Define your target customers narrowly

I just read an interesting article about a startup called Silver Concierge that took Steve Blank’s entrepreneurship course in Stanford. The whole thing is well worth a read, but the killer section for me was “Startup Lesson #1: Know your customers — and why they need your product”.

Silver Concierge didn’t make it through the customer dev process. They discovered that there wasn’t enough demand for what they were offering and that the area where they did find demand (taxi service for older people) they couldn’t build a profitable business. However, whilst that might be a great testament to the power of customer development and their most important learning it wasn’t the thing they found out. They also discovered the power of narrowly defining their target market.

The team started out targeting ‘seniors’ but found out that segment was too broad with the result that they didn’t learn anything from their initial customer interviews. In their words:

Successful companies solve acute needs — and acute needs don’t exist independently from living, breathing human beings. “Seniors” is not a meaningful customer segment. “Female older adults with limited mobility living alone at home” is. As we learned first-hand, everything about our business followed from our customer segment; as such, it was critical to deeply understand who our customer was and what they cared about before trying to do anything else.

When I think through our companies the most successful ones have a well understood and well defined target customer. A good target customer base has the following characteristics:

  • They are easy to visualise and create personas
  • They have homogenous needs (with respect to your product)
  • You can market to them effectively

Many of the best companies start extremely narrow and then expand from there. Our most recent investment Patch is a good example. They are building an online garden centre chasing the £4bn spend in that market across the UK, but the first target customers are house-proud Londoners with balconies. Moreover, their initial marketing campaign will target a group of 3,000 flats with balconies in Stratford. These target customers are young professional couples, want plants for similarly sized spaces and we can reach them with fliers.

Over time Patch will extend to small terrace gardens, then larger suburban gardens and then huge rural gardens.