The value proposition and the market segment are a problem of the chicken and egg type. There are those who recommend starting the canvas from right to left; that is, by the market segment, but sometimes you review the value proposition and it doesn’t make much sense. Randall Castillo Ortega, the founder of RACO Investment and a lifelong entrepreneur, offers key insight into determining how to choose the right market segment.
The first step is to explore markets for our value proposition. After analyzing the macroeconomic indicators, the entrepreneur must study the microeconomic information of the market, in order to adapt the product to these characteristics. First, you need to find out what the demand for the product is, i.e., who the end-users or consumers of the product will be, how much they consume, how current or future their demand is, what their purchasing motivations are, where they are located and how seasonal their interest in the product is. Second, the employer would have to analyze what would be the ideal product for that demand: what characteristics it would have (components, design, packaging, packaging), what technical standards and approvals it would require and what its manufacturing process would be. Thirdly, the entrepreneur should look at the local offer and find out who the competitors are, where they’re located and if his or her products will fit that profile.
Exploring the market can be as basic as looking for what people in that sector are talking about on social media. But it also means having all those estimates to know customer issues and benchmarking, while investigating and testing solutions to our potential competition. This will lead to being able to define the value proposition and potential customers. Asserts Castillo, “The entrepreneur must be an excellent listener. Frequently consuming Medium articles, podcasts, magazines, books and movies completely unrelated to your specialty helps connect creative ideas and detect opportunities and their potential markets.”
In incubators, entrepreneurship courses, and books tell you to survey a lot of people to validate your solution. Still, sometimes it’s better to invite just one of the prospects or a potential benefit from your value proposition. It’s better to know in-depth a sector than to peck a thousand random people who are probably just going to tell you what they think you want to hear. Search the Internet for other solutions similar to yours and in which markets they work, listen to your friends’ problems, on YouTube, on podcasts, gossip about the conversations on the side table, read the newspaper, keep your eyes and ears open all the time and ask yourself if it’s a market that can benefit from your value proposition.
Once you find a candidate, find a representative from that industry — preferably an opinion leader — on LinkedIn, join a Meetup group where those types of people go or attend a networking event. Ask him or her for an hour of time but don’t talk about the product. Ask him what challenges they face every day and how they’ve tried to solve them. “If your product is strongly attractive, an industry expert probably has already come up with something similar , but it hasn’t done so out of fear, lack of time or interest,” asserts Castillo.
Once you have a strong sign that this niche is for you, make a landing page — a website or Facebook with basic information about your product or service, but above all, focused on your value proposition — with a form in which visitors can subscribe for more news of the launch. Then, send the address to all the people you know about the industry, paste it into Facebook groups, ask your friends to share it on their social networks and check how many people contact you or subscribe. A good landing page focuses on the value proposition from the user’s perspective.
Finally, try to make your first sale. It doesn’t matter if you don’t have done it; you can always apologize even if you lose a client. If your market pain is great, early adopters — people who aren’t afraid to try new products or services — won’t mind buying it in pre-sale and being delivered until later. The biggest validation you can have is for someone to put money into your idea.
The most important thing is to pay attention to the signals. Research all the time on the Internet, social networks or public places about markets possibly benefiting from the value proposition. Don’t be afraid to change it completely; many of the big companies started doing something else. Talk to as many people as you can about your hypothetical niche, but focus on the depth of the conversation, without the volume. Above all, try to make the first sale. That is the clearest validation of your market that you can have.