Disciplined Entrepreneur Day 2

Today we focused on the most important part of the business, the root of the money, our customer. How can we acquire them?

Market Segmentation

Firstly, we have to do market research. At this starting point, an entrepreneur should have an idea expanding the use of technologies to revolutionize lifestyle or ineffective processes. Both of these narrow down feasible market segments which a product can find a spot in them. There is no strict definition for segmentation. It depends on groups of interested. It can be profession: entertainment, industrial, medical, or it can be age ranges: teenagers, white collars, pregnants. But the keys to group people together are:

  1. Same Product – One product can answer the need of all people in that segment
  2. Same Sale Process – Can use same approach to sale for all people in a segment
  3. Word of Mouth – Customers who spread words about a product generate more customer acquisition from a segment

After we got a list of interested market segments, we list down relevant information to selling. They are what they do, how they do, what needs are, who competitors are, how large market size is and etc. Now we know who can be our customers.

In the class we got an example of a decision in gray. We did an extensive market study, and we opened a Lamborghini showroom selling and fixing in Boston.

The shop is well decorated, everything looks premium. We are targeting those rich rock hard lifestyle people. But, for the very first month, no one came to the shop. Pit boys waits all day long, have nothing to do but playing their phones. One day, a customer came. She drove in a 4WD wagon BMW asking for a fix. She knows us, and we know her. She is a middle-class person having 2 sons. She trusts us in quality. She offers the same pay making same profit as doing a service to a Lamborghini.

Shall we accept this job?

Half of the students answered “YES”, because it makes same money, and we are wasting money on operational cost day by day without income. The money is sweet, but this harms our business in the long run. Why? She is not our targeted customers. Once she returns, she will spread the word about our shop and bringing more people alike her. It causes viral effect. What happens if the guy we want to have him come see the showroom having kids running around and crying. Seeing these childish acts in a luxurious place ruins the mood. It does not look cool anymore. At the end, we may have to change our business plan after long hard extensive study in the previous one.

We should not accept this offer, because it will ruin our identity. Instead, the problem we have to solve here is to get that guy to know and to come to our shop. Then, we can have viral effect as same as accepting her offer.

Select a Beachhead Market

Secondly, each market segment has its own characteristics, so one tactics for one segment may not be effective over another. Targeting multiple segments simultaneously costs more time and money to develop a product. Else, it will not be sufficiently good for any market, so limited resources are wasted. The content of this step is to select a market segment which can be source of cash flow. It does not have to be large but sustainable.

Build an End-user Profile

Thirdly, we have to dig all information as much as possible from that beachhead market. This can be done in any mean, such as, observing places the people go, what items they have/like, checking their online behavior, doing interview with them, and so on. Try to get more information on qualitative not quantitative. We are tailoring a solution just for them. This gives clues about what we can answer to them.

Calculate TAM Size for the Beachhead Market

We have an overview of market segments. We have chosen a market segment to land our product. We have known what they do and what they like. This step we are going to consider about money. TAM (Target Addressable Market) shows how much annual revenue available if you achieved 100% market share. This is done by drawing a flipped pyramid listing relevant customers’ characteristic. The more it goes down the more potential customers. The pyramid shows how many customers are. Then, we calculate how much money we can earn by multiplying revenue per customers with customers at that level.

TAM Sizing

Profile the Persona for the Beachhead Market

This is probably the most important step in building a business. This provides later steps a concrete guidance to develop products and plans. A persona is a description representing who our role-model customer is. We are going to have this person says “YES” to our product no matter what. He is going to be loyal to ours. A description must be extensive to get insight about thought and consideration processes of him. Examples are what he does, what he likes, what he cares, what he fears, where he lives, what profession is, what martial status is and so on. The description must be as real as an existing person. By these extensive characteristics, we can laid out a product and customer acquisition plan just for him.

The homework for today was naming the brand and slogan and completing all the above steps.

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2 thoughts on “Disciplined Entrepreneur Day 2

  1. This is an interesting and well-considered article. However, I would just like to add that, in that instance, it may actually be time to reconsider the business plan. Of course, there is a certain amount of time that you allow for breaking into the market. I think the main reason why half the class answered yes and the other half no, is that the one half of the class was trained in management accounting, which suggests, all other things being equal, you should try to recoup losses in the event of spare capacity; this while the other half were probably marketing students, who were mostly considering brand identity.

    1. Thanks for your comment Adel.
      Yes, if for long enough time that Lamborghini didn’t come to the shop, then our extensive plan has a flaw. Then, we should consider other opportunities.
      But here, the lecturer wanted to focus only to serve targeted customers. Accepting this service from a girl breaks our selling process, because it changes our prepared selling environment for him. So, the lecturer suggested to deny and go finding that Lamborghini guy.

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