Startups are often working back from a solution to figure out who has the problems that it can solve.
It's a tricky situation and is a result of the "innovator's bias" which is a natural predisposition that we seem to have to solutions.
In other words, it happens because most of us don't think about ideas in terms of problems or customers. We think about ideas in terms of solutions, features and functionality.
Ash Maurya - creator of the Lean Canvas - has explored this topic at length and found a better way:
"Problems and customers are two sides of the same coin.
One might observe a problem, or pick a well-known big problem [like preventing single-use plastic], and then get more specific on customer segmentation.
OR
One might pick a customer segment you want to serve [like Climate Tech entrepreneurs for us at More Traction] and then search for more specific problems worth solving."
In our latest episode of the Climate Tech Product Show, we caught up with Katie Oliver - an expert marketer, customer strategist and innovator who walked us through a framework to help Climate Tech startups define and use a customer segment, including:
- Why you should define your customer segment
- How to define a customer segment
- How to use your customer segment definition
1. Why you should define your customer segment
If you start with a solution (as opposed to a customer) you spend a lot of time trying to fit your product into a market. ie trying to figure out how and who to sell it to.
Regardless of where your startup is at, defining your customer segment aka "persona" is super valuable. Here's why:
A good persona goes beyond demographics (age, gender, income, etc). It goes deeper than that. It helps you understand mindsets, behaviours and insights around where your customer might be, what they like, what they do, etc.
...and from understanding those things, you can understand how to get your product in front of them.
This can be very valuable for businesses that are trying to get their first sale or even scale to other customer types - like many startups are!
Your customer is the most important stakeholder in your business and it's dangerous to not have them at the table somehow. Sales, Product, Marketing - all of it is about meeting a customer's need.
2. How to define a customer segment
Demographics (age, income, gender, occupation, etc.) are important, but what you really want is to incorporate insights into the persona.
Here are a few ideas to get you started:
- What are their goals?
- What are their values?
- What motivates them?
- What's important to them?
- What sorts of questions could they have about the space you are in?
- What influences them? Who around them do they listen to?
- How do they consume information?
- What are they struggling with?
- What are their pain points?
- What are the use cases for your product? Why, when or how would they use it?
Take the first stab by starting with what you know or the assumption you have.
Test those assumptions through conversations with people. Yes, you need to get out of the building and have real conversations with real people. You just won't learn otherwise. Customer discovery never stops.
If you already have customers, reach out and get to know them. Use data that you have from them. People are generally willing to help and share their opinion. [Note: check out our episode with Louise Bayne for some tips on how to have customer conversations]. You can also ask them who else they think your solution could be good for.
Don't be afraid of targetting a small niche. Most climate techs are not for everyone and a lot of them are definitely not mass-market products yet. Don't waste your money with broad targetting that will give you results that are meh. It's better to have 100 people that love you than 1k people that don't remember who you are. Targetting a niche will also give you clear results and help you rule people in or out easily.
At most, develop and target three (max!) distinct segments. Aim for segments that are different, not just shades of grey. Test and refine these segments as you go by incorporating what you learn. You need to get into the habit of continuously refining and keep learning about your customers.
3. How to use your customer segment definition
It should give you enough information about a customer to target them.
Use your customer segment definition to make measured guesses. Use the insights to seek that person out from the crowd. It needs to give you enough understanding about your segment to be able to put your solution in front of them.
As you go through the process of customer conversations, targetting and testing; things will start to emerge allowing you to refine your approach. This is experimental and there is no way around it.
You need to go where your customer is. There is no point in targetting someone via Facebook if they don't use Facebook or if it's the wrong context. For example, they might be Facebook users but are unlikely to purchase services for their business because they only use it for personal stuff.
Avoid going straight to digital experiments. You won't get any insight into why things didn't work. You need to accept that in the beginning, it's going to be clunky, inefficient and manual. Pick up the phone and reach out to people to get qualitative feedback.