"There is only one Coca-Cola" or why you should accept that your product is not for everyone

Some years ago I was attending at one of my first classes at the university where we started learning about the importance of market segmentation and how this is the starting point for having a chance to successfully sell a product or a service. In a nutshell, we need market segmentation because not all the customers have the same kind of needs and to create a solution to a problem we have to target a specific group of customers which behave in a similar way and therefore can be served with the same solution.

Of course, many of us thought about Coca-Cola, a product that for many years seems to be an everyone-target product. Anyway, fast forward to the present, we can see that Coca-Cola even if it is still serving a segment huge enough to think as "for everybody" is not anymore, in fact, a one-size-fits-all product. Just think on the several products they launched under the same brand to target customers with different needs (eg. Coca-Cola light, Coca-Cola Zero and the last one Coca-Cola Life). So if the all mighty Coca-Cola needs to adapt its products to the needs of the customers imagine you should do the same and even better.

What happen in the real world?

In theory, everybody accepts that doing market segmentation is something important to develop a successful business, but more often than not, entrepreneurs fail in ruthlessly define its target market.

Probably, the number one bias that any founder have is to wish to have segment big enough to be the Coca-Cola of "X" (Replace the "X" with any need/solution you could think about). But the truth is that most of the times your solution, if even solve a real problem for the user, is indeed helping a smaller group of people than you think, or in other words you are being helpful for a sub-segment of what you originally thought your segment was, and that is where things start going wrong.

I experienced this in the real flesh at a startup I worked some time ago, the target market we were trying to serve was “All the people who dine out”. This broad and undefined segment was not matching with our product because only a subgroup of that segment was getting real value from us.

Why doing market segmentation right is so important?

If you fail in defining your target market, you will start seeing that the main KPIs of your business looks bad, this will probably lead you to think that your product is wrong and thus, you will start trying to improve the product changing the features you already have, adding new features , sending push-notifications or sending spammy e-mail campaigns and of course doing A/B test to find that magic thing that change your business overnight, but at best what you will find are minor improvements that will lead you to frustration because in the end everything seems to have almost no impact to make your business work.

Continuing with the story, we took this approach of iterate the product as many times as possible, and as you can imagine we had the same outcome, our KPIs seems to be nailed to the ground and impossible to move, we tried almost everything and even created a “Loyalty program” thinking that we can add more value to our users, but in fact we only make the problem worse because we added another layer of complexity to the product.

What can we do to overcome this situation?

In my opinion, you have to kill the idea that the segment selected in the beginning of the product development cycle and the problem you are trying to solve are things that can't be changed, while the product is the only thing that could be broken and therefore be changed in order the improve your KPIs.

Now you have buried the first obstacle, you can start trying to find the real "Product/Market fit" because your mind is not anymore anchored to ideas that may be not truth. This mean that you will challenge everything, what you defined as the product, as the market and as the solution.

In the book "Lean Analytics" you can find a basic framework to validate your business, is only one of the many approaches you can take, but I think is a really good one and startup minded. I’m going to briefly explain this framework because is not the main point in this post. The first step is Empathy and here you try to find a real problem users have, then you have Stickiness step and this is where you try to meet that need with your product (your proposed solution), followed by Virality step that consists in fuel growth both organically and artificially, after that the Revenue step is basically finding the right way of making money and at the end Scale step that finds the way to can reach new audiences. As you can see this process can be applied to new business or an ongoing business, the only thing that probably change is how much you are attached to an idea.

In this journey, you are going to find powerful insights about how to make your business feasible but unfortunately is not like math where 1+1=2, you have to try several solutions to many users segments until you find the right approach. So is important to test as fast as possible and try not to stay anchored to any particular solution. In this case, the open-minded approach uses to work best.

This story ends with us facing the reality and accepting that there was not a fit between our target market and our product so we decided to pivot (in a shy way) our product. You may wonder why we just not defined the segment right with the knowledge we obtained from several iterations and the reason is the size of the segment was not big enough to have the business we wanted.

Conclusion

If you are a founder, you have to open your eyes and accept that your product is not a Coca-Cola and if you are an employee at a company you have to pick this battle as your own and fight to find that segment.

If you do your homework well you will be in a much better position to really develop a product that users love because you'll actually deliver value to them, this also help you to spends right in user acquisition or you'll find that you must pivot to something else. Any of this situations make you be in a much better position to grow a company.

The last I want to mention is that doing market segmentation right is only one of the many things you must excel at to really create a sustainable business.

P.S: I'm not going to lie, I've lost many battles about this, but as I'm getting older and wiser (I hope), every time is clearer to me how important for creating real value is to do this right.