Target Market Matters
Most HCM tech startups overreach when defining their target market. I’ve yet to come across a product that is great for small, medium, and large companies. I’ve also never come across a product that’s great for all industries. Defining your target market is serious business because it creates the opportunity to strongly differentiate within a market segment and create a durable advantage within that segment over time.
Also keep in mind that the larger your “total available market” is, the harder and more expensive it will be to develop and execute an effective go-to-market strategy. In other words, the definition of your target market has significant downstream consequences, including the size and scope of your media buys, the organization of your sales team, the prioritization of new feature development, and even your fundamental business model. If you decide to go after a very large target market, you must have enough resources across all dimensions of your business to buy some real estate in the mind of every buyer. That’s a very tall order.
We encourage our clients to “go small to get big.” That is, the smaller and more focused your target market, the more efficient you can be with your go-to-market strategy and integrated marketing plans.
Some of the most successful companies we’ve ever worked with made tough decisions to focus only on the healthcare vertical or small businesses or the Global 5000 or the West Coast. Remember, if you’re successful within your initial target market, you can always leverage your success to expand into adjacent target markets.
Action: Aim Small, Miss Small
Work hard to determine how small you can make your target market and still find enough total available market to satisfy your business goals. Focusing on a small target market will increase your chances of dominating that market and will provide you the leverage to expand into new markets in the future. Everyone wants to be a unicorn. I hate to break it to you, but you don’t see a lot of unicorns come out of the HCM tech segment. However, you do see many successful companies that generate millions (and even billions) in ROI for their shareholders by defining manageable target markets and methodically expanding target markets over time. Remember: Go small to get big.