How do you use market research to inform priority verticals to go after in your go to market efforts?

I don't actually use market research for that, is the short answer. If we believe that our solution is well suited for a particular vertical, we have the budget to invest in GTM to capture business in this vertical, and the vertical is fragmented / doesn't have a real clear winner, we will go for it. 

Additionally, you should look at your own customer data and overlay it with your product. For example, if Square is has developed a number of features that are suited for Restaurants, we will prioritize this vertical. If after a couple of months we are not well penetrated here, we have a problem. 

Ensure verticalization aligns well with core competencies, market perception, ability to deliver and differentiation. If you do not clearly understand the definition of the target vertical, the trends in that vertical’s consumer or enterprise user market as well as the size of the opportunity, it will cause internal and ultimately market confusion that hinders speed and success.

Assuming that you've determined this is an attractive vertical to pursue, here is a list to consider at the onset of prioritizing verticals and viability of entrance: 

- Current capabilities (such as how capable you to serve industry clients).
- The resources you have to invest (such as skills, channels, ecosystem partners).
- Market objectives (“to achieve X% market share,” for example, or “to be in the top three” in a given market).
- The type of offering(s) (whether they are fundamentally “horizontal” in nature or developed from the outset for a specific industry process or issue).
- Position in an ecosystem (owning and driving one or contributing; optimize or transform)).
- Existing position in the industry (route to market, current client expansion, competitor dynamics, industry connections and relationships, including influencers, etc.).

When looking to identify target verticals, I always prefer a data driven approach. I'd work up a detailed analysis exercise and build a vertical based TAM. I have a go-to bubble chart that I like to develop which is based on the growth rate of each (CAGR, y axis) vs the revenue opportunity (x axis). It gives you an easy visual that shows where the optimal use cases/verticals will be - up and to the right. 

Here are some other questions you can ask to focus your efforts:

1. Do we know how much revenue opportunity is out there in the key verticals?
2. What are the top five verticals based on revenue opportunity?
3. What does our customer concentration look like across verticals?
4. Do we have any strong differentiating features in certain verticals? If yes, which ones?

Market research is a pretty valuable data point in terms of prioritizing verticals (or any other segmentation slice), but so too is your product ownership point of view and your internal usage data. So you don't need to lean on external research, but it can certainly augment your other efforts. I think there's value in looking at 1p, 2p and 3p input sources in coordination with each other.

Where we have used external research towards our segmentation processes is when we do message testing measured across different user groups and then review any consideration or preference gains we see across those persona types such that we can forecast where we may see impact and how we should talk to that specific group. In this style test, we're building a messaging hypothesis and then using it as a constant and the persona type as the variable, so that we could see impact to the segment. Depending on how you set up your study, you can also introduce nuances in your messaging to work through as well. You can also look at interest across verticals and map that back to your product differentiation to target industries where you have the best PMF.

Instead of a "vertical focus" go forward with a New Audience focus so you can leverage the 5A GTM framework , and ensure you're thinking through a consumers' need. 

Also, if you focus on a new user, you can also employ the "Job to be done" framework, which can help narrow what the customer really wants to get done and how your product can satiate that need. After you establish those jobs (UXR) you can use market research and even analytics to scale out the size of these jobs and what could bring in the most users. Always put people first. 

Market research, user research and analytics (data trends) are you sweet trio of fantastic insights that can help you figure out the new Audiences to expand your product.

Making the assumption here that vertical = industry.

1. Industry definition - which taxonomy are you using. NAICS, SIC, propietary, DUNS, Clearbit? This is important because there is a lot of nuance hidden in sub-verticals, so getting your language aligned is key
2. TAM - what is the actual addressable market for your product or portfolio or launch? This can be based on historical win rates by industry/sub industry for an existing product, or can be based on focus groups/survey data of your prospect base (how likely are you to buy X)
3. Product market fit - what are the core use cases for each vertical that you're thinking about? Can you actually satisfy them? How complex is the buyer? Is the cost to serve higher than the actual revenue you can make (bad margins)? You can figure this out again by looking at competitors (the good ones will showcase what matters via their websites), looking at analyst reports and again first-had research

I believe that market insights are the #1 core product marketing capability. Literally everything – from positioning and messaging to the products and capabilities you deliver to the market – flows from insights that you generate via smart, well-run market research.

I’ve worked on dozens of products at every stage of maturity and, while most of these can be applied horizontally across several industries, it has been helpful to leverage market research to identify which verticals to target and how to tailor my positioning strategy. This type of insight has been beneficial as I move a product beyond early adopters and traverse the dangerous chasm to an early majority audience.

Of course, market research can come in many forms. In my early days as a marketer, I leaned on traditional in-person focus groups (the ones with the double-paned glasses and the unlimited jelly beans for clients) for depth of insight and quantitative survey-based research to validate insights at scale.

More recently, I’ve looked to other research techniques to help fine-tune my vertical strategy. One area to look at is your sales data to answer specific questions related to verticals. Are you seeing accentuated adoption, a faster deal cycle, and improved win rates in specific verticals? I also prioritize talking to my sales teammates to get deeper and richer insights. One cautionary note: make sure you are supplementing existing customer information with prospective customer insights. After all, if you only look at your existing customer base, you’re looking in the rearview mirror. 

Another market research area to inform verticalization and all of GTM is the competitive landscape. Are you seeing competitors gravitate to a specific set of verticals? Or are they listing out verticals on their website, but the messaging is pretty much the same. (I call this fake verticalization).

I also look at characteristics of the vertical, such as TAM or macro economic indicators of vertical health and appeal for the product. For example, at the outset of the pandemic, it was clear that certain industries such as Internet infrastructure were seeing a boom in adoption and other industries had the bottom fall out. In short, I make it a point to ensure that if I’m targeting a vertical, the addressable market is sizable enough and the vertical is poised to purchase.

The end result of these market insights doesn’t just help me with a vertical strategy; it helps me formulate the Ideal Customer Profile and sets in motion a set of coordinated actions across the go-to-market and product organizations.

Market research is near and dear to my heart and at the core of any strong product and go-to-market plan. I have many examples of how you can use research to inform vertical strategy, but my first tip is to just get started. If you are on a small but mighty PMM team (or perhaps you're the only PMM), any data is better than none.  

Verticals might mean prioritizing based on industry, company size, persona (or often a combination). I recommend trying to define what an early adopter looks like in your industry and prioritizing them early. My experience is primarily in B2B, but much of this can be generalized. 

Market research - Review trends in your industry, new legislation that may drive new consumer/buyer behaviors, join all the relevant newsletters etc.

Industry - Often times certain industries have more of an urgent need for your product than others, I've utilized tons of third party reports put our by industry groups to understand broadly which industries to do a deeper dive into. Consumer groups or industry groups are great and they host events, conferences, and trade-shows.

engagement with certain industries in the past and if so, how did they convert? 

Customer - To get insights on customers I've run focus groups, hosted 1:1 research calls, conducted surveys and worked with customer advocacy marketing teams to get feedback from customer councils. You can also take a look at your CRM system to mine for data based on past customer activities, feedback, and purchasing decisions. And of course, if all else fails (or is not an option) you can talk to your customer success team members, who talk to customers every day. 

Prospects - Yes, users/buyers who have not purchased with you before may have a different perspective than your current customers, so it's important to understand their perspective. Joining sales calls, attending tradeshow/conferences, and trying to talk to as many prospects is important. If you have a tool like Gong, this is gold for learning about prospect needs and interest. 

Competitive - Check out what your competitors are focused on from a vertical perspective. You can often tell based on their messaging, case studies, ads, landing pages, and content they are producing. Depending on your strategy (and the other data you collect), you may want to go after a different segment or choose to compete. 

Once you've collected all your research, you need to synthesize it. One way to do this is to create a score-card and then prioritize each potential verticals into tiers based on most attractive to least attractive.

We aim to diversify our revenue strategy with dynamic and compelling GTM campaigns. We use market research from internal and external sources to fuel decisions. Internal market research comes from our harvesting our own customer data to identify areas of penetration and greenfield. We couple these insights with analyst insights to invest in programming. When entering a new market, we test small segments and iterate our way to what good looks like (pricing, packaging, positioning).

When we first started to verticalize our solution, we looked at:

• TAM (total addressable market) and SAM (sellable addressable market--what is realistic that YOUR company can sell in to?)
• CARR
• Win Rate
• Average Deal Size (ADS)
• Sales Cycle (# of days)
• Number of Curent Customers

This gave us a good idea for where we were already winning and where we had the biggest opportunity. We have also been monitoring industries with high "digital maturity" based on reports from McKinsey and other analysts which has been helpful in planning for the next 3 years.

We have since refined our strategy and doubled down on key verticals for the next year by looking at:

• Pipeline (where do we have the most opportunity coming from?)
• Product Gap Analysis - what are key product gaps that are leading to lost deals by vertical? And what is the low hanging fruit and level of effort to close some of those gaps
• In addition to Total ARR and ADS

This has led us to a 2023 plan to win in verticals based on these 3 things:

•  SUCCESS: lean into what is already working (i.e. high ADS and win rates) and maintain success
•  ALIGNMENT: with product vision and brand positioning (multi-channel, depth and scale of data, orchestrated journeys, content and automation needs)
•  VELOCITY: lower win rates but higher (potential) speed to “success” by focusing on higher ADS verticals due to multiple channels, higher data fees, and need for premium features + higher opportunity (TAM)

I'm biased. I'm a former consultant and market researcher— market research always follows priority verticals and market efforts.  

Depending on the stage of your organization, you might not have the luxury of full fledge research, but you need to at least talk to customers. Get some contextual awareness or directionally where you're going, then continue to validate and optimize over time. 

There are a few questions you need to answer to determine if it's worth targeting this new vertical:

- Do you have product-market fit? Are you solving a real problem for this vertical?

- What is the size of the market opportunity for this vertical? How will it grow over time? (their industry growth and your product growth) How does it compare to markets you are doing well in?

- How similar is the vertical to existing verticals where you have success? Would you have to do much to change your value proposition or messaging?

- Are there known competitors targeting this vertical? How do you compare?

If you know you have product-market fit, the next step is to identify the size of the opportunity in the potential verticals. Use research reports to find the size of the industry you are targeting, and it's CAGR compared to other industries. You also may find spending reports to know how much they are already spending or are predicted to spend in the coming years on a technology similar to yours - IT, advertising, etc. The information is out there.

Another method is more of a "bottoms up" approach where you would determine the characteristics of the companies you are targeting (industry, employees, size of the marketing team, etc), and determine how many companies could be in your target market.

Call it however you want but it all begins with a good ol’ SWOT (or TOWS) analysis.

• If you have any customers already perform a thorough win/loss analysis (quant, not just qual—especially for GTM exploration). Identify patterns - what do your best (ACV, ARR, retention, CLV) have in common?

• Talk to analysts if you have access to Forrester and Gartner. They are a great source of VOM (voice of market).

• Look for buyers for the pain you’re solving and be open minded. Google the pain itself and see where you’re getting results. For example, you might see a lot of material about it on channels or publications that speak to a specific audience. You can narrow it down later

• Examine external factors like regulation, macro trends (market growth), investment, sheer market size, competition, savvy-ness, etc. and find the best fit. The more specific you can get the better.

  • A competitive market isn’t necessarily a bad thing if you’re clear how you’re differentiated or if you can reframe your problem/solution just a little bit to position yourself better.