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Marketing

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What is market size?

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I’m a judge for Mass Challenge, as well as the Harvard Business School competition, and I’ve noticed that many entrepreneurs don’t know what market size means. Let me call out two of the most common mistakes, which can be the difference between recognizing a real opportunity and fooling yourself into believing something is an opportunity when it isn’t.

When a potential investor (including you, investing your time and career!) asks the size of your market, they’re asking how much money is out there (or how many customers) that could conceivable be spent on your company.

Market Size Isn’t Demographics

“The market for our new deodorant is anyone over the age of 12.” Actually, it isn’t. That’s way too general. Your market is defined at least in part by who you can reach. Your accessible market is what matters. You can’t reach everyone over the age of 12. “The market for our new deodorant is teenage girls between 14 and 18.” That is a much more realistic assessment and probably much more reachable through advertising in an identifiable set of magazines, TV ad spots, etc.

Market Size Isn’t Your Customer’s Revenues

The other big mistake entrepreneurs make is giving the market size as the total market revenues of all possible customers. “We sell hand sanitizers to media companies. Combined media revenues were $100 billion last year.” That’s a slippery evasion, because no media company will spend all their income on hand sanitizers. The market is not total revenues of all possible customers, but total amount all possible customers are likely to spend on your product. “Media companies spent $100 million on hand sanitizer last year, so that’s our market size.”

Market Size is the Potential Revenues You Can Reach

“The market for our internet-enabled back scratchers is middle-age men who feel the need for meaning in their lives. There are 50 million of them in my country, and at $19.95 (+ shipping and handling) that’s a billion dollar market.” Yes, except there’s no way to reach all 50 million of those customers. If there were a mailing list of all 50 million, you could do it. And you can certainly try your best to cover every possible advertising and media outlet that reaches middle-age men. But at the end of the day, only people you can reach with your message are potential customers.

An acquaintance of mine is developing a product for online gamers who make a living by livestreaming their games. That’s an addressable market, because there are forums, awards, conventions, podcasts, and an entire media ecosystem that pretty much every live streamer follows.

To put it all together:

When you’re evaluating the potential of an opportunity, be careful to ask how much money could reasonably come your way from the customers you’re explicitly able to reach. That is a much better number to use for market size.

LinkedIn etiquette: If you must cold call (don’t), at least do it well.

LinkedIn etiquette: If you must cold call (don’t), at least do it well.

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Someone buried under marketing email

LinkedIn is an amazing resource! Use it to find people who are selling what you want. Use it to offer or find jobs. But don’t use it for outbound sales.

It’s been open season for people spamming my inbox with unsolicited sales pitches. While I’m sometimes open to sales pitches, not on LinkedIn. It’s a platform where we go to showcase ourselves to anyone interested in what we have to offer. No one goes there to be sold to; everyone goes there to sell.

This is a really great system! If someone wants an executive coach, they search for “executive coach.” Then they reach out. Everyone wins: the customer finds a coach, and the coach deals only with prospects who are already a good match.

Outbound cold emails ruin all that. People reach out with a generic form-letter pitch. “Hi! Buy my product.” The worst thing about these form letters is that they’re so obviously form letters. I’ve even had people ask what I do. What I do? WHAT I DO? Other than pages of description, links to videos, a website with 400 articles on it, and two books, that question betrays the person as a rank amateur.

Think about it. This is LinkedIn! There are pages of information right there. All it takes is a single click, then some reading. And they choose to send a one-size-fits-all form letter. The message is loud and clear: “I don’t bother to put a modicum of thought into my approach.” If they can’t be bothered to read your profile before spamming you, what does that say about the kind of work they’re likely to do?

If that’s you, and you use LinkedIn for outbound marketing (please don’t), customize your pitch. Not by inserting some cut-and-pasted text (“I read your article [ARTICLE_TITLE] today”). Read your prospect’s profile. Read anything they’ve written. Then think. Then, and only then, write:

I read your article “What Koalas Can Teach Us About Community.” Your Eucalyptus-leaf-Like-button insight was brilliant!

… Now when you segue into your pitch, you can make it personal, so in the event they are open to inbound sales, at the very least you’ll stand out from the crowd.

If you don’t use LinkedIn for outbound marketing (good for you!), but you’re on the receiving end of those who do…

Feel free to steal this canned response

Hi,

LinkedIn is primarily a platform for people to inform the world about what they do, so they can accept inbound inquiries. People also use it to list and answer job ads. But no one comes here to be marketed to.

If you are interested in hiring me or my services, let’s set up a time to talk. If, however, you want to pitch me your services in a form-letter cold call, I’m the wrong person for you. 

By the way, a word of free coaching: on LinkedIn, you can find out a tremendous amount about someone with a single click. That means letters make you look *especially* bad. A form letter screams “I don’t bother to do my homework.” That’s not a good look, especially if you want someone to hire you.

If you’re going to pitch someone (please don’t) on LinkedIn, five minutes of homework and a minute of customization, will give you a much better chance of coming across in a way that would engender a real response.

I hope you enjoyed this automated response. It attempted to give a clear answer and an example of the kind of coaching advice I give. It’s a sign of the times that this particular coaching advice is so widely needed that a form letter works, but … there you have it.

Enjoy!

Update: In a hilarious bout of complete hypocrisy, I might start doing some mass outreach on LinkedIn. Given COVID levels, I’m still not comfortable going to indoor conferences, which makes it very difficult to do propecting.

What’s your industry? The answer may surprise you.

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The way people define industries is really quite interesting. I’ve once again been asked to be a judge for the Harvard Business School New Venture Competition. They asked what industries I’m comfortable commenting on. It’s a surprisingly hard question to answer, because it’s quite unclear what an “industry” is. Here are a sample of a few things that people call industries:

  • B2C internet
  • B2B internet
  • Health Care
  • Medical Devices
  • Energy
  • Financial Services

What makes these an industry? Is it that all members of the same industry share the same markets? Is it that all members of the same industry share the same employee skill sets? Is it that all members of the same industry produce the same kind of products?

Every definition I’ve tried has glaring exceptions, which makes me wonder whether thinking in terms of “industries” really makes as much sense as I’ve always assumed.

Perhaps it makes more sense to think in terms of:

  • companies/products who serve a given market
  • companies/products that require certain kinds of distribution
  • companies/products that require certain specialized knowledge on the part of employees

What do you think?

Marketing vs. Sales vs. Copywriting vs. Design

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I’ve recently noticed that many entrepreneurs hire a “marketing person” and then end up with someone who doesn’t do what they expect. Sometimes it’s because they didn’t realize what “marketing” means. Other times, it’s because the person they hired didn’t know what marketing means. Here is a quick guide to understanding the difference between professions that are distinct, separate fields, but get confused, because the titles are so often misused:

Marketer. A marketer decides what market a product will be sold to, how the product will be described to make it stand out from its competitors (called “positioning”), and how it will be priced. A market is a broad set of people who might want to buy the product that can be reached by the company. “Every adult over the age of 25” is not a market, because there’s no way to reach every adult over the age of 25. “Single women between 18 and 35” is a better market because there are magazines, TV shows, web sites, and other venues where members of that group hang out. Those places—often called “channels”—are how a company can reach that market.

A marketer also chooses the message to send to a market. Whether to say “We’re the lowest cost pony rental service in town” or “We have the only purple pony east of the Mississippi” is a marketing decision. The first message will appeal to members of the market who care about price. The second message will appeal to customers who care about … purple.

Salesperson. Marketers deal with defining the product. Once the market is identified, the salespeople actually go out and convince people to buy. The marketer decides, “We’re selling private jet memberships to corporate CEOs.” The salesperson drives out to the country club, finds a CEO, and says, “Would you like to buy a private jet membership?”

Note: the “junk mail” and “spam” professions are often called “direct marketing.” Those professions are rarely marketing; what they are is sales-at-a-distance. Very few people I’ve met who do direct marketing spend much time defining their market and competitive strategy. They spend their time selling.

Copywriter. A copywriter writes the text that will appear on a web site or in an advertisement. Text must accurately represent what makes a product unique and appealing to its target market. Knowing takes a marketing perspective. If it’s ad copy, it must also persuade. That’s a sales perspective. The text must also be clear and well-written. That’s a writing skill. You’ll do best with a copy writer who has good writing skill, and the perspective appropriate to the piece being written. A website “about us” page may require a marketing perspective, while a product sales landing page might require a sales perspective. Don’t assume the same person can write both kinds of copy. Also, don’t assume that a good salesperson or marketer can write good copy. They’re separate skills.

Designer. A designer makes things look good, and creates a certain feel using visual design. The designer will choose your website layout, your fonts, and so on. Designers need to know enough about your site to create the mood you want. That mood, however, is usually decided by the marketers, and it should send the right signals to the target market. Marketing would decide “We want a cartoony, happy feeling because we believe that will appeal to single women between 18 and 35” or they would decide “We want a professional, elegant feel to appeal to single women between 18 and 35.” The graphic designer would then create a look, feel, illustrations, etc. to make that impression.

These are different skills, and they often require different people to get them right. But when you get the right marketing, powerful salespeople, killer copy, and a great design, you’ll build a much stronger, more powerful business than you would otherwise.