Startups need to get the right perspective on the characteristics of target market right. Without this all important perspective, SaaS startups run the risk of floundering, despite creating a good product. Rather than ruing in hindsight that a startup could have fared better, it makes sense to identify the market better and making suitable plans. Here are a seven key considerations that can make the difference, and prepare startups for the long haul in an overcrowded market.
#1 Finger on the pulse – meeting the needs of the target market
You need to have your finger on the pulse. This effectively means that you need to be fully aware of the need of the target, the desire to have a solution. And more importantly, you should be in a position to offer features or a solution that is superior to the solutions commonly available.
#2 How to morph into a monopoly? Just get the market size right
Behind every startup lies the dream of making a splash, and making it big. The secret to success is certainly not by launching a startup in a very large market, already dominated by others with similar products. Successful startups venture into niche markets, that either do not have solutions, or few solutions, with space and demand for better options.
#3 Power of the market to purchase the product
Identification of the target market should also include the ability of the prospects to pay for the product developed. Your price point will now have to take into consideration the CAC (Customer Acquisition Cost) and the LTV (Lifetime Value). After factoring in CAC and LTV, you will then need to ascertain if your average customer profile and need fits in with this calculation.
#4 Niche market and market size
While it is important to go after niche markets, the markets themselves need to be sizeable enough to support the venture with the right amount of sales. This, in turn means that various contributing factors, such as the purchasing power, the need of the customers and the churn rate need to be considered.
#5 Identifying the risk of churn
Predicting churn may be a futile attempt, but identifying high risk segments is relatively easy, with historical data as well as empirical evidence. Individual customers and smaller businesses are higher on the churn rates risk scale. Identifying the risk of churn is necessary to position products accordingly, and take value proposition higher.
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#6 Factors that influence decision making among customers
While this may appear unrelated, it is important to be aware of the factors that will be weighed in by the target market when arriving at purchase decision. If the target market is looking at the features of a product, then it is easy to create superior products and make the right pitch. If the target market only looks at the price point, then you need to be prepared for the cut and thrust of a highly competitive market.
#7 Alignment of product/service description
Description of a service takes many forms and it is important for a startup to be aware of the different nuances here. For instance, if your description is industry standard, but if the description used by the target market is different, you will be making a pitch to the wrong set of prospects. Identify the terms and description of the service/product used by the target market.
Pitching to the right customers is as important as creating the product itself. A technologically superior solution or product will bite the dust, if it is pitched to the wrong prospects. The key to success in SaaS startups is to identify the right target markets, and create products that meet the need, desire and purchasing power of the markets. With the right approach, it is possible for startups to breach the ceiling with impressive growth, with MRR and ARR hitting sweet trajectories.
