Blog 3: Understanding the Terrain: Identifying Target Customers

Embarking on the journey of an agrifoodtech startup is an exciting adventure, filled with many possibilities. Mastering the market size, successfully segmenting the market and identifying target customers are vital steps that form the backbone of your business. It is crucial to get this right as it will form the foundation of your venture. As an investor, we’d like to spotlight some opportunities that agrifoodtech startups can leverage when analysing their market to unfold their full potential.
Investor’s Insight 3: identifying target customers
Identifying and understanding your target customer is one of the most crucial steps for any agrifoodtech startup. It’s not just about knowing what products or services your potential customers want, but about understanding what drives their decisions, what challenges they face, and how your solution can meet their needs. Gaining deep insights into your target audience will empower you to create tailored offerings that truly resonate.
Understanding your customer’s world is key. For example, let’s consider a company focused on tackling food waste by providing advanced data analytics solutions for inventory and supply chain optimisation. In this case, the startup’s target customers range from big food retailers to small artisanal bakeries, aiming to reduce waste, lower costs and improve sustainability metrics. A deeper understanding of these specific challenges enables the startup to align its solution precisely with the unique needs of each customer. By leveraging these insights effectively, the startup can tailor its proposition to address the specific requirements of different target customers.
To do this effectively, startups must identify two key elements: drivers and barriers. Drivers are the motivating factors behind a customer’s decision to adopt your product, such as improving operational efficiency, meeting food waste reduction targets or staying ahead of market trends. Barriers are the obstacles that may prevent adoption, such as limited budget, resistance to new technologies or concerns over disappointing their customers.
Consider two examples to illustrate what works—and what doesn’t—when identifying your target customer:
- What works: A startup tackling food waste focuses on large food retailers that face hard targets for waste reduction but also struggle with maintaining stock availability. These retailers have clear automation processes and rely heavily on AI-driven systems, even with fluctuating staff. Through detailed analyses, the startup discovers that strict adherence to waste reduction goals has led to overly conservative inventory orders, resulting in frequent out-of-stock situations and lost revenue. By offering a predictive analytics solution that balances stock availability with waste reduction, the startup enables these retailers to reduce out-of-stock incidents and thus growing revenue whist maintaining the low food waste numbers.
- What doesn’t work: The same startup applies the same predictive analytics solution to small artisanal bakeries, expecting similar results. However, these bakeries operate differently, with stable teams and long-standing habits where bakers rely on their personal judgment for inventory planning. They rarely face out-of-stock issues but do struggle with high waste costs due to over-ordering. The startup fails to recognise this dynamic and provides little training or adaptation to address the specific needs of this customer. As a result, the bakers continue to override the AI recommendations, viewing them as irrelevant to their expertise, and the solution fails to deliver value or gain traction.
By identifying the distinct operational models and challenges of each customer type, the startup can tailor its proposition to address the specific needs of each target customer. For large retailers, the focus is on driving revenue due to avoiding out of stock situations whilst maintaining the strict waste targets. This requires intensive study of their category management on part of the retailer.
In contrast, for small bakeries, the emphasis lies in reducing waste costs by integrating forecasting tools with tailored training to adapt deeply ingrained ordering habits, ensuring that the solution resonates with their manual and tradition-based workflows.
These insights will lead to different propositions and different focus.
Understanding your customers isn’t a one-time task—it’s an ongoing process that evolves as your business grows and as market dynamics shift. Through continuous learning and adaptation, you can turn challenges into opportunities and ensure that your solution is not only desired but truly needed by your target market.