Breaking Into a Market With A High Barrier to Entry

Selling to a market that’s already saturated is a daunting prospect. So here are some tips to help you go against the big guys.

Selling to a market that’s already saturated is a daunting prospect. So what do you do if you’re building something like a streaming service or a search engine – requiring you to pry customers away from entrenched competitors like Netflix or Google? How can you penetrate a market with a high barrier to entry?

When your competition is big, you have to start by thinking small. Concentrate on capturing a narrow slice of the market and selling to the users who will be most enthusiastic about your product. Start with a small regional launch, and do lots of preliminary work to build excitement beforehand.

Reaching a few die-hard customers will do more for you in the early days than trying to reach everyone at once. Your loyal early users will help you refine your marketing efforts and spot areas for improvement in your product or service. They’ll also help you attract investors once you’re ready to go wide.

Dive, Don’t Belly Flop

Startup publications love to give advice about scaling up from your first 20 users to your first 200.

But they don’t pay nearly as much attention to going from 0 to 20.

That’s a shame, because there’s a lot you can do in that initial stage to set yourself up for success in the long run. Your approach to attracting your first few customers and keeping them happy can make a huge difference in your ability to grow from there.

In fact, focusing on the small scale is at the core of our strategy for breaking into a highly saturated market.

The term “market penetration” contains a valuable hint. It’s much easier to penetrate a barrier if you concentrate all your force on a very small point. 

Going off the high dive is less painful if you streamline your body to break the surface tension. The same principle applies to launching your product. 

Don’t try to spread out and cover as much ground as possible – that’s a recipe for a painful belly flop. Instead, narrow your focus and try to go deep before you go wide.

Step 1: Target Your Ideal Customer

Who’s the perfect customer for your product?

The first step in your market penetration strategy should be to answer this question in as much detail as possible. Develop a profile of the person who will be most excited about what you’re selling.

Give them a name, an age, and an alma mater – or if they didn’t go to college at all, take note of that. Figure out how much money they make, and what they do to earn it. 

Do they buy their groceries at Whole Foods, or Target, or Jewel-Osco? Do they drink Coke or seltzer water? Do they drink Budweiser or brew their own beer?

Applying this kind of laser focus to a particular demographic will let you make the most efficient use of your marketing budget – which, let’s face it, is probably not huge at this stage of the game.

This doesn’t mean that only your ideal customer will buy your product. It also doesn’t mean you can’t revise this profile over time. 

But your dream users are the tip of the pickaxe that will break down your market’s barrier to entry.

Step 2: Lay The Groundwork

Now that you know who your prime customers are, do everything you can to get in touch with them prior to launch. The more buzz you can generate before you start filling orders, stocking shelves, or onboarding users, the better off you’ll be.

Start a Facebook group or sign people up for a newsletter. Bring in beta testers and let them play with your app.

One great option, especially if you have a B2B service, is to offer special deals for people who sign up in advance. 

Do whatever you can to get people into your network ahead of launch – especially the people you’re expecting to rave about your business.

This accomplishes a few things:

  • Lets you hit the ground running. You’re generating a pool of people who will enthusiastically spread the word when your startup launches.
  • Helps you get feedback. Being in contact with your ideal customers can let you spot potential problems or highly desired features ahead of time.
  • Enables you to revise your profile of your perfect customer. Correcting false assumptions helps you update your marketing and messaging.

Step 3: Launch Locally

Don’t try to launch all across the country at first. Pick one region, the smaller the better, where your target demographic is well-represented.

This is less expensive than a wide release. Unless you’ve somehow already got ten million dollars of seed funding, that’s probably a major concern.

A regional launch also frees up time and energy that you can put toward testing and revising your product based on the feedback from your dedicated early users.

Any startup is an experiment. The reason you hear so much talk about pivoting is that it’s impossible to know what the best version of your business looks like ahead of time.

Even if your company’s journey is less dramatic than going from a podcatcher to a social media juggernaut, chances are that you’ll have to evolve the version of your business that really catches on.

Do that kind of experimentation on the small scale first. When you find that users are really raving about your product, you know you’re ready to go wide.

Step 4: Go After The Money

Large-scale market penetration takes a lot of money. So after you’ve thoroughly penetrated a smaller market, you’ll need real investment capital to take it to the next level.

This step is all the way down here because it’s much easier to get investors interested in a proven success than a dream.

So the time to seek a huge funding round is after you’ve defined your ideal customer, done the preliminary work to build enthusiasm, and validated your idea with a successful small-scale launch. 

At that point, you can offer investors a clear vision of how your startup can succeed and grow. 

Uber is a great example of a company that adopted this strategy. Their initial launch was restricted to San Francisco. They hadn’t really nailed down their branding at first, and the app only had the most basic functionality.

They only got their $11 million in Series A funding after they had worked out some of the bugs and achieved proof-of-concept in a single city.

At that point, they needed a lot more capital – not to build the app, but to fund the marketing efforts that would let them scale up.

The Bottom Line

As a newcomer to a well-established market, you need to make the best use of your limited resources. Define your ideal customers, put a lot of effort into getting them fired up, and launch on a small scale. Then grow from there.

Sharply focused force is the key to cracking a barrier of any kind, and markets are no exception.