, which means this is done by both companies which have been on the market and the ones that are new to the market.

For startups that want to achieve Product-Market Fit, there is no way your product will find a fit if you don’t understand the people that you target. We need to understand our customers, what they do, their culture, their behavior, their income, their most concerning problems, what they like, and what they don’t like about what they do. Everything that can help us serve them better.

This “Customer targeting” part is very important even for companies that have found the Market fit. You will hear so many startups/companies aiming to be customer centric, to achieve customer-centricity you have to master the art of targeting your customers. Now that we understand that targeting customers = understanding customers, the next thing for you is to learn techniques that can help you understand the people you are targeting (customers) better.

For a startup/company to understand its customers, they use different channels to reach out to them. Each channel provides a different perspective, every channel is very important depending on what you want to learn about your customers. Let’s first discuss the term “SEGMENTATION” and we are going to see 3 ways or channels that you can use to learn about your target customers and that offer different perspectives.

Segmentation

Customer segmentation is the act of dividing a customer base into groups of individuals that share the same characteristics like age, spending habits, interests, and other different categories. This is very key when you are targeting customers. If you learn your customer base as a whole, your product will struggle to find the Market fit because people with different characteristics like different things, so they have to be approached differently. Depending on the product you are building, you can target a single segment of customers, or target more than one but you should understand them all and provide plans or solutions that work for each segment. 

Consider segmentation before deciding on channels that you will use, because channels can also depend on which segment you are targeting. If you target Big enterprise CEOs, I am sure you will use a different channel from when you are targeting startup CEOs, because they have different interests, their time is different, and you can’t find them in the same place. Let’s now discuss some channels that are often used in customer targeting: 

1. Customer Interviews

This is one of the best ways to learn about your customers. This is 101 for all startups/companies, if you want to understand your customers, go talk to them. There is no shortcut for this. As I have mentioned, each channel offers a different advantage and perspective. There are some learnings that you can only get from talking to customers. For example, you can see that people are struggling with something and see that they have come up with a way to deal with those problems. You need to understand why they chose to deal with the problem in the way they did, how will you know that? Only by talking to them. 

How will you know the reason why they prefer one product over another one? You can only learn this from talking to them. By interviewing customers, you learn the reason behind different behaviors, you learn their problems, and how much they care.  

2. Leveraging Data

This channel is mostly used by existing products that have already interacted with customers, where they have data from their analytic tools. As we have discussed in one of our previous articles, This channel offers a very important perspective, the things that customers can’t tell you. For example, if a certain segment of customers is churning or leaving the product, you won’t learn that by talking to them but by leveraging your data.

But for new products that are still learning about their customers, this channel can also be key. If you are a tech startup and the idea you have is to build a mobile app, you can use some existing data, and learn the percentage of people who use smartphones, and how much they spend on their phones, and that can help you to understand the people that you are going to work with and that would inspire your solution. 

3. Competition Analysis

One of the best ways to understand your target customers is by doing a competition analysis. But here we are analyzing from a different perspective. The analysis is done from a customer perspective, not a competitor's perspective. You are new to the market, and some people do similar things or who are targeting the same customers for a different purpose. By observing how customers use their products, which ones they like, which ones they don’t like, how satisfied or unsatisfied they are, and other observations that you can do depending on the learnings you want can show you exactly who your customers are. 

From those observations, you can know how they want their problems to be solved, you can know if they can pay and how much they are willing to pay and so much other learning. Most people do competition analysis to see what they can do better than their competitors, but competition analysis offers more advantages than that.

Summary: Concluding we can say that the foundation to finding the Product-Market Fit is understanding the customers that you are targeting. This part is not only done by the product team, but also the marketing team needs to be involved because, at the end of the day, they will be the ones to market and advertise the product, so they have to understand our customers as much as the product team does. Next article we are discussing how to discover the underserved needs of our target customers.