Prioritize customer segments
- Updated On 26 Nov 2020
Prioritize your customer segments
Prioritizing your customer segments is a two step process:
- Start by understanding who in the world might have the problem that you are looking to solve. Brainstorm wide.
Include even the “crazy ideas” that you think are longshots, because they are helpful in expanding the boundaries of possibilities to where some of the most interesting opportunities might exist.
- Once you know which market opportunities exist, you need to rate those opportunities to help you get and stay focused -- and understand why you are saying "yes" to some and "no" to others.
1. Create a list of possible customer segments
Structured brainstorming can help your team work together to think broadly before narrowing your focus. The following videos provide a framework for brainstorming and take you through a real example of how a tech startup identified potential customer segments.
A Customer Segmentation Brainstorming Framework
When you're done doing your market segmentation you might end up with something that looks like this:
It is important to remember during this process the old adage "garbage in garbage out". The more you know about your potential customers, the more valid and valuable the insights you will be able to include. And the best insights come from getting out of the building and talking to your potential customers.
2. Rate your customer segments
When you have identified several interesting customer segments, the problem becomes "which one should I go after first?". Below is a simple framework to help decide which one(s) to focus on first.
What is the SCALE framework?
The SCALE framework consists of 5 key criteria to help evaluate the interest of a segment:
- S = Size: How big ****is the segment?
- C = Currency: How big are their pockets?
- A = Access: How quick can you access them in person/on the phone?
- L = Love: How passionate are you about solving for their problems?
- E = Early Adopters: How badly does this segment want a solution to their problem?
Not every criterion is equally interesting to all of us. But each criterion helps us think about the potential of a market segment from a different perspective. The score is interesting, but it is the structured thinking part that is the important part.
No one wants to solve for a market that has no decent market size. A small market won't make viable sense. Would you rather deliver a solution that solves a problem for 100 people or one that solves a problem for 1000 people?
If we solve a problem for someone, we sure hope that the problem is enough of a pain that someone can pay for it. Not every great business requires people with big pockets, which in this case businesses will typically serve the masses to make up for small margins.
When in the early stages of a product, we want to make sure that we can easily access people that we want to validate with. It is critical to get infront of those customers early on and speak with them face to face - if not - at minimum by phone. This is why is it important to evaluate segments by our ability to access them (either through our own network, means of physical location and online reach). The sooner we can get a hold of a segment, the faster we can learn from them. Learning that we have invalidated something is better than taking 10x longer to learn if we have validated something.
We stand a much higher chance of succeeding in a business if we relate with the people we are solving for. If we dont than we have a harder time empathizing and inspiring to solve and build solutions that cater to their needs.
If we have multiple segments that we think may have a similar problems, than we have to make an assumption on who we think has the biggest pain. The ones with the biggest pain are the ones who are likely actively looking for solutions. If that's the case, then that makes them ones who are most likely to adopt our solution first.
A legend to allow you to score using SCALE
Choose 3-5 segments and score each according to the legend at the bottom of each column.
Give a "1" if there are 1000's of them in the geographic area,
Give a "2" if there are 100,000's of them
Give a "3" if there are 1,000,000's of them
Give a "1" if they have very little money
Give a "2" if they have some money
Give a "3" if they have a lot of money
Give a "1" if you can access them in a matter of weeks
Give a "2" if you can access them in a matter of days
Give a "3" if you can access them in a matter of hours
Give a "1" if you do not relate to them at all
Give a "2" if you can relate to them in some way
Give a "3" if you can really relate to them in many ways
Give a "1" if you think they can live without having their problem solved
Give a "2" if you think they have some level of pain enough to need a solution
Give a "3" if you think they are actively searching for a solution and would need a solution
After you give a score for each, make sure to multiply the columns for a particular segment and then identify the segment with the highest score. Again, the score is interesting, but it is the structured thinking part that is the important part.
Once you know which customer segment your want to prioritize and better understand, the real work begins!
Another useful framework for breaking dow the "size" of your customer segments
TAM, SAM, Beach Head
Total global market opportunity does not mean that it is a market you can actually capture. To help breakdown the "size" characteristic, you might try the TAM, SAM, Beach Head approach. The video below explains the concepts of Total Addressable Market (TAM), Sizeable Addressable Market (SAM) and Beach Head Market as a way to identify the size of your potential customer base.
Of course to size your market, you need some numbers -- about numbers of potential customers, about how much customers might pay for your solution. And there is a lot of data out there, easy to access, that can help you to put some facts behind your hypotheses. So search the web and see what you can find.
As members of the District 3 community, you can access the massive databases that Concordia has invested in when you're on the District 3 WiFi.
You can access the databases from the links found here: http://www.concordia.ca/library/guides/business.html
Please read the following article from Concordia's Business Librarian on how to use them, and how to best conduct your secondary market research: Researching a business plan using free sources