ImaginativePRO Blog

EQUITY CROWDFUNDING SIMPLIFIED -- RAISING STARTUP CAPITAL ONLINE

 

Equity Crowdfunding is an alternative form of startup capital that lets you raise funds from the public in exchange for unlisted shares (equity) in the business. Unlisted shares aren't listed or bought or sold on an official public stock exchange, but sold online through an equity crowdfunding portal that has been approved by the SEC (FINRA).  An alternative to giving investors shares is to offer them a convertible note.

Enacted on April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act created the United States' equity crowdfunding industry. At first, only accredited investors were allowed to invest. By June 2015, another part of the JOBS Act, Title IV (Regulation A+), went into effect.

In 2015, the SEC adopted Regulation Crowdfunding to implement the requirements of Title III which permitted eligible companies to raise capital using Regulation Crowdfunding beginning May 16, 2016.

Investing through equity crowdfunding can give the investor a greater degree of personal satisfaction than investing in a blue-chip or large-cap company. Equity crowdfunding may offer more avenues for such targeted investments than publicly traded companies.

For those of you seeking investors for your startup, consider alternative financing sources like equity crowdfunding.  Please review Equity Crowdfunding Simplified, my newest e-book targeting startup founders, that explains what equity crowdfunding is, how it works, legal requirements, filing requirements, classes of investors, investor rules, advertising limitations, pro's and con's, tips for launching a successful equity crowdfunding campaign and much more.  

 

Courtesy of a YouTube video titled, "Equity Crowdfunding Simplified" by Tommy Toy, ImaginativePRO

WHERE STARTUP FUNDING REALLY COMES FROM (INFOGRAPHIC)

Prominent VCs and angel investors may dominate the headlines with their big sticker investments, but personal loans and credit – along with investments from friends and family – make up the lion's share of funding for startups in the U.S.

According to data compiled by Fundable, only 0.91 percent of startups are funded by angel investors, while a measly 0.05 percent are funded by VCs.  In contrast, 57 percent of startups are funded by personal loans and credit, while 38 percent receive funding from family and friends.  

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COMMENTARY:   Financing a startup is not a simple process.  Below we break down every step of the process and how it impacts your ownership. The first thing to understand about startup funding is that is not done all at once. There are multiple rounds of funding that occur as the business grows.

In the beginning stages, funding will typically come from your savings, loans, and family members. You should create a pitch deck, demonstrate an understanding of the market, and use this as an opportunity to show you have the skills necessary to run a business. 

After you have solidified your pitch, you should consider bringing on a startup co-founder. This person can be someone to bounce your ideas off, or even someone that compliments your skillset. Keep in mind that startups with two co-founders raise 30% more than startups with only one. 

The next stage is known as pre-seed funding. This is when you present your fine-tuned pitch to family and friends, and potential angel investors. Keep your expectations in check, startup funding for this round typically doesn’t exceed a million dollars. However, this money will be critical to the success of your company, allowing you to hire your first employees or even secure an office to work out of. Another option at this stage is to secure a business loan. You’ll have to pay back the loan with interest, but you also won’t be giving up equity.

The next stage is called the seed round. $1.7 million is the typical amount raised during this phase. This is the stage where venture capitalist funds and accelerators start to show interest in your company. However, depending on the source of funding, you may give up 10-25% of equity during this stage. 

The Series A round is the funding round that switches the focus from your company’s potential to its traction in the marketplace. Positive market reception increased revenue, and savvy use of previous investments will all play a role in this round of funding. Venture capitalists, hedge funds, and private equity firms will all be interested during this stage. Series A investments average around $10.5 million and may cost anywhere from 15 to 50% of the equity in exchange. Some businesses elect to try equity crowdfunding at this stage if they don’t attract a lot of interest from large investors. 

The Series B  round funding is traditionally used to scale your business to keep up with increased demand amid strong signs of growth and success.  In this round, you can expect around $25 million in funds in exchange for 15-30% of equity. Series B funding will also draw more scrutiny from potential investors, so make sure the business is fully fleshed out and ready to operate on a much larger scale. 

The Series C round is typically the last funding round before a potential initial public offering (IPO). Investment banks and private equity firms will be targets during this stage. If you make it to this round, your company will not be seen as a risky investment and more attractive to more conservative investors. Money raised during this round could be used to acquire competitors, increase the company’s global footprint, or increase the valuation before an IPO. 

During all the startup funding rounds described above, the shares of the company are privately held, and can’t be offered to the public. Through an IPO, the previously private shares can now be sold to the public. This allows investors to liquidate their shares if they choose and allows the company to raise even more money. Once a company goes public, the value of the company switches from an investor’s valuation to the trust and judgment of the public at large. 

Courtesy of an article dated November 20, 2013 appearing in Entrepreneur.com and an article dated October 26, 2019 appearing in My Startup Land

HOW TO CREATE AN OMNICHANNEL CUSTOMER EXPERIENCE AND WHY THIS IS IMPORTANT TO YOUR BUSINESS

Consumers don’t just touch and try products before they make a purchase. They learn about products from many platforms, including Google searches, social media, videos, mobile apps, company websites, and in-store experiences. Creating an omnichannel customer experience benefits businesses. Customers who engage through multiple channels with a business reportedly spend more. 

Let’s take a look at what goes into creating an omnichannel customer experience and how it can help you boost sales and increase customer retention. 

What is omnichannel customer experience?

An omnichannel customer experience is the connection of customer interactions from multiple channels into a single unified customer journey, enabling customers to experience your brand across multiple channels seamlessly.

Kinsta reports the following channels are commonly used by U.S. entrepreneurs  to sell products and services:

• Brick-and-mortar shop (56%)
• Social media (40% Facebook, Twitter, and Instagram, but Facebook alone is 25%)
• Website (34%)
• Pop-up shops, markets, and events (26%)
• Amazon (16%)
• Others (22%; includes Etsy, Alibaba, eBay)

Multichannel vs Omnichannel Experience 

Multichannel and omnichannel customer experiences involve selling to customers through online and offline channels. The key difference lies in the customers’ experience in these channels. 

A multichannel retailer may have a website, social media account, and brick-and-mortar store. These different channels are siloed or isolated from each other. They have little to no connection. 

Most businesses use multiple channels in their sales process. However, having multiple channels does not automatically equate to an omnichannel experience.

For example, a shopper may visit your website and browse products that they want to buy. Then, the shopper visits your physical store to buy the product in person. Unfortunately, the staff can’t find the product so they contact customer service, only to find out that the product is not available in-store. The customer leaves your shop without making a purchase. 

In contrast, an omnichannel approach aligns multiple channels to offer streamlined customer support and shopping experiences. 

For example, a potential buyer may use an app to browse your products. They might interact with social media posts to get more information about specific products or tag their friends in things they like.

Once they visit the store, an employee can assist them with an iPad and entertain their questions about the product. Instead of lining up, they can pay through their mobile phones or ask for help from an in-store assistant.

Omnichannel customer experiences are also valuable assets in customer support. Once a customer calls, your support staff can find a real-time record of their past interactions through whichever digital channel they used. No need to ask questions about their past issues with the service. 

Ultimately, this makes the buyer journey a lot easier for both staff and shoppers. Not only does it boost the efficiency of customer service agents but it also improves customer retention and brand loyalty. 

Customers are more likely to become brand advocates when placing orders is simple, customer service is easily accessible and efficient, and they experience a personalized shopping experience. 

Omnichannel Customer Experience vs. Omnichannel Marketing

It’s also noteworthy to mention that omnichannel marketing is different from an omnichannel customer experience. 

Omnichannel marketing involves sending messages to customers through digital and traditional marketing channels that connect with each other. 

For example, a customer may receive promotional SMS offers while shopping in-store. If they abandon a product online, they may receive abandoned cart emails and retargeting ads on Facebook. 

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An omnichannel experience, on the other hand, involves a multi-channel approach to sales, customer support, and marketing. It requires providing a cohesive customer experience no matter which channel customers use to interact with your brand as depicted in above the graphic.   

Companies creating an omnichannel experience must align their marketing goals, objectives, messaging, and design across various channels. By connecting these factors, a business can improve its marketing, customer support, and user experience.

Why the omnichannel customer experience works for businesses

An omnichannel strategy can significantly impact convenience and conversions.  

According to ClickZ, shoppers who used three or more channels to interact with brands had a purchasing frequency rate that was 250% higher than single-channel users. Customers who used three or more channels also had an AOV (average order value) which was 13% more than those that did not. 

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Harvard Business Review reports that customers who used more channels were more valuable. They spent an average of 4% more in physical stores and 10% more than online single-channel customers. 

These numbers prove that shoppers that interacted through multiple channels were likely to purchase more and make more purchases over time.  

Tips for building an omnichannel customer experience 

Wondering how to get started? Here are some tips you can use to integrate multiple channels. 

Map the customer journey 

Segment customers by determining where their buyer journey begins and all the touchpoints that lead to purchase. 

By identifying stages of cart abandonment, businesses can modify the customer journey and shopping experience in different channels to increase sales and improve convenience. 

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Use the right technology 

Seamless user experiences are impossible without the right technology. 

Support agents should be able to contact customers through live chat or mobile apps depending on their preferred method of communication. Websites should also personalize product recommendations to encourage customers to make repeat purchases. 

Consider software that includes sales and service tools like live chat, video and voice calls, and chatbots. 

Identify the stakeholders 

Implementing an omnichannel experience does not happen overnight. You’ll need to work closely with the departments that play a role in the buyer's journey, such as your sales, marketing, customer service, and product teams. 

Teach teams to provide customer support through different channels. The earlier you plan, the easier it’ll be to make changes and identify potential issues in the process. 

A good tip is to start small and then modify the customer journey on more platforms. You can align experiences in your main channels first, then expand these experiences across multiple supporting platforms. 

Listen to feedback 

Feedback from customers can drastically improve the buyer's journey. So, collect reviews and ask your customers to rate their experiences. 

You can send surveys through email or mobile apps. You can also generate a popup that lets customers rate their experience and give comments and suggestions. 

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Examples of omnichannel retailing

Need some inspiration? Let’s take a look at a few top brands that have successfully integrated different digital channels. 

Starbucks 

Starbucks offers a premium user experience. 

Customers are rewarded with a free drink after they sign up for a customer loyalty program. When they make a purchase through the Starbucks card, they can reload through the app, website, in-store, or by a mobile device—and their total rewards points are updated across all platforms. 

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Coffee enthusiasts can also make mobile orders, gift digital Starbucks cards, find stores near their location and tip their baristas without going out of their way. 

Neiman Marcus 

Neiman Marcus is a fashion brand that uses technology to connect online and offline platforms. 

The Neiman Marcus app connects shoppers to sales associates through text messages, calls, emails, or FaceTime. Shoppers can also use it to check their points and view upcoming events or promotions. 

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The website delivers personalized product recommendations and remembers size preferences, too. One major differentiator between Neiman Marcus and other online stores? You can use geolocation to find items stocked in nearby stores. New arrivals that suit customers’ preferences are sent through email and direct mail. 

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“Memory Mirror" is another distinct omnichannel feature. Have you ever wondered how your outfit looked from behind or from the side? The Memory Mirror can record and capture your try-on from every angle. Hesitant shoppers who need a second opinion can also seek advice on their looks by sharing the outfits with their network. 

COMMENTARY:    Acquiring and retaining customers is a key strategic objective for many business organizations.  Customer acquisition and retention has become even more challenging and adversely impacted because of the COVID19 pandemic and use of business lockdowns and infection preventive measures such as safe distancing and wearing masks.   To take full competitive advantage of the opportunity, business organizations need to adopt an omnichannel transition plan, which includes a comprehensive strategy and well-planned approach that involves addressing three key elements of the transition: 

• Culture - This is about the making changes to the human element within the organization:
  • Plan the change management roadmap (who does what and when during the transition).
  • Develop and empower highly skilled agents (select and empower leaders within the organization to drive the omnichannel transition).
  • Build a balanced talent model (HR activities: recruitment, selection, talent management, organizational structure, learning and development, analytics, performance measurement and succession planning).
• Processes - This is about the methodologies utilized to get things done:
  • Revamp business processes.
  • Design and monitor new organizational and people key performance indexes (KPIs).
• Technology - How and what type of technology is being utilized and integrated within the business organization. 
  • Perform an internal data assessment and identify opportunities for integration of technology within the business organization.
  • Integrate systems and information from all channels.

Courtesy of an article dated July 29, 2021 appearing in Acquire

THE MILLENNIALS: THE LARGEST AND MOST DIVERSIFIED GENERATION TODAY PRESENTS HUGE MARKETING CHALLENGES FOR COMPANIES

Companies that win millennials’ business stand to enjoy robust economic growth for years to come. In 2015, millennials surpassed baby boomers as the largest living generation in the United States. Now more than 75 million strong, this cohort, born between 1981 and 1997, is expected to peak at 81 million in 2036. Millennials already spend $1 trillion, and that spending power will increase as their income reaches $8.3 trillion by 2025 (versus $6.4 trillion for Gen Xers and $1.1 trillion for baby boomers).

Many forward-looking consumer companies and investment firms are wondering about the true marketplace potential of millennials and the appropriate influence of this cohort on their strategies. Because millennials are critical to future growth and value creation for consumer-facing businesses, we investigated this generation to understand their marketplace potential better.  We surveyed 11,000 people in May 2016, including 7,000 millennials, 2,000 Gen Xers, and 2,000 baby boomers about their attitudes, buying preferences, and category behaviors. Our research showed that millennials are a complex cohort with diverse preferences. The seemingly conflicting press on these consumers reflects seven distinct segments. Consumer companies and investment firms should take this complexity into account as they shape their strategies, as capturing a meaningful share of millennials’ potential will not be a one-size-fits-all proposition.

Aligning to the right millennial segments

We found that millennials fall into seven distinct segments along a spectrum of three behavioral clusters: value, quality, and image. Within each cluster, we see two or three segments that behave quite differently from one another (Exhibit 1).

Exhibit I

Value-driven consumers: 40 percent of millennials

These consumers fall into two segments, both of which are conservative in their purchase decisions and care less than other segments about brands. Economizers are relatively unengaged, budget-conscious consumers who go after deals and are brand agnostic. Risk avoiders rely heavily on recommendations and advice before trying new products or brands. They want to know that they have made good decisions and will emphasize advice and recommendations from others when they make decisions.

Quality-driven consumers: 22 percent of millennials

These consumers have definite preferences and consider brand selection a mark of their ability to make thoughtful decisions. Diligent loyalists show a distinct need for control and routine in many aspects of their lives (for example, diet and finances). They care about being informed and are largely content with their current products. Premium enthusiasts are highly educated consumers who see products and brands as extensions of themselves. They are willing to pay more to obtain the quality they care about. This cluster has the greatest affinity with health and wellness activities and brands.

Image-driven consumers: 38 percent of millennials

This cluster consists of three different segments. Experience-driven “you only live once” millennials (YOLO-ers) focus on enjoying life today, even if that means living beyond their means. Higher-income showcasers follow the latest trends, think newer brands are more innovative, and show off their purchases on social media. Explorers are willing to pay a premium to be the first to try new products or brands in order to set themselves apart.

Understanding millennial behaviors and preferences

Despite current lower incomes and concerns about the financial future, millennials as a whole spend money. Our research found that millennials are willing to pay premium prices for both goods and services, suggesting that “premiumization” trends will continue. In our survey, just over half of millennials indicate that they don’t mind paying more for quality products that will last for years. Even for value-conscious millennials on a budget, one-third admit that they spend more than they should, compared with 29 percent for Gen Xers and 14 percent for baby boomers.

This willingness to pay (for quality) extends across multiple product categories, especially food and beverages at home, where half of millennials report that they always or often pay premium prices. Other categories where we see greater willingness than other cohorts to pay a premium include tech devices (44 percent), apparel (39 percent), footwear (37 percent), and, surprisingly, automobiles (31 percent). But willingness to pay a premium differs by segment. YOLO-ers are especially willing to pay a premium for exclusive products and services. Explorers will pay more to get exactly what they want, while premium enthusiasts favor products made by companies that share their values. Marketers will need to communicate differently to win each segment’s consideration and loyalty.

Millennials spend on material things, not just experiences. They do spend more than older generations on experiences—for example, millennials report spending $164 per month on average on entertainment versus $101 for Gen Xers and $134 for baby boomers. What they do not do, however, is curb spending on other material goods to afford memorable experiences. Just as millennials are willing to pay a premium for quality, our research showed this cohort is outspending other generations on several major product categories, especially apparel and footwear. Millennials spend $524 per year on apparel versus $355 for Gen Xers and $439 for baby boomers. For footwear, those numbers are $264, $185, and $134, respectively (Exhibit 2).

Exhibit 2

By and large, millennials are also outspending either or both of the Generation X and baby-boomer cohorts on categories where we expect to see moderate to high growth (Exhibit 3). Consumer-facing companies should ensure they are well positioned to capture growth from categories where millennials outspend others. They may also need to convince their millennial customers to spend in other categories to deliver on their long-term growth aspirations.

Exhibit 3

Millennial segments differ sharply in their preferences for healthy products.  Not every millennial is deeply health conscious. Some segments (diligent loyalists, premium enthusiasts, YOLO-ers, and showcasers) care deeply about health and wellness.  In fact, they care more deeply than older consumers in the same segments.  These millennials want to know exactly what is in the food they eat and prefer organic, non-processed ingredients. But other millennial segments (economizers, risk avoiders, and explorers) find processed foods and nonorganic ingredients quite acceptable. We foresee plenty of growth in better-for-you and healthy categories, but the growth is coming from a portion of millennials and the influence they are having on their parents and children.

Influencing millennials

Millennials are thoughtful buyers. They look (and can find) a lot of information before making purchase decisions. More than half of millennials say that they “almost always research before buying,” which is sharply higher than other cohorts. Yet millennials are less persuaded than older generations by brand-directed marketing. They are more likely to rely on brand and product recommendations obtained via word of mouth, online reviews, and social media. Nearly half get most of their apparel inspiration from social media (versus 28 percent for Gen Xers and 7 percent for baby boomers). Millennials are also far more likely to share their opinions of products and brands, both on- and offline. Once millennials have children, they are far more likely to advocate for products and brands online.

Consumer-facing companies must adapt to having less direct control over the information that consumers get about their products. Leveraging different modes across a customer’s decision journey and tapping into customer advocacy is essential. Hispanic millennials, for instance, identify more with generation than ethnicity. To understand the relative importance of generation and ethnicity in the attitudes and behavior of Hispanic millennials, we compared their survey responses with those of non-Hispanic millennials and Hispanic Gen Xers and baby boomers in the same segments. What we found was that there was a much stronger correlation with generation than ethnicity among Hispanic millennials in all seven segments (Exhibit 4). There was a distinct difference between male and female Hispanic millennials, particularly around where and how they like to splurge. This suggests that there is more upside in targeting older Hispanics with more unique products and considering millennial segments rather than homing in on a narrower demographic-based segment.

Exhibit IV

Implications for consumer companies and investment firms

As consumer companies and investment firms consider portfolio-growth opportunities and new assets, they would do well to factor millennials into the equation. This cohort already has real marketplace potential, which will increase significantly over a relatively short investment horizon. Many Generation X– and baby-boomer-rooted businesses are struggling. Reaching a meaningful share of the millennial potential requires having different capabilities. Marketers, operators, and merchants need to take the following steps: one, penetrate the right segment; two, unlock what motivates that segment to spend money; and three, act on strategies that build loyalty through ongoing consumer engagement. When vetting organizations that claim to have a millennial opportunity, consumer companies and investment firms should probe and measure the extent to which they have done all three actions.

COMMENTARY:   As a management consultant I have had numerous opportunities to work with and advise young entrepreneurial millennials.  They gravitate towards live entertainment and sports events, health and fitness, gaming, internet surfing particularly social networks, reading, socializing with close friends, participating in social causes, and early adopters of the latest gadgets and technology.  

Millennials don't watch much TV, and get most of their entertainment, news and information from surfing the internet.  They represent real challenges for marketers wishing to reach them.  They ignore television commercials entirely, referring to their close circle of friends for opinions and recommendations on products.

As explained above, millennials fall into seven distinct consumer segments (economizers, risk avoiders, diligent loyalists, premium enthusiasts, YOLO-ers, showcasers and explorers) within three behavioral clusters: quality, value and image.  Any marketer wishing to reach millennials must personalize their content for each of the seven distinct consumer segments and incorporate the behavioral attributes of quality, value and image to entice the millennial.  There is no one-size-fits-all marketing strategy so don't even try.  Millennials are far too diverse, brand agnostic and complex for any one marketing solution to work.        

Social media is the place to be when it comes to engaging and marketing to millennials. Typical advertising outlets won't grab their attention. Use social media to leverage a real, genuine connection with them. If you do this well, it can lead to better sales and brand impressions, as well as more trust.

Forty seven percent of millennials believe all Americans have the means to start their own business, and 84 percent revealed that they are more satisfied as an entrepreneur than when they worked for someone else.

While older generations generally view going into business for themselves as too risky, millennials are more likely to take the leap of faith.  In fact, 56 percent of millennials reported that entrepreneurship has always been a long-term goal, compared to 43 percent of Gen Xers and 21 percent of baby boomers.

Millennials have grown up with technology and view it as essential to running any business today. Fifty percent percent of millennials believe that growing up with the internet has prepared them to become entrepreneurs. Further, 66 percent of millennials believe that they are able to handle the marketing and social media aspects of growing a business, compared to 28 percent of baby boomers.

A lot of millennials began their businesses from their passions with the most popular sectors being art, music and entertainment (13 percent), followed by food and beverage (12 percent) and retail (10 percent).

While there are a number of factors that influence a person’s choice to become self-employed (such as the state of the economy), 24 percent of millennials revealed that they come from a family of entrepreneurs or small business owners, compared to only 12 percent of baby boomers.

Courtesy of an article titled "Cracking The Code on Millennial Consumers" dated March 18, 2017 appearing in McKinsey & Company Blog

 

 

HOW TO TARGET THE RIGHT AUDIENCE FOR YOUR BRAND

“You can’t be everything to everyone,” is an old marketing adage.  Doing so makes you nothing to no one, or so the saying goes. But how many companies are brave enough to act on this principle?

It is easy to talk behind closed doors about actively choosing to not target specific audiences, and quite another to actually execute campaigns and messaging that may effectively eliminate you from consideration for future business. This is how McDonald’s ended up serving salads no one bought, it's how one of the greatest flops of all time, “new Coke,” happened. Coca-Cola is generally thought of as one of the most successful brands in history, and even they got sucked into the idea that you need to change to find new customers. The question is: at what cost?

Whenever you address a new market or audience, your current customers will ask the question, “Do I still fit with this brand? Do they still serve me and my needs?” When you have built up credibility and strong brand loyalty, this question is a whisper.   Targeting markets and customers requires caution:

• Address too many new markets too quickly, and you’ll feel the effects of slow sales, lower customer loyalty, and decreasing momentum in your business.
• If you try to be everything to everyone from the very beginning, you’ll fail to win any market. You have to pick an audience to target and tailor your marketing message for them. Here’s why.

Targeting everyone creates brand confusion

As we’ve evolved, our brains have learned to lump things we see and interact with into general categories—dangers to be aware of, things that are enjoyable, edible goods, anything and everything you can imagine. This helps prevent us from becoming paralyzed by decision making. Unsurprisingly, brands and products are also affected by this system.

You cause brand confusion by trying to target everyone. To continue the McDonald’s example, when they first introduced salads to the menu, they were working to target an entirely new customer base: those who want healthy food.  The issue here is that McDonald’s has stood for convenience, speed, and consistency forever.  When you go to a McDonald’s, you’re looking for a very quick, portable meal that won’t slow down your road trip or take up much of your work day.  If that’s what you associate with McDonald’s, and then they start offering salads—hard to eat on the go, and not all that fast—why would you even consider buying them?

On top of causing confusion, when you begin targeting an unrelated customer set, your brand feels inauthentic—to both the people already buying from you, and those you’re trying to target now. New Coke was an attempt to appear modern compared to the fresh view of Pepsi. Except Coke didn’t need to do that. Their customers felt betrayed by the change in formula, and anyone who wanted to rebel against the established and storied brand of Coca-Cola was already drinking Pepsi. It wasn’t about the taste, it was about what the brand stood for. Changing that attracted nobody and just upset Coke’s loyal brand followers.

Earn the right to expand your market

A natural question to ask is “If we target one group, can we later grow by targeting more groups?” Consider Amazon as perhaps the best example of expanding from one small offering to, well, the entire world of consumable goods. When Amazon started, they sold books online. That’s it. Then they branched out into consumer electronics, and then added their leading revenue maker, Amazon Web Services.

If Jeff Bezos had launched Amazon as an online bookstore and provider of business networking infrastructure from the start, would that combination have made sense to anyone? Would anyone have trusted that the software was any good? Personally, I would have been entirely lost—and I expect the executive teams who decide to purchase AWS for their business would have felt the same way.

You don’t just get the entire war chest at the beginning—you have to earn the right to expand your target market. A great example of doing this successfully is Lululemon. When Lululemon was founded in 2000, it made only yoga clothing specifically designed for women. Talk about niche. After becoming known for making exceptionally comfortable, durable, and high-performing yoga clothing, Lululemon expanded into other areas of fitness including running, cycling, and weight training with a focus on a CrossFit-loving clientele. It was only after dominating the women’s activewear market that Lululemon moved into men’s clothing. They first became the go-to brand in one segment of one part of the activewear industry and then, slowly but surely, grabbed more and more market share from adjacent segments.

Growth has costs—more so if you overreach

Even a brilliant business mind like Jeff Bezos has had to struggle with the growing pains of rapidly expanding into new markets. As recently as October of 2019, Amazon has conceded profit to fuel growth. Very often, Amazon has entered a market by first offering a product on its platform, and then figuring out how to produce it cheaper themselves at a similar quality, and then offering their own line. This is how AmazonBasics came to be, and it certainly ruffles a few feathers—and clears out a few checkbooks along the way.

Additionally, investing in growth means having less liquid cash readily available. Having cash is an asset, especially during tough economic times, as we are all acutely aware. Access to capital is cheaper due to low interest rates, and typically weaker competition is pushed out of the market—freeing up superior talent you can bring into your organization, not to mention customers suddenly looking for options. Those with cash come out on top as growth and expansion become more readily accessible. If all of your capital is tied up in playing in a few too many sandboxes, you’re in a bad position to take advantage of these opportunities as they present themselves.

Long-term growth and scale requires patience and honesty

We all want to be the next Lululemon, a small business turned public company with massive numbers of loyal fans across various market segments. But is your business truly ready for that? Have you earned that sort of success?

No doubt, success to that degree requires a bit of luck at important moments. But, even more so, it requires smart strategic thinking about who your buyer is, and how you can wow them time and time again. It requires the patience to recognize that just like a human relationship, your brand will not be loved by everyone in a day. It requires the patience and discipline to see your strategy through and to adjust when needed. And it requires the honesty to recognize that you’re simply not capable of being everything to everyone—which is completely okay.

Own your share of the market. Serve the people only you can uniquely serve, and do it with excellence. Make their lives better each and every day, and when the opportunity arises to strategically move into an adjacent market and improve that customer’s life as well, take it with confidence. But earn it first.

COMMENTARY:   In order to target your ideal customers you need to know the following:

• Who they are
• What they do
• Where they are
• What appeals to them
• How connected they are
• What the do online

The following infographic explains each element of what you need to know about your target market.

How to Define Your Target Market

To build a solid foundation for your business, you must first identify your typical customer and tailor your marketing pitch accordingly.

1. Look at your current customer base.
2. Check out your competition.
3. Analyze your product or service.
4. Choose specific demographics to target.
5. Consider the psychographics of your target.
6. Implement target marketing.
7. Evaluate your decision.
8. Use additional resources as needed.

Target marketing does not mean that you are excluding markets that do not fit your criteria. Rather, target marketing allows you to focus your marketing dollars and brand message on a specific market that is more likely to buy from you than other markets.  This is a much more affordable, efficient, and effective way to reach potential clients and generate business.

With a clearly defined target audience, it is much easier to determine where and how to market your company. Here are some tips to help you define your target market.

• Look at your current customer base - Who are your current customers, and why do they buy from you? Look for common characteristics and interests. Which ones bring in the most business? It is very likely that other people like them could also benefit from your product or service.
• Check out your competition - Who are your competitors targeting? Who are their current customers? Don't go after the same market. You may find a niche market that they are overlooking.
• Analyze your product or service - Write out a list of each feature of your product or service. Next to each feature, list the benefits it provides (and the benefits of those benefits). For example, a graphic designer offers high-quality design services. The benefit is a professional company image. A professional image will attract more customers because they see the company as professional and trustworthy. So ultimately, the benefit of high-quality design is gaining more customers and making more money.
• Choose specific demographics to target - Figure out not only who has a need for your product or service, but also who is most likely to buy it. Think about the following factors:
  • Age 
  • Location
  • Gender
  • Income level
  • Education level
  • Marital or family status
  • Occupation
  • Ethnic background
• Consider the psychographics of your target - Psychographics are the more personal characteristics of a person, including  how your product or service will fit into your target's lifestyle:
  • Personality
  • Attitudes
  • Values
  • Interests/hobbies
  • Lifestyles
  • Behavior
• Evaluate your decision - Once you've decided on a target market, be sure to consider these questions:
  • Are there enough people who fit my criteria?
  • Will my target really benefit from my product/service? Will they see a need for it?
  • Do I understand what drives my target to make decisions?
  • Can they afford my product/service?
  • Can I reach them with my message? Are they easily accessible?

Courtesy of an article dated August 31, 2021 by Joe Mills for Element Three