Writing for Business Advice, Christine Thoma, head of strategy at ZEAL Investments, explains how startup founders can develop a business idea and grow their customer base.
At the beginning of each startup, there is an idea. However, the idea is only the starting point and the really hard part comes with the execution. And at the heart of this is the challenge to achieve product-market fit.
It is therefore vital to crack a number of key questions: Who is your customer base? What real-world problem is your product or service solving? What are the unmet needs of your user?
We often come across startup founders that have impressive product ideas but have not thought about the user. A lot of the time this leads to products that may be functional but fail to delight and therefore never really hook into their target audience.
Here are my three top tips to keep in mind when trying get to the bottom of this challenge, taking some inspiration from my favourite read on this topic – Peter Thiel’s Zero to One.
(1) Start small and monopolise a niche
A large market is compelling and many startup owners are attracted by the promise of sizeable opportunities. However, this also means much more competition, and it’s fierce.
To get your business idea off to a good start it pays to start small. You’re a little fish so focus on clearly defined waters. This will give you time to identify your early adopters, test your offer in a niche market, listen to feedback, adjust and steadily expand your pool with a product or service that works at smaller scale.
So, let’s say you want to launch a B2C service that helps reduce costs for consumers. Students are a particularly price conscious market segment and so could be a good starting point.
Is there a way to work with students in your area or even at a particular university? Rather than promote your app to any student with a phone, focus on this one sub group to begin with. Remember, Facebook started with just one university.
(2) Scale up
Once you’ve nailed your niche and the needs of your early adopters, you can start planning to take your offer further afield. Think about markets, locations or users that you could target and steadily expand your geographic and demographic reach.
Using the above example, you could consider looking at other universities or colleges in your area.
Or, more concretely, consider Amazon. It started off selling books and, once it dominated that market, added similar items such as CDs and DVDs.
The company deliberately chose to take each step at a time, growing its customer base steadily without shooting for the sky from day one, and yet it still ended up as the largest online retailer in the world.
(3) Build a dense network
The two steps above illustrate that the early net does not need to be cast far and wide. No niche is too small to be dominated. Instead, it very much depends on the degree of coverage in that niche.
Facebook is a good example. It started as a social network for Harvard students, then expanded to include all Ivy League institutions before eventually going global.
Some businesses are built on so-called network effects: the more users they have, the more valuable their goods or service becomes to those users.
Having a dense network can also be a powerful protection from competition. The more inter-related customers or users you have, the harder it is for other players to come into that space and take market share away from you.
If Facebook only had two users, it wouldn’t be worth much to anyone. But, with an audience of 1.5bn, similar social networks don’t stand a chance of muscling in. Who would want to switch to another service that none of their friends, family or colleagues are using?
A good idea is crucial to the start of your startup, but it’s just that – the start. Keep your customers firmly in your sightline and make sure your offer is relevant and useful. Steady growth that tackles one market niche at a time is the key to growing a market-conquering customer base.
Christine Thoma is head of strategy at ZEAL Investments
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