Regardless of whether they’re a Fortune 500 brand or a startup, there is one similar, yet dangerous, tendency I’ve noticed: trying to be something to everyone all at the same time.
While this is always a costly mistake, it’s particularly dangerous for early-stage startups.
Businesses have to be ruthless in segmenting their target market. This is especially true if you’re resource-constrained — i.e. a startup.
Tight startup customer segmentation is focusing on the ideal segment(s) for your product and resources as it stands today.
Yes this means you’ll ignore potential customers in the present, but it’s what’s needed for long-term survival (and gain).
Easier said than done, I know. Even I have to force myself to tighten segmentation when working on my own personal projects, so unsurprisingly, this is an area where I tend to get the most resistance from CEOs.
Why Tight Marketing Segmentation Is Difficult
I’ve come to the conclusion that it’s because, instinctively, we feel that targeting fewer customers, not more, is the riskier option.
I blame it on the old saying, “don’t put all your eggs in one basket.”
Rational behaviour dictates that we act in a manner to reduce the risk of failure. It’s only natural and it’s smart.
And while this underlying logic is sound, the orientation shifts in a startup.
Severely constrained resources.
It comes down to this. The more customers (or users) you target, the more resources you need to be effective.
So while spreading the eggs over multiple baskets may feel like the safe play, it actually increases your risk of failure.
Let’s use the mega-popular book and soon-to-be Matt Damon blockbuster, The Martian, to illustrate this point.
The astronauts were going to run out of food. Although NASA sent an emergency supply rocket, the odds it would make it weren’t looking so hot.
5 Astronauts + 15 Months From Getting Back To Earth + Only Enough Food To Feed Everyone For 3 Months = Certain Death For All
Doesn’t take a rocket scientist to do that math.
But what if they spread out the food to the bare minimum needed for survival?
Everyone could survive another three months, but they would all still certainly die.
However, if they put all the resources towards just one astronaut — the youngest, strongest, and one who needed the least amount of food — it would exponentially increase the likelihood of some survival.
You can guess what the backup plan was…
Spreading limited resources too thin almost always leads to failure. And while focusing the resources doesn’t guarantee survival, it’s the best way to dramatically up the odds.
As a startup, your biggest risk is market. That is to say being able to profitably acquire and retain customers. Trying to acquire everyone who’d be interested in buying your product means you’ll likely fail.
But betting on the ideal customers — through smart marketing segmentation — infinitely increases your likelihood of startup survival. And who doesn’t want that?