- Updated on 02 Jul 2019
Start your market segmentation by brainstorming a wide array of market opportunities. 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 have identified numerous potential end users and applications for your idea or tech- nology. Your next task is to list the top 6–12 particularly interesting market opportunities, where a market opportunity consists of a specific end user and one or a handful of applications.
- Is the target customer well-funded? If the customer does not have money, the market is not attractive because it will not be sustainable and provide positive cash flow for the new venture to grow.
- Is the target customer readily accessible to your sales force? You want to deal directly with customers when starting out, rather than rely on third parties to market and sell your product, because your product will go through iterations of improvement very rapidly, and direct customer feedback is an essential part of that process.
- Does the target customer have a compelling reason to buy? Would the customer buy your product instead of another similar solution? Or, is the customer content with whatever solu- tion is already being used?
- Can you today, with the help of partners, deliver a whole product? The example here that I often use in class is that no one wants to buy a new alternator and install it in their car, even if the alternator is much better than what they currently have. They want to buy a car.
- Is there entrenched competition that could block you? How strong are those competitors, from the customer’s viewpoint (not your viewpoint or from a technical standpoint)? Can the competition block you from starting a business relationship with a customer? And how do you stand out from what your customer perceives as alternatives?
- If you win this segment, can you leverage it to enter additional segments? If you dominate this market opportunity, are there adjacent opportunities where you can sell your product with only slight modifications to your product or your sales strategy?
- Is the market consistent with the values, passions, and goals of the founding team? You want to make sure that the founders’ personal goals do not take a back seat to the other criteria pre- sented here.
Example of market segmentation in a real company
Now that you understand how to get started with market segmentation, watch the two-part example to understand how it looks like in the context of a real company:
The Sensable Market Segmentation Chart
When you're done doing your market segmentation you should end up with something that looks like this: