Ian Sweeney on Go-to-Market Strategy
Advice on pricing and customer segmentation
You can’t make a product intended for nobody. When you imagine yourself putting your device on store shelves, who do you picture picking it up and buying it? How much are they paying for it? These questions are core to your business, and before you go to market, they must be answered. But how? We brought Intersection X principal Ian Sweeney in to talk to our startups about approaching these questions, and we had a chance to chat with him afterward.
HWY1: In your talk, you discuss a very useful framework for thinking about go-to-market strategy called the Lean Canvas; what’s the hardest part of it to fill out?
IS: Probably the hardest area to fill out is pricing. It’s also the most misunderstood aspect of building a go-to-market strategy; you can’t think of pricing as just the dollar amount that people will pay for something. It’s a lot more complex: pricing needs to follow the strategy of the business. You have to think about the way customers buy today and consider things like “What’s the unit of measure they buy in for our market?” People really struggle with pricing.
Is it generally worse to price a product too high or too low?
Too low, although it’s not a terribly bad issue. Let’s take Uber as an example: we buy Uber rides multiple times a week — if I want to increase the price on you, that’s hard to do because you notice the price changing and you don’t get any extra value. On the other hand, if you have customers that buy once and stay with you for a long time, it’s less of an issue changing the price because you’re not changing the price on that customer, rather only on the new customers. Generally speaking, price high and you can always discount it if you need to get customers in.
The Lean Canvas also addresses customer segments. Is it a problem for a company to have numerous different customer segments in their market?
It’s a problem if they’re trying to chase them all down at once, yes. We always tell startups that you can really only focus on one or two segments, so be careful about the ones you choose, Dividing your attention across multiple segments is hard to do in an early-stage business. You’ve got to go after them in bowling ball fashion; hit the first segment and then you can start chasing the next one, and the one after that, until you achieve world domination.
Is there a rubric for picking a particular segment to go after?
There are lots of different ways of thinking about it; the one that’s most commonly applicable is “crossing the chasm,” where you find the customer segment that’s most desperate for the thing you offer and is most comfortable with the associated risk of trying something new. Once they sign up, they’re the first bowling pin; the next segment, the people whose need isn’t quite as high and whose risk tolerance is a little lower, will use the original ones as a reference point.