Building a Business — Market Segmentation

Our goal has always been to build a business and Arc is our first step in that direction. We used the Lean Canvas to identify the problems that we were trying to solve and the Slack App Directory provided a steady stream of companies joining every day.

The natural next step for Arc was accepting payments. But before we could start, we had to find a group of people who loved the service that Arc was providing. They needed to love it so much that they’d pay for it. We had apprehension about moving from a free “beta” plan to a paid service but we recognized that if no one was going to pay to use Arc, we were never going to become the business that we wanted to be. So, we had a very clear goal:

Find an industry that Arc helps so much that paying is a no brainer.

Once again, the Slack App Directory gave us a huge advantage. Two months after our launch we had thousands of companies using Arc and asking us questions about the service. This gave us a strong user-base to start our investigation.

To make our target market search easier, we used Intercom’s free platform. We implemented it shortly after our launch so we could easily look into our user data. This was a huge help, because I could quickly get key information about Arc users, such as:

• Their email address
• Their website from their email address
• A snapshot of Arc usage (we don’t store any private information)

With all that data, it was a very straightforward process to start creating our target market! One word of warning, straightforward does not mean fast.

I started by going through all of our users in Intercom one-by-one and narrowing them down to a few categories. That strategy was quickly abandoned because, surprisingly, the majority of our users were from the same industry. Hundreds of marketing companies were using Arc and we never noticed until I dug into our data. I went through every entry in Intercom and identified the marketing agencies so I could contact them directly.

With my lengthy contact list in hand, I wrote personalized messages to hundreds of our users. I could have automated the whole process with Intercom but saving money and making sure each one of our users got a personal message were priorities for us. After two weeks we had a ~20% response rate and a ton of amazing feedback. One clear thing kept bubbling to the surface; marketing agencies loved using Arc and they wanted to see more Google Analytics metrics. It saved them time and made Google Analytics more accessible to their entire team. An added bonus, I’d worked in advertising for years so I could draw on some of my personal experiences when I was talking to our users.

When it comes to pricing, marketing agencies are a great target because they have a clear correlation between time and money. Most agencies bill their clients by the hour, so if we save an hour of work, that has a very distinct cost.

So, with one sweeping motion we had identified a target market, confirmed that market was interested in paying for Arc, and developed the framework for our pricing model!

Image by NASA

Originally published at blog.unioncode.com on June 28, 2016.