Top 3 Reasons Why Small Companies and Start Ups Fail to Gain Market Traction and What Can Be Done

Introduction

You nailed your niche. Done the market analysis with risk mitigation. Found the market opportunities and potential customers. Approved in certain regulatory markets. Developed the market development/market penetration strategies and started going for it.

You’re calling on accounts and customers yet no there is no revenue, or seems like you are fighting tooth and nail for each dollar, spending more energy for small returns.

The messaging is correct and the end users (consumers) are thrilled. The science is there, based on KOL groups this is the hottest thing ever. And payors like how your product increases patient outcomes while remaining cost neutral or (better yet) cost reducing.

The benefit is clear and established. Targeted regulatory environments have approval and distributors are lining up, excited to start promoting. You may even have a small direct sales force ramping up.

However, the rapidly downward trend on your energy's ROI relative to top line revenue and less than spectacular market traction is an inspiration killer indeed.

This is a tough place to be, especially if you are a seedling company needing next round funding to start/continue commercialization, or a Series A that is commercialized (ie launched in targeted markets) who needs additional investment to go to the next level to expand into new markets or invest in pipeline products.

Likewise if you are a small company that enjoyed good market traction at one point yet now are hitting a plateau.

It is bloody hard to sell to investors, potential strategic partners and board members the benefits of getting deeper in the game when the revenue targets are being missed. Or when the intended market is unreceptive and there is zero traction.

As a start up or a small company, your precious resources of time, energy and money need to be well spent. It is easy to start panicking and try to chase all loose ends, especially if you are sitting on a bowl of spaghetti-like wrapped priorities across the business.

So what is happening?

The top culprits are sneaky and insidious, and even though you thought you nailed it, several years later still no hockey stick revenue as forecasted. Or zero commitments from customers as required to keep moving forward.

While you may have targeted your customers, or think you did, more than likely one (or all) of the below 3 culprits are in play:

1. The wrong (right) customers are targeted with the right (wrong) strategy and message

2. Synergies among different customer groups are either unidentified or mismatched

3. Confusing a customer's willingness to listen as an indication of an intention to buy

The bottom line of your struggling top line? Don't give up hope!

Let's take a look at these 3 reasons in more depth.

The Top 3 Culprits

As mentioned above, odds are the customers are not being targeted correctly (or not at all), there lacks a strategy on how certain customer groups (accounts or segments) can drive strategic partnerships or what seems to be a signal to buy actually is not a signal to buy at all.

Let’s break this down a bit one by one.

Targeting the Wrong Customers with the Right Message/Data (or vice versa, or not at all)

Have you found yourself in the position where you have contacted a customer (whether prescriber, hospital or otherwise) over and over (and over…and over) and they have yet to bite?

Or one does bite, a lot of energy is put into developing and servicing the customer. They buy yet the sale is small compared to your efforts? And to boot, leaves you well below hitting the revenue targets… putting you in the position of having to go-through-it-all-again and find another customer to close the revenue gap?

Feels like you are climbing in a haystack searching for needles. Of which there is little time nor energy to do so.

What is in play is that although you think they are the right customer, more than likely they are not. So even though your messaging and energies cleared the bar with market research and focus groups, when you hit the ground it falls flat. Or you do after expending countless hours in developing the customer.

It could also be they are the right customer, yet it is unclear precisely what the potential is. Or what their needs are. Or what other customers are required to leverage strategically to get things going.

Bottom line, if it is unclear as to what is the customer's potential (which drives their needs) across the landscape of all customers, you are effectively operating in a vacuum.

Missing Strategic Synergistic Opportunities within the Customer Base

How do you know if the hospital you are targeting is the right customer not only to point 1 above (do they have the potential in the therapeutic area), yet the right type of customer that can help you reach your goals in securing (or maintaining) the right strategic partner?

Or at the account level (ie prescribers), are you targeting the right ones who can impact the hospital (and then the strategic partner)?

Even better still, sure, getting some sales in the beginning is preferred than no sales at all. There are customers who have potential, yet you need to carefully balance how much energy is invested, as there are other customers where the potential is greater.

Of course where potential is greater, the selling cycle may be longer depending on the barriers. And greater potential accounts more than likely have greater impact on the big strategic partners. So it is a matter of spreading your energies across several customers with different mixes of potential.

Knowing which customer has what type of potential and hence how much energy you invest is the key.

Confusing a Customer's Willingness to Listen/Likes the Product with the Intention to Buy

I am certain you have seen the excitement when pitching your product to customers, and it feels really good! The validation by potential customers, after a long time of being in development or hitting a plateau, is very motivating.

Yet where are the sales? The initial contracts?

The clinical data presented makes sense and the doctors agree your product is best on the market. Payors (like procurement or insurance) see the cost benefit and agree your product is a must have in the hospital.

While they are raving about the product, there is little traction or commitment. And it is confusing because it is not adding up. How can they agree yet not buy?

It feels like cognitive dissonance, doesn’t it?

And it leaves you asking yourself ‘what can we do differently’?

How do I Solve This?

Now that the problems have been identified, what can you do?

There are 3 things you can do

Redefine What It Means to be Ready to Buy

Would it be crazy sounding if I told you that yes, you can apply metrics to the conversations you have with customers to determine when they are ready to buy… or putting you off?

When a customer is moving forward towards buying, the key indications are they are willing to commit one of these resources: time, energy and money. These are the metrics.

For example, you show hospital procurement how cost effective your device is across non-invasive surgeries. They like how they can increase surgery capacity by 22% and hence serve more patients who are on the waitlist more quickly.

If procurement picks up the phone to schedule a meeting with other decision makers in the hospital to review this, that is committing a resource. The sale is moving forward.

If the response is they like it and will talk to others, the sale is neutral. No resources have been formally committed to move the sale along. Analyse the situation and plan the next step accordingly.

If they push back, or push you away, there could be several drivers. It is possible they are not the right customer or they are and the targeting strategy is off. If indeed they are the right customer, it is possible you are experiencing a false objection. Double check if they are indeed the right customer from a potential perspective, regroup and dig deeper.

While every startup and small company is different when it comes to sales processes (discussed next) and products, identifying what resource commitments look like for your business will lessen the headaches and help you remain focused.

Create clearly defined sales processes with metrics & tools to measure if the sales process is moving forward or is at a standstill

Creating a map of what the sales process looks like for each targeted customer group (payors, prescribers, etc.) has several benefits:

1. Creates a clear vision of when the sales process is moving along and when it is at a standstill

2. Gives the ability to measure commitment along the sales process with key stakeholders

3. Use of strategic tools to measure the commitment internally so that the sales process continues to move along

Ok, so what does this mean?

As a small company or startup, as mentioned before (and I'm sure you have experienced) resources are thin and must be used wisely.

When you map out the sales process, it serves as your ability to gauge and measure not only whether things are moving forward, it allows you to place strategic tools along the way to measure the progress.

For example, the NDA is used widely with start ups to protect their assets. In fact, it is overused.

If the start up is not segmenting (discussed below), the NDA loses its strategic value in the sales process and puts the start up at risk of diluting its overall value.

The NDA serves 2 purposes: it is used on qualified customers with potential and is used as a metric in the sales process to indicate a sales is moving forward.

If your customers are unclear, are the wrong customers, or a clearly defined sales process is missing, the NDA is rendered nearly useless.

Find the right customers and leverage synergies powered by segmentation

Whether your customers are B2B with large strategic partners (which are usually the ones targeted to eventually buy the start up or the life line of a small company), hospitals or a distribution channels in targeted regulatory environments, knowing where the business potential is (or who can drive sales) allows you to go where the potential really is, as well as identify who can help you strategically long term.

This is a god send when targeting strategic partners, as you can leverage your other customers synergistically to meet (or exceed) revenue goals and catch the eye of your desired buy out partner.

Likewise for small companies where launch has happened and the results are at a standstill compared to previous years, creating strategic synergies makes the best use of your thin resources.

This strategic use of segmentation is what I refer to as ‘segmentation on steroids’.

To illustrate this, we will start from ground zero segmentation to illustrate.

Let's say you are a start up who is developing a medical device with biometrics for specific therapeutic areas. The MVP is approved for use, targeted regulatory markets have been identified and you are launch ready.

More than likely this is your customer map. It is a combination of targeted B2B (Strategic Partners), B2B2C (hospitals, insurers, prescribers) and B2C (consumers). Your sales channels are on the left.

In the above example, Google/Amazon (for the AI capabilities) and Medtech (for certain therapeutic areas, like JNJ, Edwards), have been identified as potential strategic partners (and to boot, targeted as the buy out company down the line).

Yet knowing what other customers you need to develop (and sell to) in order to support the strategic partnership initiatives is critical as well.

So then, for example, let's take a look at the customer segment Hospitals. There are several customer segments within hospitals that have been identified as critical to the business

Now that all the potential customers within Hospitals are identified, the segmentation needs to be done for each customer based on the therapeutic area in which the product addresses-- private, teaching, residency and ambulatory.

This is the tricky part, as it requires smart & accurate cut off points to determine the correct potential for the accounts that lie within each of the customer segments of hospitals.

“What you measure matters” is one of my mottoes, so getting these cut off points nailed down is critical.

In this example below, the focus in on Private Clinics the cut off points are linked to metrics of impact versus effort.

Based on what metrics you select for the cut off points (and again be careful with this, make sure it is the right metrics), the Private Clinics within the Hospital Customer Segment naturally falls into their respective segment box.

As cut off points measure the potential of the Private Clinics, the results would look like this:

Now it is clear which customers to focus on (and how) so you put your energies and thin resources to better use.

The next step is to do the segmentation for the other Hospital Customers (teaching, ambulatory and resident), as well as for the other customers (insurers by type, consumers by type, etc).

After segmenting across all customer types, then look for the synergies (as well as opportunities) across the customer types as well as how you can leverage them in strategic partner initiatives.

As for the 4 boxes– Focus, Grow, Convert, Simmer– each of these boxes will have their own strategies.

Side note: the above example uses cut off points of effort and impact. These are better perhaps when measuring product compliance or likability in consumer focus groups.

It's important to emphasize that the cut off points will vary for each customer group (ie insurer, hospital, etc) as what you measure will be different-- whether it is therapeutic potential, consumer acceptance or measuring distributor potential.

However ensure that the different metrics for all customer types cut offs (consumers, prescribers, etc) are working together synergystically so you can identify which customers deserve your time and energies both within the customer group and strategically across the business.

As time and energy are commodities hard to come by when a start up or small company, being effective and strategic on how and where you invest your energies is very important!

When you segment your customers across all customer types, you clearly see those with greater potential may have a longer sales cycle (Growth, Focus), versus low hanging fruit that can be easily converted (Growth and Convert). And those where less energies should be used (Simmer).

This allows you to better plan your time, energies and prioritise more effectively across the business.

And you can also clearly see who needs to be developed to support the strategic partnership strategy, versus those who are needed solely to drive sales.

This also drives your ‘scorecard’ with key criteria for distribution (especially important when evaluating distributors if direct sales is later down the line), as not all distributors are equal nor alike. And if you have a small direct sales force (as they can be costly!), you know where to better direct their efforts.

Spoiler alert: most start ups and many smaller companies fail to map out and segment customers during product development phase. While there are no commercial activities, it is critical there a commercial person alongside product development to plan for the market launch, including finding the right customers, where they are in the segmentation and targeting them effectively.

In Summary

Finding the right customer groups with the potential required is the first step in understanding where to target your energies and resources in generating revenue. Yet knowing how to leverage these different customer groups among each other to reach the overall revenue goals is the key.

Be careful with the seductive ‘sounds great I will talk to XYZ’ or 'I love the clinical results and see how it can benefit us' without a commitment of their resources on their end. Words without committed action unfortunately are empty promises.

Ensure you have sales processes in place for each customer, as well as strategic tools that can be used to measure the sales process and move them along the process (or better yet, telling you where to redirect your efforts or when to prioritize another customer). As your resources are limited, you need to know when it is time to keep moving, re-pivot or bail.

As for the key ingredient in the magic sauce of segmentation: it is what you measure that will make or break segmentation. While why you are measuring and how you measure are important, the what is even more so.

Ensure what you measure is the right choice when deciding on cut off points for each customer group. Being 1 degree off in what you chose to measure now may put you 15 degrees off course when commercialization starts.

Lastly, if you are a startup or a small company, taking this approach speaks volumes to investors, C-Suite and board members.

Not only do they want to see what kind of revenue potential you have, or what type of customers you plan to target, they also want to see the thinking behind this.

To them, seeing how things are thought through is a great indicator of strong business acumen. A quality most investors, C-Suite and board members seek.

After many years in the biotech / pharma / medtech / healthcare AI sectors in various international commercial roles, Jen continues her entrepreneurial passion in helping small companies, niche companies, new to market and start ups harness the power of smart commercialization strategies and tactics to increase business performance.