How to vet your company’s target market & why it matters for growth (+ 5 Key Tips from EnticEdge CEO, Julie Weber Ugarte)
If you run your own business or lead strategic teams, chances are you’ve heard the phrase “vet your market” or “vet your audience” tossed around quite a bit. While definitions will always vary by company in terms of the due diligence vetting process itself, we want to go back to some baselines of what market vetting entails and why it’s important for company success and growth.
You’re a mission-driven company, so that mission is impacting customers in a direct experience; therefore, customer-centricity is a must, which is why understanding your target customer is so important. In the simplest terms, vetting a market means ensuring that the market you’re targeting is the right one. This generally means a few things:
First and foremost, if you have a new product or service, you need to confirm that the value you think your product or service is bringing to a target audience/potential customer is in fact of value to them (and how to best articulate that value to them).
Confirm that your messaging resonates with your target customer segment – that they understand and can relate to your mission, tone of voice, and value propositions.
Confirm that your target market — in the way you envision it — actually exists and that you have a strong understanding of their population size, relevant demographics, motivations, goals, and frustrations are vital.
Next, verify that this target market is accessible — that you have access to or can feasibly gain access to your target market. If not, then garner a deep understanding of what roadblocks there are between you and your audience. Some roadblocks could be geographic, related to credentials or industry expertise (which is more often the case), or even a go-between who becomes your initial target market. For example, if you’re launching a new med tech solution for primary care doctors, can you directly access the physicians who will ultimately be purchasing your product or do you need to go through someone else on the healthcare team first? Additional roadblocks that you need to be ready to tackle could be regulators such as the FDA, setting up systems to adhere to HIPAA regulations, or various others.
Do your due diligence on the competitive landscape. Who are the players? Why is one company leading and another struggling? What shifts are taking place in the marketplace? Are there new regulations in the space? Are you creating an all new market with your innovation? Working to foresee potential hurdles will help you plan and align needed resources - and hopefully turn them to opportunities.
Better to vet your market, engage successfully with one customer, and build from there than to reach out broadly to a confused audience.
While market vetting processes and research will vary from firm to firm, our CEO, Julie Weber Ugarte, shares a few key steps in her team’s process below. In addition to obtaining her MBA from Northwestern’s Kellogg School of Management, Julie has extensive experience with market research to support global campaigns she’s helped lead and small startups she’s helped see growth:
“With the explosive growth of technologies to help garner data, I see executives get overwhelmed with tackling a research project, or figuring out how to best slice and dice the data that does come in to make sure it’s directly meaningful. Defining beforehand exactly what you’re hoping to achieve with research, outlining what you will do with that research and, determining exactly where it will inform next steps are all essential prior to a research project at any level.”
Especially when the budget is limited, remember that interviewing 1,000 people is not always necessary. Look for quality over quantity. If your technology is going to revolutionize member experience for health plans, then speak to 3 directors and 2 SVPs of Member Experience for the size health plans you’re targeting, and learn. Asking open-ended, non-leading, pre-prepared questions can open up conversation around opportunities and barriers you might not have considered.
Don’t forget the age-old TAM, SAM, and SOM model. Yep, it’s still relevant (even in the world of AI) — here’s a quick reminder:
Your TAM, or Total Addressable Market, is built from industry research, population numbers, patterns, and starts wide in terms of data.
Next, you narrow down to your SAM, or Serviceable Available Market, which is a portion of the addressable market that your company is targeting. Here, primary research is used to understand product usage, pricing, and more to best assess these targets.
Last, but extremely important, is your SOM, or Serviceable Obtainable Market, which is that percentage of the SAM that you can realistically go after with your current product or service — you need to know your SOM intimately. Too often companies vaguely understand this target audience, and it often becomes your most loyal clientele.
For instance, after going through this model, in the example of health plans above, you might decide to go after only health plans of a particular size, or only in particular states or regions because of state regulations, or you might learn that in fact the chief operating officer is actually the end decision maker for your technology that’s about to revolutionize member experience.
While it might seem like extra time on the front-end, when your team is hectic and focused on product tweaks and marketing ideas, it’s vital to success to have clearly vetted your target market. Too much money is spent diverting resources to a market that companies only have a vague understanding of - spending time and resources only to find out that if they’d known about a particular need in that market, they would have known they (a) could not serve it and needed to pivot slightly or (b) understood their own value in a different way and needed to articulate it differently. On the flip side, being ready to serve the needs of your SOM positions your company for success.
Think about this, as well, if you’ve tailored your product or service at launch to start by serving the needs of a particular market and you ensure that that market understands your product or service and engages appropriately with it, that’s a win. You’ll learn from this audience as you go, as well, which will inform next iterations and initial growth. If instead, as an early-stage company, you had tried to capture too large of an audience at the start (or many multiple audiences at once), you could be faced with trying to accommodate diverse and unexpected customer demands (aka, heavy customizations). While it’s important to have agility and flexibility, there are only so many resources available. So, be informed and prepared ahead of time; this approach will help you ensure successfully building market share over time.
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