A Question for Start-Ups: Why Will You Have Customers?
In my role as Adjunct Professor at the Fuqua School of Business at Duke University, I have the opportunity and the honor to work with talented faculty and exceptional students. It's always a pleasure to me to get to North Carolina.
After a recent session with MBA students, my colleague Professor Christine Moorman and I received the following question from a class participant: What is the value of segmenting customers and devising a profile of customer needs when you are a start-up and have "no customers?"
The student continues:
My mentored study project is at Duke Integrative Medicine -- a year-old organization trying to focus on shifting the paradigm associated with treating medical symptoms to one of treating the whole person. As a virtual 'start-up', the organization's marketing efforts are integral to the program's success, and yet the marketing strategy is unclear. As I see it, there are two populations this group is trying to reach: The healthy people (who have a desire to 'age gracefully'), and the 'sick people' (who are referred by Duke physicians as a supplement to their 'traditional' treatment). I would love to help this group develop a customer segmentation system -- a way to identify who their customers are, to then better offer products to meet their needs.
Prof. Moorman noted in her response that segmentation is valuable when differences exist and those differences are meaningful in distinguishing customers on the basis of factors that will predict customer involvement with the firm. It is simply a way of focusing the firm on the best prospects.
We may want to add that in order to start a business, a nascent company must first analyze the need for the business -- in other words, confirm there is a market. This research will define the potential and likeliest customers, and that can serve as the beginning of differentiation based on value -- and on need, which is more important to this new organization right now. Why will you have "customers?" And in the two general categories you named, what needs will different people be meeting (besides medical, generally)? Now that you have been up and running for a year, you have the luxury of comparing your actual experience to the projections before you started, and now setting up more accurate projections.
What do you entrepreneurs out there recommend?
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Whether marketing another product or a new start-up, finding customers is your number one business assignment. You may call it target profiling or something else, but this is the question you've got to address before starting it all up and distributing your product. Then, customers will vote for your start-up or product depending on their experiences. True, customers are an asset you live with or you don't...
There are two seperate catagories to be addressed. One that has the need and you should focus on satisfying this need. The the second for which you would create the need, and primarily their need is to stay out of joining your 'in need' group. In my mind, you would have two naturally defined segments, i.e curative and preventive.
The biggest segment could be sick who can be shifted to health seeking/maintaining segment.Almost every visitor to the hospital is a potential customer.You need to follow up / befriend the patient
The "Why" question can be posed to all companies--new and old--as the market landscape shifts. It seems "Why do we have customers?" is equally relevant.
Simple steps:
Determine the total universe who might buy; remove those who will never buy if hell were to freeze over first; define segments rigorously, keeping each small; attempt, though three years trading history is useful in order to do it(!), the point at which a mini market segment is likely to be a profitable segment; obtain data to enable marketing into the potentially most profitable segments; move down the profitabilty scale as necessary in order to attempt market dominance.
Continually refine segmentation, but always segment for profit within whatever other segmentation is performed.
tim