2. • Assess market segmentation
• Based on primary research, determine
your beachhead market
LEARNING OUTCOMES
By the end of this workshop, you should be able to:
5. What Information Used to Segment?
Classification variables
• Demographic variables — Age, gender, income, ethnicity, marital status, education,
occupation, household size, length of residence, type of residence, etc.
• Geographic variables — City, state, zip code, census tract, county, region, metropolitan or
rural location, population density, climate, etc.
• Psychographic variables — Attitudes, lifestyle, hobbies, risk aversion, personality traits,
leadership traits, magazines read, television programs watched, PRIZM clusters, etc.
• Behavioral variables — Brand loyalty, usage level, benefits sought, distribution channels
used, reaction to marketing factors, etc.
Descriptor variables
• Census bureau demographic characteristics
• Third-party classification variables like PRIZM or VALS
• Geographic characteristics or regions
• Panel data and scanner data on buying habits and usage levels
• Customer data collected by companies for internal use
6. B2B vs B2C Demographic Variables
B2B
• Business Lifecycle (e.g. startup, established,
mature)
• Industry
• Financial (business financials like: Revenue,
Profits, Debt, Turnover, Cash Flows, Financial
Ratios etc.)
• Ownership/Shareholding (shareholding
pattern/ ownership of the business: Publicly
Traded or Privately Owned,
Government/Private/Joint Venture)
• Market Capital/Valuation
• Business Model
• Delivery Model
• Marketing Strategy
• Value Chain (Who are the partners and
suppliers of the company?)
• Target Customer Segment
• Technology
B2C
Age
Sex
Income
Occupation
Education Level
Relationship Status (current status and/or relationship
history)
Language (either those spoken/written or those not)
Race
Ethnicity
7. Market Segmentation
o Top 6-12 markets based on primary market research
o Pick 1 market opportunity to pursue as your
beachhead market
oIGNORE ALL OTHER MARKETS (for now)
8. Who Are Your
Earlyvangelists?
• Has a problem or need
• Understands they have a problem
• Actively looking for a solution
• Problem large enough they have made an interim
solution
• Has budget or can obtain one quickly
10. • Buy similar products
• Similar sales cycle & expect products to provide
value in similar ways
• Word of mouth communication exists between
customers in the market
3 Conditions That Define a
Beachhead Market
11. Characteristics of a Market
Segment
• Big enough
• Different
• Responsive
• Reachable
• Interested in
different benefits
• Profitable
12. 7 criteria
for selecting the best beachhead
market
Is the target customer well-
funded?
Is the target customer readily
accessible to your sales force?
Does the target customer have a
compelling reason to buy?
1
2
3
13. Can you today, with the help of partners,
deliver a whole product?
Is there entrenched competition that
could block you?
If you win this segment, can you
leverage it to enter additional
segments?
Is the market consistent with the values,
passions and goals of the founding
team?
4
5
6
7
14. STARTUP TEAMS
• List 5 potential
generic CUSTOMER
types
(e.g. physiotherapist,
nutritionist, patient,
hospital, insurer, etc.)
5 MINUTES
16. STARTUP TEAMS
• Narrow both customer &
user lists to 2 each,
evaluating against
10 MINUTES
CUSTOMER
• Big enough
• Purchasing power
• Ease of direct access
• Compelling reason to buy
• Can you deliver a full product (with or
without partners)
• Is there entrenched competition
• Can you leverage success to expand to
other customers if you win this one
• Segment compatible with
values/passion & goals of funding team
USER/PATIENT
• Big enough
• Ease of direct access
• Compelling reason to use
• Can you deliver a full product (with or
without partners)
• Is there entrenched competition
• Can you leverage success to expand
into other users/patients if you win this
one
• Segment compatible with
values/passion & goals of funding team
17. Dendogram to Show Segments
Cancer Patients
Solid Tumours Blood/Lymph
Tumours
Female
✓
Male
✓
<$60k
income
>$60k
income✓
Seeing
oncology
nutritionist/
dietician
✓
18. STARTUP TEAMS
• Draw a dendogram to
segment at least one of
your shortlisted markets
Satisfy 3 conditions that
define a market:
1. Customers buy similar products
2. Customers have a similar sales
cycle and expect value in similar
ways
3. Word of mouth between
customers in the market
10 MINUTES
19. Research Deep Dive
– Identify specific end users
– What will product be used for?
– What actual value do users gain?
– Whoare the most influential lead
customers
– What will ease or hinder
adoption of the new technology?
– Do you need to partner in order
to deliver value to the customer?
– How many customers is 100% of
the market?
– Who else tries to solve the same
need or problem?
– What else does the customer
need to get a full solution to
their problems or needs?
20. STARTUP TEAMS
• What are your
assumptions about this
customer?
• Prioritise from least to
most risky
10 MINUTES
A priori. dividing a market into segments without the benefit of primary market research.
intuition, analysis of secondary data sources, analysis of internal customer databases to group people into segments.
examples:
Heavy versus moderate and light users
Men versus women
Younger versus older users
North versus south regions
VALS or PRIZM clusters
Buyers versus non-buyers
Re-application of previous post hoc segmentation schemes
Post hoc – ANALYTIC SEGMENTATION. THIS IS BEST PRACTICE AND WILL DEMONSTRATE A LEVEL OF DEEP MATURITY. Primary market research is used to collect classification and descriptor variables for members of the target market. Segments are not defined until after collection and analysis of all relevant information. Multivariate analytical techniques are used to define each segment and develop a scoring algorithm for placing all members of the target market into segments.
Interdependence (clustering via K-means) – informs your strategy
Dependence (Treeing via CHAID) – informs your tactics
Sample size: 400-600 minimum; 1000+ typical. Figure that a 5% seg ment can hold promise and that you do not want to make inferences from subgroup (segment) sample sizes of less than 30 … thus, 30/5% = 600 minimum.
There is some overlap between these two categories. Distinction is not particular relevant for your purposes and centers around which are available in public secondary sources or not.
There is some overlap between these two categories. Distinction is not particular relevant for your purposes and centers around which are available in public secondary sources or not.
Almost all first-time entrepreneurs find that ignoring market opportunities is difficult. They doggedly hold on to the idea that more markets increases their odds of success and that they are best to hedge their bets until one market takes off.
You are not looking for the perfect market opportunity – don’t fall into paralysis by analysis
Your goal is to start a company, not become a professional market analyst. Therefore, you will focus on the market opportunities you have already researched, and choose one that fits well with the criteria presented below.
These are your first and most important customers. They are willing to take a leap of faith and buy an early product (perhaps unfinished, untried). They are also willing to help co-develop & refine the product.
has a problem or need. There is a concrete, identifiable problem. By solving the problem, costs are reduced, time is saved, revenue is increased. The problem can also be emotional in nature: a need for social acceptance or contact, credibility, safety, competitiveness, etc. But also consider the need for food and amusement. People have to be willing to pay for the solution of the problem.
understands that they have a problem. The person or company must be aware that they have a problem. When the problem doesn’t ‘hurt’, or they are not aware they have a problem, they will not be able to help you and your startup. And you need their help in your quest for a sustainable and scalable revenue model.
is actively looking for a solution, and has the time to find the solution. An Earlyvangelist is eager to find a solution. They also have ample time to help search for the perfect solution for the problem they experience.
has a problem so large, that they have made an interim solution themselves. Is the problem so painful that they try to solve it themselves? When the Earlyvangelist is making ‘duct tape solutions’ themselves, the need for a good solution must be great!
wields a budget, or is able to obtain one shortly. The Earlyvangelist has to have the money and decision-making power to buy your solution. They have to commit to your company (think of money, time, data, or payment in kind).
NUBB: Need, Urgency, Budget, and Buying authority
Early adopters are the first clients to buy your product when it markets. Yet there is a substantial difference between an Early adopter and an Earlyvangelist. An Earlyvangelist does not just buy your product; they buy your vision. The vision of your enterprise is what binds the Earlyvangelist to your company. In your search for the perfect solution to your problem (in the shape of a product or service), you will often make little mistakes. An Earlyvangelist will help you find these mistakes and help you develop a perfect product. After all: they believe in your vision. They have such need for a solution, that they are willing to go on this search with you.
For example, existing customers serve as high-value references for potential customers. In fact, they may belong to the same professional organizations or operate in the same region.
Are early adopters representative of the greater market? Do they share a need profile?
Big enough. Market must be large enough to warrant segmenting. Don’t try to split a market that is already very small.
Different. Differences must exist between members of the market and these differences must be measurable through traditional data collection approaches (i.e., surveys).
Responsive. Once the market is segmented, you must be able to design marketing communications that address the needs of the desired segments. If you can’t develop promotions and advertising that speak to each segment, there is little value in knowing that those segments exist.
Reachable. Each segment must be reachable through one or more media. You must be able to get your message in front of the right market segments for it to be effective. If one-eyed, green aliens are your best marketing opportunity, make certain there is a magazine, cable program or some other medium that targets these people (or be prepared to create one).
Interested in different benefits. Segments must not only differ on demographic and psychographic characteristics, they must also differ on the benefits sought from the product. If everyone ultimately wants the same things from your product, there is no reason to segment buyers. However, this is seldom the case. Even commodities like sugar and paper plates can benefit from segmentation.
Profitable. The expected profits from expanding your markets and more effectively reaching buyer segments must exceed the costs of developing multiple marketing programs, re-designing existing products and/or creating new products to reach those segments.
You need positive cashflow
In some instances, 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. Also, since your product is substantially new and never seen before (and potentially disruptive), third parties may not know how to be effective at creating demand for your product.
Would the customer buy your product instead of another similar solution? Or is the customer content with whatever solution is already being used? Remember that on many occasions, your primary competition will be the customer doing nothing.
4. No one wants to buy a new alternator and install it on their car, even if the alternator is much better than what they currently have. They want to buy a car. You will likely need to work with other vendors to deliver a solution that incorporates your product, which means that you will need to convince other manufacturers and distributors that your product is worth integrating into their workflows.
5. Rare is the case where no other competitors are vying to convince a customer to spend its budget on products to meet a specific need. How strong are those competitors, from the customercs viewpoint (not your viewpoint or from a technical standpoint)? Can/will the competition block you from starting a business relationship with a customer?
6. 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? Or will you have to radically revise your product or sales strategy in order to take advantage of additional market opportunities? While you want to stay focused on your beachhead market, you do not want to choose a starting market from which you will have a hard time scaling your business. Moore uses the metaphor of a bowling alley, where the beachhead market is the lead pin, and dominating the beachhead market knocks down the lead pin, which crashes into other pins that represent either adjacent market opportunities or different applications to sell to the customer in your beachhead market.
7. Presumably, this question was addressed in the Market Analysis, but you want to make sure that the foundersc personal goals do not take a back seat to the other criteria presented here.
This is who PAYS
This is who USES your product or service. For example, you may have applications in cancer, diabetes and wound care. You can’t succeed in all three.
