Over on Sprouter, I’ve been answering startup marketing questions and I keep getting variations on this one (I’m paraphrasing):
We are developing an application similar to Yammer. I’m struggling with defining my target market and positioning because my product can be used by small or large organizations in various industries. Do I need to focus on a niche or not? I know it’s important to go after a specific market segment in the beginning, but I don’t think Yammer did this and they are successful!
Market strategy isn’t as transparent as you might think. Yammer seems like a good example so let’s look at them. You can see a partial customer list here. About half of the customers listed are in “Technology” or “Internet”. There is anther group called “professional services” which includes folks like Deloitte and Edelman who either service tech clients or resell technology. Even some of those listed in other categories I might call Technology as well (For example, I wouldn’t call Pitney Bowes “Manufacturing” per se and Swiftcurrent Strategies is a social media consulting business that happens to focus on “Government”). It’s possible they didn’t focus on technology as a segment. Maybe they focused on “folks that understand the value of Twitter” which ended up being a lot of tech and services companies focused on social media. However it happened, I can see an obvious segmentation there.
Regardless of whether other startups are segmenting or not – should yours? I personally see some obvious benefits to taking a more targeted approach:
1/ If you have sold one deal there you know you can sell another one – You learn a lot selling to a company. You learn what their pains are, you learn what they love about your product. Much of what you learn selling to one customer in a particular segment you can apply to another customer segment. I bet Yammer didn’t have to spend much time explaining what the service was all about to Mashable or Groupon because they already use tools like Twitter. You can imagine what the sales pitch would be like and it would be the same for many internet companies like them. Similarly companies like Cisco and Alcatel spend a lot of time talking about business communication and collaboration so Yammer would make sense to them. Sell one company like that and you can probably use the same sales pitch on another.
2/ Having a reference account in a segment makes it easier to sell into other accounts in that segment – Businesses like to see that other businesses just like them are using the product before they buy it. Having a first customer reference in a segment makes it easier to sell the second. Having a couple of references makes it way easier to sell the next group, and so on, and so on.
3/ Traction in a segment, leads to increased awareness in that segment, leading in turn to more traction – In my opinion building awareness is one of the hardest things for B2B startups. There are so many massive companies spending a fortune on marketing, how do you get heard above the noise? The easiest way is to not try to be heard by everyone, but focus on being heard in one particular space. People in the same industry talk to each other, hang out in the same places online and quit jobs and move to other companies in the same industries. Word of mouth travels around communities. The more traction you can build in a particular community the more awareness you will also build.
This is all classic Crossing the Chasm bowling pin stuff so it isn’t new or novel but in my opinion it still works.