The next process in the BrainKraft Product Launch Framework is to choose the Market Segments to become the focus of your product launch.
You can find many books written on the topic of Market Segmentation. Most are academic deep dives with tons of market research and analysis techniques. Remember this is a beginner's guide so I’ll stick to the basics.
So what’s a Market Segment? It’s simply a subset of potential customers with similar needs and preferences.
TIP: A market segment is a group of potential customers with similar needs and preferences.
The primary purpose of segmenting a market is to focus limited resources to achieve the best results. Not everyone wants or needs your product. You want to focus on those who do.
Market segmentation benefits all parts of your business. Your marketing team can target potential customers with a message that resonates with their needs. Your sales team can identify better sales opportunities. And these are just two examples. Market segmentation helps your entire organization to focus its efforts on activities that yield the best results.
There is a chicken and egg dilemma when defining Market Segments. Do I define the profile of an ideal customer first then identify the Market Segment or do I define the Market Segment and then identify the ideal customer? There isn’t a right or wrong approach. Both methods will produce a good result.
Customers and Market Segments are deeply connected. Don’t be surprised if your first pass at defining a Market Segment results in revisiting the definition of an ideal customer profile. Iteration is to be expected. Just don’t over analyze it. And don’t try to be all things to all people. Think of it as a starting point that gets refined over time.
A common mistake when defining Market Segments is to only use observable demographic attributes (type of company, size, geography, industry, etc.). Demographic attributes are needed for targeting, but I want you to produce a better Market Segment definition than just demographics.
Let’s say your organization’s area of expertise is in the financial services arena. “Financial Services” is not a Market Segment definition, it’s a label. Every financial services organization is not likely to be a potential customer for your product.
Your objective is to define groups of organizations within financial services that are a great fit for your product. By extension, you’ll exclude all others. These groups - Market Segments - represent the best opportunity to achieve your Launch Objectives.
Who Has an Unmet Need You Can Solve?
The key to finding the best Market Segments is to answer two questions:
How compelling is the unmet need?
How adequately served is the need today?
In other words, your potential customers have a burning issue and want to address it today, and few options are available to solve it.
The degree of an unmet need spans a spectrum. On one end of the spectrum is “Underserved”. These are Market Segments for which there is an unmet need but insufficient options. “Adequately Served” means potential customers have a range of options to choose from. “Over-Served” means there are many options available to potential customers.
Which one do you prefer? I prefer Underserved because I believe I’ll have a fighting chance. I avoid Over-Served because differentiating in a crowded market is harder. If my product is disruptive I may not have an option, however. I’ll consider Adequately Served when I have a product (or brand) that is differentiated.
The Unmet Need vs Adequately Served Matrix can help. As you identify groups of people with an unmet need find the square where they fit. Focus on the squares with the best opportunity for product launch success.
Why is a Market Segment Underserved?
When a Market Segment is underserved your first reaction should be “Why?”.
It could be there isn’t a good solution in that Market Segment. It could be an extremely difficult Market Segment to serve that others have tried and failed. Or… maybe it’s underserved because there isn’t a compelling need.
Does a Compelling Need Exist in the Market Segment?
There is a need and there is a compelling need. It’s easy to rationalize that everyone on the planet has a need for your product. That’s the wrong way to think about it. I want to you determine how compelling the need is and which Market Segments have the most compelling needs.
The Unmet Need vs Adequately Served Matrix simply uses low and high. Potential customers in a Market Segment either have a compelling unmet need or they don’t. You know it’s compelling if they are will to spend time and money with you.
Think about it from a salesperson’s point of view. They sit down with two potential customers. Both seem eager to learn about your product. But after the sales call one potential customer can’t wait to learn more and the other seems disinterested. That’s not the fault of your salesperson. It’s a different level of need. One is compelling. One isn’t compelling.
You can either identify Market Segments with a higher compelling need now or you can let your marketing and sales teams thrash around until they figure it out. What suffers is the success of your product launch.
Your choice of Market Segments doesn’t have to be perfect, it just has to be good enough to provide guidance to the rest of your launch team.
One Customer Doesn’t Define a Market Segment
It’s a mistake to assume the attributes of a single customer define a Market Segment for all potential customers. This situation happens more frequently than most of us are willing to admit.
Let’s say you offer a solution targeting large enterprises. You get an early adopter customer who loves your product and they have a compelling need.
Examining the observable demographic attributes of your early adopter customer, you could rationalize that every company with matching demographic attributes has the same level of urgency. You could be very wrong and spend a lot of time chasing potential customers with no compelling unmet need.
Is the Market Segment Worth Chasing?
You’ve identified Market Segments with a compelling unmet need that are not adequately served. The next step is to make a business decision.
Your organization has limited resources and can’t chase every potential customer. So you narrow down the list of Market Segments to those with the best potential to achieve your Launch Objectives. What makes a Market Segment attractive to your organization?
Does the Market Segment have enough potential customers?
Do you have access to buyers in the Market Segment? If not now, how can you get access to them?
Is the Market Segment a strategic fit?
Will potential customers have to replace the product they have today with my product? How hard will that be for them?
Will potential customers have to change their (or their organization’s) behaviors? How hard will that be for them?
Do we have the authority to serve the Market Segment? If not now, how can we establish authority?
Under10 has a neat way of looking at this through something they call ASPIRE (authority, systems, passion, innovation, research, expertise). I’ve found it’s a quick way to help evaluate Market Segments.
Between now and the next installment of the A Beginners Guide to Product Launch you need to:
Identify a set of Market Segment candidates. Don’t assume the Market Segment definitions you have in place today are adequate.
For each Market Segment candidate, document the identifiable attributes (demographic attributes). These are the most obvious attributes.
Evaluate how compelling the level of unmet need is today or each Market Segment candidate. Low and high is good enough for now. How do you know it’s high? Low?
Evaluate how adequately served each Market Segment is today. Is the Market Segment underserved, adequately served, or over-served? How do you know?
Exclude any Market Segment candidates that have a low unmet need or are over served.
Can the remaining Market Segment candidates achieve your Launch Objectives?
Did you learn anything new that causes you to rethink your Launch Objectives? Do you have more questions that weren’t covered in the Product Launch Planning Session?