You may believe your product could be bought by everyone, but trying to market to ‘everyone’ can be very expensive and not very practical. Finding the target market with the most pressing problem is a much better starting point.
If you were starting a fast food business you would want a large crowd of hungry people to sell to. That would be more important to your success than a fantastic advertising campaign, best quality food or even the cheapest price.
Imagine if you were one of the fast food vendors at a major concert or sports game and people were hungry or thirsty after sitting out in the sun or freezing cold for a few hours, you are going to sell a lot of food and drinks even if the food is more expensive, of average quality and you’ve only done minimal marketing outside of the venue.
In other words, when it comes to deciding which customer group to focus on, always pick the ‘starving crowd’ or the group of customers who are so desperate for a solution that they will buy it even if it’s more expensive and made by a startup business that no one has ever heard of.
Price sensitivity
When you are desperate for a solution, price is going to be very far down on your list of criteria. That’s why medical specialists and after hours plumbers can charge a premium.
They can also be harder to find when you really need them. The starving crowd is much less price sensitive than a market with lots of choice.
When they’re no longer starving
Another thing to keep in mind is that tastes change, products come in and out of fashion and technology moves on. You probably just have to look at the things you've stored in your garage over the years to see examples of this.
The thing about ‘starving crowds’ is that once they’ve eaten they’re no longer starving. Not all demands have unlimited appetite. If you have a product that once purchased that’s it, the customer has no reason to come back, you have to continually look for new ‘starving crowds’. This is quite different to something like a Pandora bracelet where you purchase the bracelet initially, but then constantly go back and buy charms to go on the bracelet.
It’s important to understand the dynamic of starving crowds and how that can impact on your cashflow.
Photo by: Roslyn Clark
About Lighthouse Business Innovation Centre
Since July 2008, Lighthouse has worked with over 990 distinct enterprises and provided group and peer based services to over 3400 enterprises and individuals. For over five years Lighthouse has successfully delivered business advice, education, mentorship and networking opportunities to help these businesses commercialise their ideas and grow their companies. Lighthouse also delivers programs such as the ACT Microcredit Program for the ACT Government. Visit www.lighthouseinnovation.com.au for more information.
