Nailing Down Your Target Market
Market Research
April / May 2008
Volume 6 Number 2
As Technology Ventures Corporation nears its 15th annual Equity Capital Symposium, we are working with clients on various aspects of their business cases. Most of the clients are scientists and engineers, and for some, this is their first foray into the world of market research and marketing. Many understand their technology well and feel that there are benefits to be had from it, but they do not understand how to really nail down target markets and market needs, two items that are vital in their efforts to secure venture capital funding.
With emerging technologies, it is difficult to assess markets and validate product needs, as most readily available market research deals primarily with established technologies and markets. While that sets the overall framework for emerging technologies, you have to delve deeper to get at the heart of those markets. The best way to do that is to talk with prospective customers and established industry experts.
Most people do not like picking up the phone and talking with strangers, so it's best to establish a game plan before doing it. Assuming you've already done some basic market research into potential markets and their industry players, here are some tips for validating markets and market needs.
The first step is figure out some companies in your possible target markets and people within those companies to talk with. (Check databases like Hoovers and D&B, industry associations, and trade journals to get some names in the positions that are appropriate for your questions.) Within any market, there are industry leaders, newcomers and companies in the middle of the mix. Some companies are innovators, and some are not. Ideally, you want to talk with some of each category, but you might want to start with some of the smaller, less intimidating (theoretically, anyway) companies rather than the big guys until you build up some confidence.
The next step is to determine what you want to know. The biggest issue you want to uncover is the potential customer's "pain" in the area you are addressing.
For example, pretend you have developed some integrated chip electronics to help with wireless communications. Further, pretend your possible target markets are communications, gaming and medical. Each may have a different "pain," and you need to establish as much as you can about each one. Will your product really help them fill a need? If so, you should also address items such as additional engineering needed, manufacturing issues and timing issues. You also want to know how much they are willing to pay for the electronics. Obviously, the information required would vary as to the product you've developed.
The third step is to craft a questionnaire. You should start off with a general statement of why you are calling, such as: "I'm developing wireless IC electronics that I believe will significantly impact the industry. I know you are a/an (leader, innovator, expert) in the industry, and I would like a few minutes of your time to ask some questions that will help me produce the best product for the industry's needs. " You have stated what you are doing, and that you are asking for advice—€”not a purchase—€”from this individual. People really do like giving advice, but you have to get them at the right moment, so expect some rejections. Be careful in this general statement, and throughout the interview, not to disclose more of your technology than is necessary; you want to protect it.
Now for the actual questions. Start off with more general questions (e.g., "What are the biggest issues facing the wireless chip market for this application?"), and then get more specific (e.g., "If you had electronics to overcome this issue, how would you expect them to be integrated onto the chips?"). Always group like subjects together and order the questions in a logical flow—€”no bouncing around—€”to keep the interviewee focused. Possible follow-on questions can be thought of before you call, but be prepared to modify them or create new ones on the spot to best capture needed information based on the interviewee's responses.
Wording the questions to get the correct type of responses can be tricky. Ask as many open-ended questions as possible. These start off with "how" or "what" (e.g. "What are the biggest issues?" and "What are the costs to the industry of those issues?") and force the interviewee to come up with a unique answer.
Open-ended questions usually yield the most information, both good and bad, that can help validate needs. Stay away from closed-ended questions, or those requiring simple yes/no or numerical answers, as much as possible; these can be leading and limit responses and therefore information. An example is, " Do you want to reduce the cost of electronics on your chips?" This leads the interviewee to the answer you want, and of course the answer will be "yes." That's hardly credible information!
Ask each person you speak with if he or she can refer you to someone else to call. That gives you a new contact and an entrée to that person, making it less intimidating to call but also more likely that the new contact will speak with you. Be sure to send a thank you note to each person you speak with, and leave the door open for a future call if you think you might need it.
Finally, look at and analyze the data you receive. Remember that it is qualitative, not quantitative, data, although it should give you plenty of good information to digest. Group the responses by industry, and write down all of the customer issues and related comments, both the good and the bad. Assess your technology against the issues, and you'll start to have some answers as to whether your product really will be useful to the industry(-ies) and whether it can effectively be integrated into current operations. If so, great; if not, maybe a few product tweaks will get you there.
Betsy Gillette is director of market research and planning for Technology Ventures Corporation.
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