How to Target the Best Market for Your Startup [Part 1]
If you’ve chosen entrepreneurship as your vehicle for achieving your desired lifestyle, then hopefully you’re busy working on your business, or at very least began validating your idea. Which ever of the two it is, at some point you’ll decide to target a market – one that you believe has the most potential.
But how can you make the best informed decision without wasting any time?
If you have a few moments, I’ve done my best to help you make that decision using data driven marketing.
In this post, you will learn how to target the best market opportunity for your startup using the most effective method I’ve found so far.
I’ll show you exactly how to do it step by step.
This methodology combines ideas from Noa Kagan's technique for finding $1,000,000 worth of customers, as well as Tim Ferriss’s teqnique for validating product demand before building it.
But before I jump in.
What if I asked you to find me a fishing spot on my local lake in less than 12h, and promised to pay you €10,000 if I catch my personal best (heaviest fish).
This is what you’d probably do:
1. Look up my local lake on Google
2. Find out what my personal best is
3. Speak to locals to find out what fishing spots have been producing the biggest catches lately, and what baits they’ve been getting caught on.
Now what does this have to do with finding the best market?
Just like choosing the best fishing spot, targeting the best market is made easier if you know where there’s more demand for your solution – it’s much cheaper and easier to satisfy demand rather than creating it after all.
Measuring demand can be a little tricky though, and it isn't a five minute job, so if you’re not willing to do some work, please stop reading now.
There, we got rid of all the lazy wantrepreneurs and we’re left with the get things done crowd – awesome!
Let’s get started. Remember, if you don’t do this your competitors might! Don’t let them find that golden market opportunity before you do, so do follow along.
Create a Way of Ranking Potential Markets
I’ve created a simple spreadsheet that’s designed to help you measure and compare demand across different markets.
Open the Market Comparison spreadsheet or click here for the Excel download
Save/edit your own, Select “file” > Download As”
Open your file
How The Spreadsheet Works?
The basic concept behind this demand measurement methodology is to rank markets based on the potential size of the market, as well as their response to your offer. It sounds more complicated than it really is, so I’ll walk you through each step.
Let’s assume I have an idea for a mobile app that helps english speaking university students learn how to cook.
For the purpose of this walkthrough, I’m going to measure and compare the demand between the main native english speaking countries, however, you aren’t limited to segmenting your market by country. You can also measure the demand across different cities, age groups, or sexes, with just a few adjustments to the steps outlined in this post.
Here’s what my sheet would look like at this point.
Start by Collecting Data That Already Exists (Secondary Data)
The reason I prefer to collect secondary data first, is to save money. Ideally, you will eventually test demand by showing your offer in front of customers. Running that experiment means spending some cash on sending paid traffic to a landing page. In order to spend as little a possible, sometimes as little as €100, you’re going to want to eliminate markets that don’t look promising judging by their secondary data.
The two secondary data points that we will be collecting are the Facebook potential reach, and the Google monthly search demand. This keeps things simple while you’re learning this methodology. But as you get better, you can always include more data sources to improve the accuracy of your results.
Another reason these two data points serve as your two base metrics is because they represent the volume of people you can pay to reach within minutes of setting up an advert on each network, which I personally think is a lot more practical than a statistic found in a library.
Gather the Facebook Potential Reach
Incase you’re new to Facebook advertising, when setting up an ad on their system, you can choose who you wish to display advertisements too based on a number of demographic data points (age, sex, interests etc). As you narrow your target audience, Facebook updates you with the estimated number of profiles that fit your targeting settings – that’s the number we’re after.
Step 1) Create a New Advert
Start by clicking on “create adverts” which is under the top right drop down menu. You’ll be asked to choose the objective for your campaign, however, because you won’t actually be rolling out the ads at this point, select “send people to your website”, and type any domain.
Step 2)Set Your Market Demographics
Next you will need to use Facebook’s targeting options to define your customer profile, and then measure your first market. Facebook has a lot of data on it’s users, so you can be quite detailed. Instead of walking you through each setting, i’ll let you play around with it because it’s the best way to learn. Here’s what my settings looked like.
Step 3)Input the Potential Reach into the Spreadsheet
Once you have defined your target customer and the market you wish to measure, you need to take the audience size highlighted in the photo above, and plug it into the spreadsheet. Here’s what my spreadsheet looked like after doing this.
See, not too hard is it. Lets keep at it.
Collect the Google Search Demand
Google gives you a potential reach similarly to the way Facebook does. Instead of giving you the total number of profiles though, you can see the number of times a search query (words typed into their search engine) is searched for on a monthly basis. This is extremely useful because keywords can be used to represent the searchers intent. By listing keywords that indicate demand for your problem/solution, you can easily begin to see differences in the potential demand.
Just as with Facebook, I’ll walk you through each step.
Step 1) Create a List of 15-20 Keywords
Start by creating a list of keywords or phrases that a likely customer would type into a search engine when looking for a solution like the one you’re offering.
To create this list think about the way your customer would phrase their problem/solution, and try to find out what words they would use to phrase their search. If you are doing entrepreneurship right, you should have access to some target customers, so don’t be shy now, reach out and ask!
Here are a few example keywords for my hypothetical app idea:
-Student and can’t cook
-Student cooking recipe app
Log into adwords and under the tools menu, you’ll need to click on “Keyword Planner”. Next click on “get search volume for list of keywords…”. Then take your list of keywords, and copy paste them here.
Step 3)Segment Your Market
Underneath your keyword box you have some targeting options where you can segment your market by geographic location. Note that If you are comparing demand between markets based on age, sex, or anything other than location, you’ll need to do your segmentation via your keywords if you wish to use this datapoint (example: “student cookbook for men”).
Step 4)Input Search Demand into Your Spreadsheet
Just as we did with Facebook, we will go through each market segment and recorded the data point. Here’s my up to date spreadsheet.
Identify Markets that Look Promising
Before continuing with the primary data experiments which is A LOT more involved, it’s a good time to identify markets are appealing, and to remove markets that don’t look promising.
Here’s how to do that.
Step 1) Equalize the Data
As you can see, the Facebook number is much bigger that the Google search – making any attempt at calculating an average biasly favor Facebook. It may very well be appropriate to prioritise Facebook over Google in your business, but that’s a bias that we want to control with the “weight”, so lets equalise the data set.
To do this you need to take the number that’s on row 20 in the green box, and type it into the tuner box. That should adjust the data in the grey columns so that its average (red square) equals 1000.
Step 2) Assign the Importance of Each Data Set
Now that we have equalised the data into comparable metrics, it’s time to tell the sheet how important each data set is on a number of 1-10, 10 being the most important. We do this because some marketing channels and data sets will be more important to your business than others. If you already have a startup and have been tracking your key metrics via an analytics tool, you might have found that traffic from Facebook has a higher lifetime value (LTV) customer than other social channels, so you would want to assign that channel a higher importance than poorer performing ones.
You can assign the importance of each channel via the weight box. As we saw, Facebook has the potential of driving a lot more volume, so for now, I’m going to give it a weight of 8 because I’m searching for the “biggest market opportunity”, and I’ll give Google a 4.
Remember that as you add new data sources, you will want to adjust these weights, ensuring that they align with your business goals, and take into consideration the data's accuracy.
Step 3) Sort List and Compare Market Sizes
After setting the importances (weight) of each channel, you need to highlight the entire data set including the demographic segment (from B6 - k20)
Then head over to the menu and click on Data > sort range, and then sort the sheet based on the average demand (column [k], [Z to A]).
You should now be able to see the markets in order of their potential demand based on the data you collected, as well as their assigned weight – pretty fucking cool right!
You should take care when making strategic decisions based on this data – please use a little grey matter. When I used this methodology in the past, it served more as a usefull tool for guiding conversation with management, but due to the nature of event marketing, it was not the only deciding factor in where we went – it was extremely helpful though!
I personally recommend repeating this process several times, but with a few different variations on your segmentation. This will give a better feel for who are the potential customers, and where are the biggest markets. At some point though, you’ll need to start comparing demand by measuring responses to an offer from real people – that’s where it gets really fun!
But that’s it for now. The next post in this series will show you how to collect secondary data, by running a live experiment. It will involve creating simple digital ads, and landing pages, as well as go through some of the essentials of tracking a multi-channel marketing funnel – giving you a handy skill set as well as the tools needed to find the best market opportunity for your startup.
If you don’t want to miss part two, sign up to the mailing list to be notifed when new content is published on this blog. You can also follow the Agile Existence Twitter and Facebook pages if that’s how you find great reading.
How would you expand on this methodology? Let us know in the comments below.