Determine your target customers

- Let's explore the core elements of product strategy using the elevator pitch framework as our guide. The elevator pitch framework is simple and helps you express your strategy in only two sentences. You keep the capitalized words intact and replace the underlined lowercase ones with the core elements of your strategy. Then you read the whole thing out loud and see if it feels right. The first blank spot in the framework asks us to fill in the target customer. In other words, identify who we're building the product for. Now, you may be asking yourself, "Why should we do that? Why should we limit the reach of our product? Can't it work for everyone?" Well, it's generally true that your product can't be everything to everyone. Even products that seem to have universal appeal typically start from a narrow target. Take Facebook, for example. Before it reached the masses, it was targeted at college students in the United States and was designed specifically to get them hooked, and the rest is history. Now, no matter the size of your company or how much money you have in the bank, the resources you have available to invest in product development are limited. They're better spent creating a critical mass of value for a distinct target audience than spread thin across many audiences, failing to satisfy any of them. The auto industry provides some great examples of customer targeting. Consider Toyota versus BMW. The two car companies clearly target different sets of customers. Toyota aims for mainstream middle-class families that value functionality. BMW targets more affluent people who are interested in a luxury experience. Both companies have created great products that suit the needs of their target audiences. It's easy to see how targeting clear customer segments helped Toyota and BMW make many product choices that led to their success. Imagine what would happen if they tried to build car models that target all types of customers. Would the car model be designed to be economical or luxurious? Would it emphasize reliability or performance? So as a product manager, focus is your friend. You might ask, "What does customer segmentation look like?" Consumer products typically target demographic categories such as age, gender, level of income, and so on. They may also target geographic locations. Enterprise products would typically target companies by size, industry vertical, and so on. As you identify the target customer segment that's right for your product, you should also consider the overall size of that segment. How many consumers or customers would it cover? What would be the addressable opportunity or potential revenue available to you in this market segment? Now let's go back to BMW and fill in the target customer spot in the elevator pitch framework. For educated, affluent males, ages 35 to 55. That would be one reasonable way to identify a customer segment for BMW's basic model, like the Series 3. There could of course be plenty of people outside of this target who buy a BMW. Identifying this target doesn't mean that the car is not going to work for women or high school graduates. But it helps BMW design the model to be highly attractive to this customer segment and win market share in that category. Let's do this also for an enterprise product. We can look at Salesforce and how it emerged as a dominant force in the customer relationship management, or CRM, market. For small businesses without a CRM solution. That would be a good way to describe Salesforce's early strategy to focus on the lower part of the market where Siebel, the large incumbent at the time, wasn't active. By focusing on this segment, Salesforce was able to establish a launching pad that allowed it to later climb up to larger enterprises. Target customer is the first blank spot in the elevator pitch framework for a good reason. Everything else flows from this first choice. Who you build for is a critical decision that can make or break your strategy.