A lot of the aspiring and early tech entrepreneurs we talk with believe that addressing a broader market and targeting practically everyone is the strategy that gives them the best chances for success. “If I focus and narrow my target customers I will miss out on this great opportunity”, they say. The reality is that a startup cannot effectively build and market a product for everyone. In this article we will make a deep dive into why that is and how to address it. Let's go!

Why Building for Everyone Is a Bad Idea

Let me share with you a quick story from the U.S. air force which was made popular by Todd Rose in his book “The End of Average”.

“In the late 1940s, the United States air force had a serious problem: its pilots could not keep control of their planes. The air force had an alarming, life-or-death mystery on its hands.

After multiple inquiries ended with no answers, officials turned their attention to the design of the cockpit itself. Back in 1926, when the army was designing its first-ever cockpit, engineers had measured the physical dimensions of hundreds of male pilots (the possibility of female pilots was never a serious consideration), and used this data to standardize the dimensions of the cockpit. For the next three decades, the size and shape of the seat, the distance to the pedals and stick, the height of the windshield, even the shape of the flight helmets were all built to conform to the average dimensions of a 1926 pilot.

Now military engineers began to wonder if the pilots had gotten bigger since 1926. To obtain an updated assessment of pilot dimensions, the air force authorized the largest study of pilots that had ever been undertaken. In 1950, researchers at Wright Air Force Base in Ohio measured more than 4,000 pilots on 140 dimensions of size, including thumb length, crotch height, and the distance from a pilot’s eye to his ear, and then calculated the average for each of these dimensions. Everyone believed this improved calculation of the average pilot would lead to a better-fitting cockpit and reduce the number of crashes — or almost everyone. One newly hired 23-year-old scientist, Lt. Gilbert S. Daniels had doubts. He kept asking himself the same question in his head: How many pilots really were average?

Out of 4,063 pilots, not a single airman fit within the average range on all 10 dimensions. One pilot might have a longer-than-average arm length, but a shorter-than-average leg length. Another pilot might have a big chest but small hips. Even more astonishing, Daniels discovered that if you picked out just three of the ten dimensions of size — say, neck circumference, thigh circumference and waist circumference — less than 3.5 percent of pilots would be average sized on all three dimensions. Daniels’s findings were clear and incontrovertible. There was no such thing as an average pilot. If you’ve designed a cockpit to fit the average pilot, you’ve actually designed it to fit no one.” You can find the full story here.

The moral of the story? Building a product for everyone results in solving the biggest common denominator of these probably similar, but different problems. In other words you get an average solution that provides average results at best.

Why You Cannot Market Your Product Effectively to Everyone

Your startup cannot be everything to everyone. In principle, effective marketing has two primary requirements: 1) compelling messaging and 2) the ability to effectively reach your target customers with that message. In order to have a compelling message you need to get very specific in your understanding of the challenges and needs of your target customers and also express that in a way that resonates with them. Similarly, the channels through which you reach your target customers are also very specific to these customers - e.g. you probably won’t reach teenagers if you market in newspapers or on Facebook instead of TikTok.

“OK Vesko! You have my attention. If building for the broad market is not the right way, then what is the right market in terms of size?”, you might be thinking. Glad you asked!

What’s the Right Size for Your Initial Market?

There are three principles that can help you make better market size related decisions:

1. The market should be small enough so that you can dominate it - having a small market gives you the ability to solve a problem or a set of problems for your customers really well. At the same time by focusing on a smaller market you avoid competition from big companies. Why? Because big companies need to pursue big market opportunities in order to grow and rarely can afford to pursue small markets. What means to dominate a market? Directionally it means to have a market share of 30%+.
2. The market should be big enough to make sense - at the end of the day you are building a business and the single necessary condition that makes an initiative a business is a paying customer. And in order to have a good business, you need enough of them. How much is enough to make sense? Directionally a big enough initial market for a typical software product company is ~$5M.
3. There should be a clear path to a bigger market - while a market of size $5M is a good starting point, it is generally not enough for ambitious innovation-driven technology startups. Assuming that you have already dominated your initial market means that your product performance effectively addresses the needs of your current customers. With incremental improvements of your product you can start addressing the next set of customers up market who generally have more and bigger needs while at the same time pay more. The other equally valid option is to start addressing adjacent markets in a similar way with small additions to your product and modifications of your messaging.

How to Properly Segment Your Market?

If we can offer you one advice about properly and usefully defining your target customer segments is to always think about your customers and their needs holistically and not in isolation. There are so many great and innovative products failing because entrepreneurs think about solving a problem without relating it to a specific group of similar enough customers. The best way to build a solid foundation of an innovative startup is to always think about customers in conjunction with their underserved needs.

Why focus on underserved needs? A good market to enter is one in which customers are not extremely happy with how the existing solutions meet their needs. When you develop a new product or improve an existing one, you want to address important customer needs that aren't adequately met. Thus the "underserved needs" term. Customers are going to judge your product in relation to the currently available alternative solutions.

One More Thing

At Icanpreneur we believe that the #1 reason startups fail 9 out of 10 times is simply because the typical entrepreneurial path is chaotic and is based primarily on gut feeling and luck. We believe that entrepreneurs should use their intuition and gut feeling to imagine the vision of the intended impact of their startup instead of discovering what the entrepreneurship steps are. This is where we can help - at Icanpreneur we are focused on building the guided journey that helps aspiring and early entrepreneurs systematically go from idea, through investment, to product/market fit. Become part of the change now.