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babysitting-vs-daycareYou’ve got big, big plans for the weekend – reservations for a delectable dinner and disco dancing with longtime friends. The only holdup? You need an all-star experienced babysitter, one that you can trust with your kids, so you can leave your house without worrying about what might happen. Where do you look for someone to look after your kids for the night? One startup, Happier Day, is tackling this very problem by connecting daycares, child care agencies, nannies, and parents, enabling better communication between all parties. That’s enough specificity for a target market, right – why segment further?

Market segmentation is the first step towards delineating important differences between groups of target customers. By just shooting for the largest market, you can end up with an average company that delights few. Exclusivity reigns supreme when it comes to entrepreneurship: focusing on solving your specific customer’s problem from their perspective will make them love your product. Your customers will feel that your product was made for them.

Happier Day broke their market (child care arrangements) into full day and part day preschools, relative’s homes, existing family child care providers, relatives coming to the child’s home, friends and neighbors’ homes, nannies, and friends/neighbors coming to the child’s home. In this brainstorm, they included relatives, friends and neighbors, even though they didn’t end up targeting them – which is fantastic. A wide lens helps in later deselecting those outside of your market segment.

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They did choose to focus on full-day and part-day daycares, nurseries, and nannies. They further segmented daycares as either corporate or private, and they chose to focus on private daycares because of a more accessible decision-making end user (the daycare owner), and because they focus on providing personalized features for their parents. Similarly, they characterized nannies as either live-in or live-out, and agency or non-agency; Happier Day focused on live-out agency nannies, because live-out nannies have a greater need for improved communication with parents, and because parents that vet their nannies beforehand are typically already using an agency.

The fog is lifting! Dreams of a night out on the town are coming back into view, and we have a clearer picture of our market segment. From there, key questions are:

  1.  Is the target customer well-funded? In Happier Day’s case, parents using agencies tend to be wealthier.
  2. Is the end user accessible to your sales force? Happier Day chose private as opposed to corporate agencies for this exact reason.
  3. Does the target customer have a compelling reason to buy? Better communication with child care services.
  4. Can you today, with the help of partners, deliver the whole product?
  5. Is there entrenched competition that could block you?
  6. If you win this segment, can you leverage it to enter additional segments?
  7. Finally, is the market consistent with the values, passions, and goals of the founding team?

By understanding the homogeneous group of customers that is going to buy your product, you have stable bedrock on which to build a business. Once your niche group of customers start raving about your product, there is a foundation on which to expand.

Through market segmentation, Happier Day defined its goals and is on the road to building its business from the customer’s perspective. Get the suede shoes and leave some room for filet mignon – the kids are covered for tonight.

But from here, to truly understand your market, you’ll need to do some primary market research – going out and talking to some real people. The good news is that you can learn how: for more content like this, covering primary market research, market segmentation, establishing a beachhead market, creating an end user profile, performing a total addressable market calculation, and understanding your customer persona, through case studies of real-life MIT entrepreneurs, check out Entrepreneurship 101: Who is your customer? and Entrepreneurship 102: What can you do for your customer?

Alan Rozet