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How To Jump From One Market To Another
You need to re-validate everything before making the move. (#41)
For early stage startups, I’ve always been a fan of targeting a specific market. The narrower, the better. If it works, it means you’ve found your ideal client profile (ICP) and are gaining measurable traction. It’s why I say: big markets don’t matter initially, focus on a small one.
Focus on a niche
Win there first
Jump from that niche to another one
Rinse and repeat
But how exactly do you do that?
Without question it’s easier said than done. 🧐 😅
In my experience, moving from one market to another happens either through a pull or push mechanism.
You either get pulled into a new market by existing customers, partners, etc. Or you push your way into a new market (ideally because you’ve learned they need what you’re selling).
Let’s examine both.
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1. Getting Pulled Into an Existing Market
When a startup launches, it:
Focuses on a specific niche and only targets customers in that market; or,
Goes after a few markets at the same time (i.e. “We’re targeting independent accountants, small accounting firms and tax specialists”); or,
Tries to more broadly appeal to a wider audience (i.e. “We provide software for small businesses!”)
The first two options make complete sense. The third is risky because you clearly don’t have your ICP well defined and you’re farting into the wind. 💨
In the first scenario, it’s not uncommon for companies in other niches to find you. You get what look like random signups from customers you weren’t targeting or expecting.
The same holds true in the second scenario, but you’ll also have customers across markets and be able to assess them.
In the third scenario, you’ll be able to look at the buckets of customers you’ve brought in to see if any one of them is bigger and/or better than the others.
These are all pull scenarios—where a specific group of customers (in a specific market) tells you, “Hey! Your product is valuable to us. We want it!”
Standout Jobs Goes from Targeting Startups to Enterprise Customers
Between 2007-2010 I was the CEO of Standout Jobs. We built a content management system (CMS) for job sites, with the goal of replacing the crappy career/job page that existed on most companies’ websites.
Our initial target was tech startups. We hypothesized that they’d want more dynamic, engaging career sites to attract talent. They did, although not to the degree we expected. Without going into all the gory details, you can read my in-depth postmortem on Standout Jobs in two parts: Part 1 | Part 2.
As we made more noise in the market, we started getting inbound interest from enterprise customers. They didn’t want to replace the career section of their website (between marketing, I.T. and a bajillion approvals it would have been too complicated) but they wanted to build microsites targeting specific roles. For example, one big U.S. telco was hiring hundreds of customer service representatives, and they used Standout Jobs to build and launch a microsite specific for those roles. It was faster and cheaper than what they would have done otherwise.
We didn’t completely shift away from startups, but we did start targeting enterprise customers with the microsite value proposition. We got pulled into a new market because of inbound demand.
In a scenario where you’ve got customers in two or more markets, you have to figure out if one of those customer groups is better than another. Although you may already be in the markets, there’s an opportunity to double down on the market that’s working and abandon the one that isn’t. You might be surprised by which set of customers are more actively using your product, getting value and sticking around.
Digging into this allows you to focus all of your attention on the market that’s working, in effect pivoting into the market. Once you’ve made that decision it changes everything you do including the product, go-to-market strategy, pricing, etc.
Note: Focusing in one market that’s pulling you doesn’t preclude you from exploring other markets. It also doesn’t mean you won’t go back to the other markets that you thought would be a good fit. It’s all about focusing on what’s working now so you can keep things moving ahead and live to fight another day.
2. Pushing Into a New Market
When you focus on a specific niche it doesn’t mean that your solution isn’t suitable for others as well. But focus wins. This is especially true for early stage startups—if you don’t have a clear ICP it’s like throwing darts at a dart board blindfolded. You might hit something, but it might not even be the board!
Still, you have the ambition to build a big business. Being in one market isn’t enough. You know you want to move into other markets at some point in time.
Before jumping in wildly, run experiments against the new market to gauge the response. There are lots of ways you can do this without taking too much attention away from the core market and your immediate goals.
Interview users in the new market: This is a no-brainer. If you have a sense that a second market could be a fit, you have to talk to people in that market. Learn about the similarities and differences to the market you’re focused on. Get to know the people. You might be able to ask your existing customers for referrals too.
Run a landing page test: Launch a landing page focused on the new market and find a way to drive traffic to it. Test conversion. See if you can engage anyone in a conversation once they’ve signed up.
Go to events: Find where people aggregate offline and meet them. You can gather a ton of data this way. I recently spoke with a startup that’s thinking of having a booth at a conference, because it’s the easiest way to meet a bunch of people. If you’ve got the budget for that and it’s only a few days, why not? Put yourself into the market, let people know you’re there and see what happens.
Find online communities: Figure out where people in the new market spend time online and go there. Engage. Watch and learn. See if they’re talking about the problem you solve. Collect that secondary research and information to better understand the market. Doing this is supplementary to direct engagement with users though. Don’t rely exclusively on what you’ve found online through reading/research to make a decision.
When pushing into a market without pull signals, you need to collect sufficient evidence and build up enough conviction to justify a move. There’s a good chance going into a new market will require changes (we’ll discuss this in a moment) and it’s important to understand what those changes will be and then decide if they’re worth the investment. So experiment. Learn. Test. All of this can be done alongside the core operations of the company.
One additional point: Going through the exercise of exploring a new market does not mean you have to move into it immediately. You might learn that the new market is a perfect fit for your business but you don’t have the resources necessary. You might be able to use what you’ve learned to help raise capital to expand. Maybe you need to bring on additional team members to drive the go-to-market successfully. Don’t rush this process. Collect the learnings and then figure out what to do.
How To Decide When to Jump Into a New Market
There’s no perfect answer to this question. For starters, it depends on the resources you have available. Really small startup teams may struggle to balance between multiple markets. If you don’t have problem-solution fit in Market A, jumping to Market B is more akin to a pivot than an expansion. The difference matters.
Pivoting vs. Expanding
A pivot is one change in your business based on validated learning. It’s possible as you look to move from one market to another that it’s an actual pivot. Pivoting the market means you’re abandoning the original market you’re in, and replacing it with a new market. That’s a big move. It’s a fundamental change to your company.
Expansion is a different story. It means you’re growing, and now adding more to what you do. You’d expand when things are reasonably stable in the first market and you’ve got a handle on it. In an effort to grow, you find a second market to jump into, hoping you can match (or exceed) the results from the first one.
Whether you’re being pulled into or pushing into a new market there’s a set of questions / criteria you should go through.
Even in a pull scenario you need to validate if it’s the right move; one or two customers pulling you into a market isn’t enough.
A Framework for Evaluating a New Market
This framework includes 8 main questions (with a few “choose your own adventure” options throughout), designed to help you think through how to enter a new market through experimentation and learning.
I’m making the assumption that you’ve already launched and have traction in a specific market. You either have problem-solution fit or product-market fit in the current market but want to grow into a new customer segment.
Problem-Solution Fit: You validated a problem and built a solution that fixes it. You know the solution fixes the problem because you have a set of customers that use the product, tell you they get value, pay for it and churn is low. You haven’t jumped from early adopters to later adopters, and your next step is figuring out if you can scale customer acquisition (to get to product-market fit).
Product-Market Fit: You have problem-solution fit and you’ve figured out how to acquire customers in a repeatable, scalable way. The new customers that you acquire are “good customers”—they use the product, get value from it, pay and don’t churn (too much.) They’re behaving similarly to your early adopters.
For more on my definition of product-market fit, please read: You Don’t Have Product-Market Fit (and that’s OK)
1. Do they have the same problem?
Despite any progress you’ve made to-date in your first market, you need to re-validate the problem. That means doing the necessary customer discovery to make sure that customers in the new market have the same problem as the current one.
If the problem is different you’ll likely need to change too much about the business. You probably have to build a new product, with a new value proposition and potentially even a new business model. That’s starting to sound like a completely different business. Some companies do this—they offer different products to different markets, but you have to be clear on that before jumping in because it’ll be a significant investment.
It’s possible the problem is different but the solution is the same. But this is rare.
2. Do they realize they have the problem?
Depending on the market’s maturity they may not even realize they have the problem you’ve validated elsewhere (and built your business on). The market may not be ready for the solution. It might take a lot to drive awareness to build traction. Or they might be clamouring desperately for a solution. It’s important to know the difference.
3. Do they think about the problem in the same way?
They might have the problem and know it, but still not think about it the same way. For example, the problem may not be as severe compared to other problems they have. Or they might not associate the same value proposition to the problem; i.e. “If you fix this problem for me I’ll get X out of it,” (whereas your current market is getting Y value).
It’s not enough to validate the problem. The problem has to matter in a big way.
How do you know if you’re solving a problem that matters? Read this.
4. Are they solving the problem today, and if so, how?
Let’s assume the problem is real and they know it. How are they solving the problem? How similar is that to how your current market solves the problem?
If companies in the new market aren’t solving the problem in any meaningful way, you need to know why. Do they not care? Is the problem not painful enough? Are they lacking awareness of what’s out there? Has no one paid attention to the market? It’s critical you figure this out.
If they are solving the problem, you need to know if the solutions are “good enough” (which is a powerful force for entrenched solutions) or lacking something.
You should dig into their customer journey, what I call, “A Day in the Life of the Customer” to really understand what they’re doing and how, and where the solution comes into play (or doesn’t).
5. How big is the market?
Next you need to understand the market size. I would not go down the road of doing a top-down business model where you find TAM, SAM, SOM through research and put very high-level numbers in place.
Instead, build a bottom-up business model. This requires that you dig in a bit more and really understand how the market works.
How do you do a top-down and bottom-up market analysis? Read this.
You can also use these Bottom-Up Business Model Templates that I built in Google Spreadsheets.
It’s possible the market is too small, even if you’re getting pulled into it. Jumping into a new market will take time and resources, and that means tradeoffs will be made versus the existing business and its focus. To justify that you need to believe the new market is worth jumping into.
6. How can you reach the market?
A new market means a new go-to-market strategy. There may be overlap with your current approach, but you need to figure that out.
Do you believe it’ll be easy or hard to get into the new market? Why?
Do you believe it’ll be inexpensive / cost-effective? (CAC/Customer Acquisition Cost may vary between markets.)
Can you use the same channels you’re using now or not? For example, you might be using LinkedIn ads—but how do you know if those will work for the new market? (You gotta test it.)
Jumping into a new market means a lot of experimentation on go-to-market. You may have a channel or two working well for your current market, maybe acquisition is already scaling, but that doesn’t mean what worked in Market A will automatically work in Market B.
7. Can you make money?
Targeting a new customer means re-validating your pricing. You might charge the same, in the same way (i.e. have the same business model). But what if this new market wants to pay less? Is that still economically viable? Does it make sense to pursue the market?
Alternatively, the new market may want to pay more—which would be fantastic! Although they might have other expectations that come with that, including a higher level of hands-on customer service.
The entire business model could change as well. This shouldn’t happen very often, but you have to make sure that the new market is willing to pay the way you want them to. With Standout Jobs, we started with a monthly recurring revenue model and then shifted to a “per job posting” model because it was more comfortable for our target customer. For enterprise customers we added a setup and customization fee because they wanted more handholding.
8. Is your current product (with minimal to no changes) suitable?
Now you have to look at your solution. You know there’s a real, painful problem, with a big enough market that needs a solution. But is your solution the right one?
If you have to make a lot of product changes you’re introducing considerable risk. Suddenly it’s not a simple jump into a new market, it’s a new product in a new market. Building a new product takes time and money.
Ideally you can take your existing product and point it at the new market using some of (or most of) the go-to-market tactics you’re already using. That’s the Holy Grail of going from one market to another. The only substantial thing changing is the market itself. But in my experience it’s never that simple. A host of other (hopefully) small changes have to be made. You have to figure out what changes to make, understand why you’re making them and then decide if they’re worth doing.
Below I’ve put together a visualization of this decision framework. If you’re thinking about moving from one market to another, I hope you find this helpful. (It’ll be quite small on a mobile device, but you can click here to get a full view of it.)
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