Customer Profile Dimensions

This article is part of our “Business Startup Guide” – a curated list of our articles that will get you up and running in no time!

Market research is a very important step for all startups as, amongst other things, it helps you understand whether your offering is likely to generate demand. Once you have a clear sense of who your customers are, the following represent some additional things to think about:

  • Where are these customers?
  • How many customers are there?
  • What do they require from your product or service?
  • How you intend to reach them?

In looking to answer these questions focus on these overall understanding you are trying to develop with relation to your clientele and market:

  • Understand where your customers are. If you are planning on opening a coffee shop in Dublin, it is important to recognize that the primary market you’ll serve will largely be a function of the footfall in that area. Given the intense competition, for what is essentially a commodity offering, people do not travel far, so your addressable market will largely be a local one. Hence, in this instance the proposed physical location will be a significant determinant of success. While coffee is a high margin product, the importance of locating in high footfall areas means rental rates per square foot tend to also be very high, so you need to factor this into your plans. Finally, you need to be very clear on your basis for competing as it is likely there will be many other coffee shops where you plan on opening. This is not necessarily a bad thing. Opening in an area with no coffee shops could be a signal that there is insufficient footfall in the area. Looking at a different example; in the context of software development (or simply Internet websites), product managers will often create detailed personas of typical customers which then help inform subsequent decisions made when developing the application. For Irish developers it is important to have a global outlook from day 1. The domestic market is small and does not offer the scale software companies need. Hence you’ll see examples with Irish startups targeting non Irish customers from the start i.e. the social recruitment software player, prices in $’s (despite being based in Cork) so as to market effectively to their largest customer base.
  • Estimate the size of the market you can serve. Once you obtain an assessment of the size of the market that you can realistically target, you can then ensure that you have commensurate resources in place. Similarly, if you do intend to seek external investment, the size of the market will be of significant interest to prospective investors and the level of investment they will consider. With a coffee shop, the market size will be a combination of people residing within say a square KM of the premises, married to the footfall or passing traffic. One easy way to get some plausible estimates for the market size is to do some primary market research. For example, you can call in to an existing coffee shop, order a coffee and count the numbers of customers passing through in an hour. You can come back at different times to account for the cyclicality of the business (customer numbers typically peak around rush hour commutes). This data can then extrapolated out to help you assess a range for the likely customer demand on a particular street. With software developers, the market size will clearly depend on the actual product and feature set. Given customers do not need to be locally based, the reach can be far wider (and largely a function of the inherent demand for the offering, the language on the site and the placement in Google’s’ search engine). Again there are a number of tools that can be used to assess likely demand ranges i.e. analysis of keyword competition, number of competitors etc
  • Be clear on what your customers require. It is important to recognise the different requirements of different customer groups. Customers of coffee shops at a busy train station may simply want a fast service as a key element of the offering. They will probably consume ‘on the go’ so a simple kiosk may offer the best return. Customers in a coffee shop in the suburbs may want somewhere to spend some time. Some will place a high value on wifi access, others on the ability to fit a buggy in the door. While the core product is the same, the service offering can vary greatly. Having a clear sense of your different customer groups and their requirements will help you meet the needs of the different niches profitably. For software developers, it is best to meet the requirements of the largest niche with a main offering. Once the application is available the key will be to solicit feedback from all early users and to then decide if their varying requirements can be merged into new features which may take the shape of a different product versions. So ‘power users’ may opt for a premium offering with an enhanced feature set over the main version.
  • Create a marketing plan to target them effectively. Location is everything for coffee shops, so this will be a key element of your business plan. Once that has been decided, external branding and signage will help you
    communicate the offering to the market. The internal set up of the store will also signal the markets catered for. Listing in local business directories, handing out flyers and placing local newspaper adverts will also help create brand awareness. Social media will also increasingly play a role as the adoption of smart phones continues apace, and users increasingly rely on geo-targeting applications to find services they need while on the move. For software developers it is important to identify the 5-10 keywords that are likely to generate traffic and to optimise the site for those. PPC advertising will also represent a cost effective means to market to prospects. After that, a whole mix of marketing activities can be considered for your marketing plan ranging from print advertising to trade show attendance to social media marketing (blogs, Twitter, LinkedIn and Facebook activity).

In summary, having a clear sense of who your customers are from day 1 will help ensure you can define your market accurately. You can then market to these customers effectively while also helping you ensure that your cost base is not out of kilter with the likely demand levels. The more you know about your customers the easier it is to meet their needs and to target them with appropriate messaging. Finally, it will also help you understand the wider landscape i.e. who you do not intend to target and also who the main substitute and competitive offerings are.