In this series of posts, we discuss the role of Product Manager in defining, documenting and communicating market opportunities – in particular answering five key questions about your proposed product…
In this post, we focus on your Target Customer is for whom you are solving a problem. Even though you believe your product to be mass-market, or it is early days for your product and its appeal within customer segments is unclear, you should not define your audience too broadly. Do so and your target customer becomes too abstract to inform your product development decisions. Define your audience too narrowly, however, and you may fail to discover that your product appeals to users you hadn’t initially intended to serve.
Not everyone who uses your product or service must pay you – although, obviously, some must. Your customers are those who pay you – they may or may not be users of your product. Users utilize your product to achieve their goals – they may or may not pay you directly for this. For example, if you have a media or content website, advertisers are the customers who pay you for access to your readers’ attention. Your readers are your users and possibly receiving content for free. When we discuss “target customers” throughout this blog, we’re including both customers and users (unless specified).
There are three key advantages for defining your Target Customer:
- Focus on exactly who (and who you do not) serve – As you evolve your product, you will prioritize many competing ideas and feature requests. Knowing precisely who you are doing what for, and why, is essential in providing clarity for you, your stakeholders, and your development team. If you don’t know who your target customer is, you risk one or more of five poor outcomes:
- Creating a “one-size-fits-all” product that isn’t sensitive to your customer’s preferences
- Creating a product with too many features, but one that does nothing particularly well
- Making product decisions that favor short-term business needs (often at the expense of your customer’s long-term needs)
- Over-optimizing for one customer or user type, over the needs of others – this is particularly destructive for marketplaces (where you must balance the needs of buyers and sellers) and in media products (where it might be easy to give way to advertisers’ needs over those of your readers).
- Creating the product you want (because you mistake yourself as a proxy for the customer)
2. Draw attention to hidden customers and users – You may have an “obvious” target customer. But in conducting more thorough analysis you may discover other types of users are unexpectedly using your product. They need not be large in number, but may indicate a new opportunity you can explicitly address.
Beyond your primary target customer, you may also have other decision makers and influencers, all with a say over where and how a product is used. This is particularly common in enterprise services; but can also occur with consumer services.
Consider a theoretical product targeted to high-school students. In addition to this target user, you might also consider the needs of (and create a value proposition for) other influencers or decision makers: parents, teachers, principals, and school districts. For a medical product, in addition to the patient you might consider how nurses, doctors, hospital administrators, and insurance companies are also served by, or perhaps resistant to, the product.
3. Build empathy with customers – By usefully describing your customers, their lives, and their environment, you can create a picture that will allow you to “walk in their shoes”. When product and design decisions are being taken, you are then more readily able to reflect on the impact these decisions will have on your target customer. Furthermore, when conducting user testing, these attributes become useful for qualifying users or discovering additional unmet needs you might address.
Target Customers Best Practices
Defining your target customers is not a one-off exercise – as your product grows you may acquire entirely new customer segments you hadn’t initially intended to attract. Or you may learn more information, identifying flaws in your original assumptions about who your customers are and what they need.
1. You likely have multiple, complementary target customers
You may have several target customer types, with different but complementary needs, that you serve simultaneously with your product., Each will require a separate value proposition and different parts of your product solution should be designed to meet their needs. Their interests may even compete with each other, requiring you discuss trade-offs and perhaps rank one customer type as having greater importance than another.
Customer combinations are often two-sides of the same coin:
- Enterprise services: The economic buyer is the purchase decision maker. This person usually requires your product to serve a business need in both a secure and cost-effective way. The end-user is the person operating or using the purchased system – perhaps employees of the company. The end-user needs the functionality to achieve their work goals efficiently and easily (much like a consumer). They may have little say, however, in the solution the company purchases. Poor enterprise services pay little attention to the end-user experience, optimizing primarily on delivering sales. Unfortunately, these products build a negative reputation, might go unused (shelf ware), and struggle to retain customers when the product is up for renewal.
- Media sites: Consumers of content from media, social media, gaming and other ad-supported products make up your audience (or readers, traffic, or visitors). They want to be kept interested, informed and entertained. Advertisers pay for access to and the attention of your audience, usually to promote their brand or for a direct response (usually clicking on an ad to go somewhere else).
- Marketplaces: Buyers want to find, purchase and secure reliable delivery of a quality merchandise or service at a reasonable cost. Sellers want trouble-free transactions, a good price for their merchandise, minimal returns, and to receive payment quickly. Marketplaces are everywhere. Think, for example, of a job search website: it provides candidates the ability to search and apply for jobs, while businesses use tools to manage applicants and the recruiting process.
- Non-profits and Social Enterprises: The end-user receives some service at a discount or for free. But to make these types of offerings sustainable they require funding from agencies or donors. Agencies and donors are customers too – they are expecting some value from their generosity (such as recognition or to achieve a policy goal).
2. Sub-segment target customers, even if you will deliver the same product solution to them
For consumer products, the same product may serve different end-user segments using it to achieve different goals. GoPro, a light water-proof camera, for example, serves sports enthusiasts, divers, hikers, and travelers. LinkedIn’s Lynda.com, an online education subscription service, serves hobbyists (such as amateur photographers), small business owners, self-employed consultants, and creative professionals. While there may be much in common with these segments, their goals for using the product are different. Create unique value propositions and messaging for each.
Another way to “slice” consumer product users into segments is to map them into their lifecycle stage. It may be useful to think about them in this way if you are undertaking specific enhancements to a product designed, say, for a highly-loyal expert user as well as a first-time novice.
Lifecycle segments might include:
- A First-time Visitor is someone considering your product, learning more about what you offer
- A Trial User has completed some task that might lead to purchase of your product, perhaps signing up for a free trial or setting up an account
- A Paid Customer is someone who values your service enough to pay you at least once
- A Loyal or Repeat Customer is an ongoing payee for your service. They’re happy with the value you deliver, and are adept at using your product and its advanced features.
- A Lapsed or Former User is a user who has stopped using your product for any number of reasons. They can be a wealth of information and a target for re-acquisition.
Enterprise services can also be segmented. One common approach is by size. However, there is no definitive classification system for size: some define categories by headcount, others by revenue. The following segments are proposed by market research and analysis company SMB Research.
|Sole Proprietors||Self-employed professionals (who may contract or outsource occasional help)|
|Small Businesses||<100, but the majority have less than 10|
|Small-Medium-Business (SMB or SME)||100 – 1000|
|Medium-sized Businesses||1000 – 10,000|
|Large Enterprise||> 10,000|
Sole Proprietors and Small Businesses make up 98% of all businesses in the US. They often act more like consumers in their behavior and product purchasing habits. The larger the enterprise the more attractive they appear. However, they can also be more demanding, take longer to progress from lead to client, and require you to build a specialized sales and support organization
A second method for enterprise segmentation is by Industry Classification. The North American Industry Classification System (NAICS) [http://www.census.gov/eos/www/naics/] as of 2017, map industries into 17 top-level and 99 second-level categories.
For enterprise products, your target customer (or market segment) should have the following in common:
- They buy/need similar products with the same value propositions, benefits, and features. Can you productize a single solution for them?
- They have similar sales cycles and decision makers. Can you create a sales process that is largely standardized?
- When you gain key customers in a particular segment, others in the same segment view it as a validation of your product. Are prospective customers likely to respond well to your reference customers? Will they talk with each other (creating word-of-mouth)?
Keep segmenting until your target customer largely shares these three things in common. Remember that “Fortune 500” is not as useful a segment as “Financial Institutions in the Fortune 500”. Fortune 500 financial institutions tend to have the same needs, similar processes for decision making, and want to see you’ve completed successful implementations for companies like them.
3. Constrain your target customer by their attributes
Broad and all-encompassing target customer definitions, such as “students” or “parents with small children” are usually not useful. To focus on a more specific target, add qualifiers:
- Demographics such as Age Range, Gender, and socio-economic factors (education, social, occupation, income, industry).
- Geography if you are focusing on a specific market (country, state, city); or environment (urban, suburban, rural).
- Goals and Values such as their aspirations and interests (relative to the problem you are addressing).
- Motivators and Inhibitor – intrinsic factors such as personality, frustrations, incentives, or work culture.
- Technology Comfort and Preferences which may inform the kinds of solutions you should pursue.
When defining attributes, resist the temptation to do so in terms of your proposed solution – your solution isn’t being explored at this point, the market opportunity is. For example: “Lynda.com is for creative professionals seeking online video content delivered through a web browser” is stated in terms of a solution. Better – although not perfect – is “Lynda.com is for creative professionals seeking to learn new skills who prefer a self-guided, self-paced approach accessible anywhere and anytime.”
4. Create a Persona to bring them to life
Personas are intended to describe your target customer as a stereotype or archetypal user. They are designed so you can empathize with your intended target audience by describing them as a person with busy lives, competing priorities, and needs, wants and desires. Personas help you look at the world – and your product’s role in it – through the customer’s eyes.
They also provide a language for effective communication within your team. When designing and implementing your product, personas are a convenient short-cut to discuss trade-offs. Ask, for example, “What would Debbie think about that?”. Immediately everyone can reference your persona, Debbie, and imagine her using your product.
Personas are closely related to but not identical to your target market. Generally, the target market is much more diverse than the average or typical user. Personas capture many of the common attributes within that target, but not all target customers will have all attributes. For example, your target market might have the age range from 24-39 and be 70% women. Your principle persona should be 29 (assuming that is the median age) and be a woman.
Build secondary personas for one or two others – but only if they represent a large segment of your user-base. (If they make up a small percentage then you should not make explicit product trade-offs in favor of them.) In this example, the 39-year-old male in the target may not be representative of the average user but might warrant their own persona if they exhibit materially different behaviors or needs. Create a persona only
Personas aren’t just for consumer products. You can also them when selling in enterprise environments (as you sell to people, not companies). Use them to describe both the economic buyer of your product (the person making a decision to acquire your service, often a senior manager) and the end-user of your product (the employees who will use your product day-to-day).
End-user personas are particularly helpful in sales-driven enterprise companies where the client relationship centers on the economic buyer. When end-users have little choice over whether they use your product or not, product priorities tend to favor the economic-buyer’s needs. End-user requirements might be ignored. Create an explicit end-user persona and you can raise awareness of their needs, making sure their experience and satisfaction is considered by your team too.
Internal users can also have personas. Think, for instance, of the people responsible within your organization for product support, marketing, business operations and development and create personas for them where warranted.
Finally, when creating personas don’t focus on how they will use your product. Keep specifics of the solution out of it – especially features. Concentrate on the overall context in which your target audience lives and works.
You can build your own personas using the framework here.
War story – Using Personas
My ecommerce client had developed a powerful set of personas. One was a detailed definition of the life of a busy mom – dropping her kids off to school, working full-time, and how she made key purchasing decisions for the family. Convenience and simplicity were of upmost importance to her.
Another persona described the motivations and values of a comparison shopper – wanting to review options side-by-side, making trade-offs, and shopping across a variety of online and offline stores (with little loyalty to any of them). Choices and low prices were of the upmost importance to this persona.
Although both personas used the same ecommerce site, their needs (and the product features required to support them) were different.
Impressively, these personas were ingrained into the client’s culture. Large posters were displayed on each floor. Rarely did a meeting go by when one or other persona was not invoked to determine which decisions stayed true to the needs of the customer. Even though many employees were not similar to either persona themselves, they had developed true empathy and sensitivity for their target customers.