Home
A/B Testing your Marketing Positioning for your Obtainable Market using Meta Ads
When running a small startup, the ambition to market globally must be tempered with the reality of limited resources. This calls for a focus on understanding and defining the Serviceable Obtainable Market (SOM).
By leveraging business tools to gain a deeper insight into the market, startups can more effectively target the portion of the market that is realistically reachable.
This approach ensures the most efficient utilization of resources, enabling smaller companies to focus their efforts where they are most likely to achieve tangible results and growth.
A Quick Primer on Market Sizing
Market sizing is an essential process for businesses to estimate the potential audience or revenue their products or services might attract. It involves calculating the total number of potential buyers and the possible revenue based on that population size.
Key Segments of Market Sizing
Market sizing is typically broken down into three major segments:
Total Addressable Market (TAM): This represents the ultimate revenue opportunity available or the total market demand for a product or service, assuming a 100% market share. Understanding TAM helps businesses grasp the potential scale and directs the long-term vision of the company.
Serviceable Available Market (SAM): SAM refines TAM by focusing on the market segment actually accessible to your company, given its current or near-future capabilities. This includes considerations of geographical reach, regulatory environments, and the constraints of the company’s existing business model.
Serviceable Obtainable Market (SOM): The SOM is a more specific segment of SAM, targeting the market portion that can realistically be captured in the short to medium term. It accounts for factors such as competitive landscape, existing brand recognition, and effectiveness of market entry strategies.
The Hypothetical Nature of SOM
Determining your SOM involves making educated guesses about where the most significant, achievable opportunities lie. If you were to consult ten different analysts, you might receive ten varying estimates on the size of your SOM, each reflecting a different interpretation of potential market gaps. The challenge for any business is deciding which opportunity to pursue first, recognizing that each estimation of SOM is fundamentally a hypothesis that needs validation through market engagement and real-world testing.
Market Awareness
The five stages of customer awareness are a framework designed to help marketers understand the mindset of potential customers at different points in their journey towards purchasing a product or service. These stages can be crucial for identifying your Serviceable Obtainable Market (SOM), as they help pinpoint where and how your product fits into the current market and customer needs.
The Five Stages of Customer Awareness:
Unaware: At this initial stage, potential customers are not aware of your product or even that they have a problem needing a solution. Marketing efforts here aim to educate about the problem itself before introducing your solution.
Problem-Aware: Customers recognize they have a problem but don't know the solutions available. Here, the focus shifts to content and information that outlines the problem more clearly and begins to introduce your product as a potential solution.
Solution-Aware: Customers know the solutions available but might not be aware of your specific product. At this stage, marketing should differentiate your product from the competition by highlighting unique features and benefits.
Product-Aware: At this stage, customers are aware of your product but are not convinced it is right for them. This is the key moment to offer more detailed information, customer testimonials, and competitive comparisons to persuade them.
Most Aware: Customers are fully aware of your product and its benefits and are close to making a purchase decision. Your marketing should focus on conversion strategies such as special offers, guarantees, or final reassurances about the product's value.
Reaching customers in the Unaware stage presents a significant challenge, as these individuals not only lack knowledge of your product but also of the problem it addresses. This group forms the top of the marketing funnel, where the focus is on education—informing them about the problem and introducing your solution. Given that your product is new, the likelihood that this audience is already aware of it is quite low. Hence, marketing efforts here are crucial and must be designed to gradually build awareness and guide potential customers down the funnel to more advanced stages of awareness.
Your Serviceable Obtainable Market (SOM) is most likely to be found among those in the Problem Aware and Solution Aware stages. These customers recognize the problem and are beginning to explore possible solutions, making them more receptive to your messaging. By effectively communicating how your product addresses their needs, you can transition them from simply understanding the problem to seeing your product as the preferable solution.
Meanwhile, the Product Aware and Most Aware groups are positioned at the Bottom of the Funnel, where strategies shift towards sales and lead generation activities, targeting individuals who are considering various options and are close to making a purchase decision. Here, the focus is on differentiating your product from competitors and persuading those who are already familiar with your product to finalize their buying decision.
Building a Cohort Matrix
To do this effectively, you can use a structured approach by creating a matrix that maps out your Ideal Customer Profile (ICP) hypotheses against potential problems and solutions. This matrix serves as a strategic tool to visualize and explore the various combinations of customer segments, their unique challenges, and how your product or service can address these issues.
Constructing the ICP Matrix
Begin by dividing your matrix into rows and columns. Each column should represent a different ICP hypothesis, categorized by distinct characteristics such as profession, hobbies, or other criteria that effectively segregate your potential customers without significant overlap. These columns are crucial as they define the groups you believe are most likely to benefit from and be interested in your offering.
For the rows, identify 2-3 common problems that each ICP might face, followed by 2-3 tailored solutions that your product or service offers. This arrangement allows you to systematically address how each customer segment’s specific needs can be met with specific features or benefits of your product. For example, a column might represent "Fitness Enthusiasts" as an ICP, with rows detailing problems like "lack of motivation" or "time constraints for workouts," and solutions could be "engaging fitness apps" or "quick 20-minute workout plans."
While the matrix will provide a comprehensive view of all possible customer segments and their respective challenges and solutions, remember that your Serviceable Obtainable Market (SOM) cannot feasibly include every ICP listed in your columns. To refine your SOM, you will need to prioritize which segments are most accessible and valuable to your business. This is where tools like Meta Ads Manager come into play.
Using Meta Ads Manager, you can input the characteristics of your various ICPs and utilize its targeting capabilities to estimate the size and accessibility of each segment. This platform allows you to see which segments have enough potential customers to be viable and which can be effectively reached with your advertising budget. By analyzing the data from Meta Ads Manager, you can narrow down your focus to the ICPs that are not only the best fit for your product but also have sufficient reach and engagement potential to justify the investment.
Setting Up the Campaign on Meta
When it comes to validating your Serviceable Obtainable Market (SOM) using digital marketing tools, Meta Ads Manager offers a comprehensive platform to conduct detailed market analysis. To effectively assess your SOM, you should aim to identify customer segments with the highest purchase intent, as monetary transactions represent the most substantial form of user commitment to your product.
Setting Up Your Sales Campaign
For a precise evaluation, it is advisable to set up a manual sales campaign, steering clear of the Meta's Advantage+ Campaigns. Advantage+ leverages Meta's AI to optimize audience targeting, which can be helpful but offers limited control over settings and makes it difficult to analyze specific market segments independently. Instead, use a manual setup with Campaign Budget Optimization (CBO) turned off. This ensures that the budget is evenly distributed across all ad sets, allowing for a fair comparison of their performance over a 7-day experimental period. Without CBO, you can clearly see which ad sets perform best under equal financial conditions, rather than having the platform allocate more budget to already successful ad sets.
Creating and Optimizing Ad Sets
Each column of your ICP matrix, representing a unique customer profile, should correspond to a separate ad set. If your matrix defined four distinct ICPs, you should create four ad sets. For these ad sets, enable Dynamic Creative to allow Meta to test different combinations of visuals and text, optimizing each ad’s performance. It’s also crucial to maintain consistency in your testing environment by targeting a single country or region, as market characteristics can vary significantly across different areas.
In each ad set, create several ads corresponding to the number of problems and solutions identified in your matrix rows. This structured approach allows each ad to specifically address the distinct pain points and proposed solutions relevant to its respective ICP.
Extracting Insights
How we completely broke down the homescreen to build something better.
After running your campaign, the next step is to analyze specific metrics to gauge the effectiveness of each ad set. Important metrics to consider include:
Cost per Purchase: Measures the cost effectiveness of your ads in driving purchases.
Install to Purchase Conversion Rate: Evaluates how well your ads convert app installs into actual purchases.
Return on Ad Spend (ROAS): This is crucial as it tells you how much revenue each dollar spent on advertising brings back. A positive ROAS indicates a profitable ad, whereas a negative ROAS suggests that the ad costs more than the revenue it generates.
The goal of this experiment isn’t necessarily to run the most successful sales campaign right away, but rather to identify which customer segments (ICPs) demonstrate the highest engagement and purchase intent. By analyzing which ad sets yield the highest number of purchases and maintain a healthy ROAS, you can determine where to focus your marketing efforts more intensively.
Through this process, you'll gain valuable insights into which ICPs are most responsive and profitable, allowing you to refine your marketing strategy and better target your SOM with precision, ultimately leading to more effective and efficient marketing expenditures.
Return back to Home
© Jonah Jacob Eapen 2024