Realistically, it’s unlikely that your venture will meet the needs of everyone in the market. You’ll be more successful if you target your idea at one market sector or segment , and aim to meet its needs fully.
To identify this segment, look at the market on a micro level. Think about the following questions:
• Which segment of the overall market is most likely to benefit from your venture?
• How is your venture or product different from others already servicing this segment?
• What trends is this segment showing? Is it growing, and, if so, is this growth set to continue?
• What other market segments could you access if you’re successful in this one?
Look for qualitative and quantitative data. Talk to prospective customers to gather feedback on their needs, and to find out how well competitors are meeting these. Then, look for data on the sector you’re targeting, for example, by reading analysts’ reports and market research reports.
Most products don’t actually appeal to an entire market, but rather just a subset of that market. Who are the people within the market that you are going to be serving, and how many of them are there? You can easily make a mistake by thinking you are going to serve an entire market when you are really only targeting a small set of people within that market. In that case, you are left with a market that is significantly smaller than expected, and your sales will likely reflect that fact.
a) Micro level questions about target markets
1. Is there a target market segment where we might enter the market in which we offer the customer clear and compelling benefits, at a price he or she is willing to pay?
2. Are these benefits, in the customer’s minds, different from and superior in some way – better, faster, cheaper or whatever – to what’s currently offered by other solutions?
3. How large is this segment, and how fast is it growing?
4. Is it likely that our entry into this segment will provide us entry into other segments that wemay wish to target in the future?
b) Three ways to define market segments
1. Who the customers are i.e demographic terms (age, gender, education, income etc) if itis business to business, then it will refer to the industry in which the customers do business, plus firm size and firm characteristics.
2. Where the customers are in geographical terms?
3. By how the customers behave (life style terms) or in business to business how the products may be used.
c) The micro market test
1. What customer pain will your offering resolve? How strong an incentive do customers have to give you their money? Will customers buy what you propose to offer?
2. Who precisely are the customers that have the pain? Do you have detailed accurate information about who they are, where they live or do business or what they do?
3. What benefits does your offering provide that other solutions don’t?
4. Does the target market have the potential to grow?
5. Are there other segments that could benefit from a related offering?
6. Can capabilities that are transferable from one segment to another be developed?
