If you’re a company’s founder in an early market, you know how hard it can be to cross the chasm between early adopters and mainstream customers. Early markets are by no means easy to tackle, so in this post, I’ll discuss seven tips that will help founders navigate these difficult waters. These tips range from defining the competitive space to defining and executing the right sales strategy and will help you decide the key actions to take, regardless of your product.
But first, some basics.
What are early markets?
An early market is a market in which a company sells a product or service that is not yet considered mainstream. In most cases, the company is selling to early adopters who are willing to take a chance on a new product or service; in other words, visionary customers who believe a new product will end up becoming mainstream.
These markets can be very difficult and are very common in the technology industry. And if you choose to go after them, it will probably benefit your company’s development enormously thanks to the first-mover advantage, if done right. For example, think of the first companies that developed the payment protocols that gave birth to the first credit cards. It’s no surprise that this handful of companies still dominate the credit card scene in countries like Canada and the U.S., 80 years after the first credit cards made their appearance.
Common Mistakes Entrepreneurs Make in Their Business Journey
The following are a set of tips that will help your early-market startup make it across the chasm and reach success:
Tip #1: Be ready for a long haul.
First, it’s important to remember that early markets often take years to develop, so be prepared for the long haul. Also, it’s very common for early markets to be extremely unpredictable.
For example, if you had asked a consumer in the mid-’80s what he thought of the idea of a flat, touch-screen device that could stream videos and play music, chances are he would have found it ridiculous. Yet today, we can’t imagine our lives without them.
Tip #2: The initial sales strategy is essential.
Sales in early markets are very different from your typical sales strategy for mainstream products and services. Your strategy should be closely linked with product design, release, and feedback cycles since it is an important element in determining if you have product-market fit.
In early markets, you should be selling to the few select customers who truly want your product badly enough and have the internal grit to work with a startup developing an unproven product and to deal with the difficulties that will surely come up along the way.
This implies that your first customers need to be well-aligned with the vision of your company and product. This usually means that you, as the company founder and visionary, are the only one who can really sell the product to the right customer in the early stages of sales.
For example, suppose you’re launching a startup that will develop a new form of banking in the emerging metaverse; one that integrates the services that the best established banks have to offer and the services the biggest cryptocurrency exchanges have to offer with the virtual-reality worlds where people will spend most of their time in the near future. When pitching your product, you’ll need to be able to clearly convey how your startup is different from banks and cryptocurrency exchanges, what your vision of the product is, and even how you envision the metaverse will evolve.
If someone who doesn’t have this vision perfectly aligned with yours manages to sell your product, they will most likely be selling it to the wrong person for the wrong reason, creating false expectations and problems down the road.
Tip #3: The way you segment early markets matters.
We all know how important market segmentation is for a successful marketing strategy, and it is even more important for early-market startups. Following Geoffrey Moore’s market segmentation for pre-chasm companies, your marketing strategy should focus first on innovators, then on early adopters who will become design partners to help improve your product, and lastly, on an early majority that will begin to drive sales.
Why start with innovators?
Innovators are confident risk takers who look for opportunities to advance their technology and bring new products to market. They love new ways to solve problems and can provide valuable feedback to help you boost your go-to-market strategy by steering your product in the right direction if you need to. In short, innovators will help your early market product reach market-value fit.
Why are early adopters important?
Early adopters are different from innovators because they’re more interested in sorting out specific business problems that your product can help with so they can get an edge over their competition. Therefore, they’ll become design partners who will help you improve your product-market fit.
This phase is concerned with your product’s beta or early general availability (GA) release. Early adopters expect that there will be bugs that need sorting out, and they’ll help identify and solve them and even help you develop an adequate user experience, which is why they’re referred to as design partners.
As a rule of thumb, when marketing to early adopters, you’ll want to give them a significant discount or offer your product for free in exchange for their valuable feedback.
The early majority
Connecting with the early majority is one of the hardest parts of growing an early-market company. However, it can be accomplished by getting enough feedback from the previous two segments to get a good product value and market fit. To achieve a product-sales-market fit, i.e., to cross the chasm, your product must be free of any major or obvious flaw and must be generally available. The user experience must flow from the demo to installation to production-level execution and beyond without a hiccup in a reproducible way.
Once you get your first 5-10 paying customers with similar use cases, you can hone your marketing strategy and begin scaling your business.
Tip #4: Choose the right early sales representative.
Even though you’re the best person to sell your product to the right customer in the first stages of your marketing strategy, you’ll probably want to hire a sales rep to give you the support you may need to close the first deals.
But, how do you choose the best sales rep for your early-market product?
Your priority should be to hire a strong senior sales rep who can close deals. As the founder, it will be up to you to do the actual selling, but your first sales rep will help get you in front of the appropriate person to sell to within a company. They’ll discover strategic initiatives that match your product, find budget within the account and more.
Tip #5: Optimize for adoption, not sales.
If you face a lack of adoption in an early market, it’s not a good idea to solve the problem by hiring more salespeople. This rarely works since you’ll only end up selling to the wrong customers doing more bad than good.
It’s best to optimize for adoption, which means making your product easier to install, easier to integrate with existing frameworks, platforms and workflows, etc. This means asking your potential users and the first innovators you reach out to the best way to integrate your product with their existing environment instead of assuming it on the fly, only to be proven wrong down the line.
For example, imagine you’re developing a new B2B payments app based on cryptocurrency, and you assume most of your clients will use Bitcoin instead of other options like Ethereum, but it turns out to be the other way around. While it may be easy to adapt your product later, this is a waste of time you could have avoided if you had only asked the right question from the start.
Tip #6: Avoid bringing in a sales executive too early on.
You may feel tempted to immediately hire a VP of sales once you have a working product. This is generally not a good idea since you won’t have a big enough market at first for them to thrive, and they’ll likely end up quitting. This can be very detrimental for your entire sales team.
You should only hire a sales exec when most of your sales representatives (at least 80% of them) are selling thrice their on-target earnings (OTE). It can take years to reach this point for many early-market startups, so hiring a sales executive is not likely to be your top priority.
Tip #7: Don’t assume you have no competition.
When you’re targeting early adopters, you may be tempted to think that you have no competition since you have a new product you assume no one else has. However, it’s possible for your prospect to have other options you must consider. This is important because you need your potential customers to have something they can relate to that serves as a benchmark to compare your solution against. Otherwise, how will they know your solution is any good? You’re better off making an effort to create a competitive space (therefore setting reference points for your prospective customers) than you are denying the existence of one.
The bottom line
The seven tips listed above will help you succeed when founding a company in an early market. The most important thing to remember is that your initial marketing strategy is essential and must be executed well in order to reach the right customers. You should also segment your market correctly and focus on optimizing adoption instead of sales, which will help you achieve a product-sales-market fit and cross the chasm.
