As an example, we have recently worked with a medical device company that has developed a new method for detecting vascular disease. Their first customer focus was on general physicians. As their marketing efforts evolved, they received feedback from some of their physician customers, who told them, “Your marketing is all wrong. You are missing the biggest segment.” The company then learned that physicians who derive income from governmentbacked health-care plans like Medicare receive much higher compensation after detecting vascular disease than physicians who offer more traditional fees for services and who seek reimbursement from insurance companies.
This insight led the CEO to refocus his firm’s marketing strategy on a much larger—although narrower—segment, which increased excitement from investors and paved the way for an early IPO to raise expansion capital. That would not have been possible with the original customer focus. This story underscores something important: the CEO should frequently revisit the focus of the firm on its target customers and help guide his team to hit the best bull’s-eye possible. During the life cycle of many companies, the target market is evolving and they must make many ongoing corrections to keep their strategy in line with changing customer needs. When investors ask you about “traction,” they are really asking you to provide hard evidence of actual customer interest. Short of having a current revenue stream and related references, the next best way to demonstrate traction is to present quotes and references from potential customers and industry insiders on the merits of your offerings and why they will do business with you. Without such external validation, you will not be able to demonstrate traction nor capture much investor interest.
And that, in the eyes of investors, validates your solution and shows them you do, in fact, have a business.
