When you're launching a feature to start to unlock a new market, what's the best way to identify your target market segments and ensure steady penetration into that new market?
Entering a new market organically can be incredibly difficult, so the first step is always to check that there is enough opportunity in the new market to warrant the time and resources. From that new market, you'll want to carve out your beachhead market segments.
Identifying the beachhead segment(s) is a strategic exercise, not a tactical one. That means you'll need to pick the 1 or 2 segments where you have a competitive advantage over incumbent offerings and substitutes. This is close to the "Right to Win" concept many companies use.
To solidify the segment definition, it's best to do market research to find the "edges". Start with a hypothesis about the definition then conduct market research on both sides of those segment boundaries. I've been surprised how quickly we can tell whether we hit the mark. Depending on what this research produces, you may need to adjust the variables you're using to define the market (ex. switch from Revenue to Employee Count), refine the thresholds instead (ex. changing Employee Count from +1,000 to +5,000).
The one thing to keep in mind is you're doing this segmentation and research to "de-risk" your market entry. You won't be able to take all the risk out, but vigilance here will dramatically improve your chances of a successful launch.
Here are the steps I typically follow to unlock what the target segment can be:
Step I: Analyze your Offering
What does your product/feature offer in terms of functionality?
What gap do you want to fulfill by bringing this to the market?
Why do you think this feature is needed today?
Define some jobs it is helping accomplish as well as value it unlocks for your customer?
Step II: Brainstorm the kind of Customers who might need this Offering
(Put this in the form of a table with the following headers Customer Cluster, Problems/Pain Points, Needs/Wants, Gains/Values)
Which customers would require this kind of a feature/product? List all the ones that come to your mind. Cluster them into broader categories initially.
Identify specific problems/pain points individual cluster of customers are looking for. Keep in mind that each cluster has a unique need/problem they are trying to address. It is important to list their specific problems/needs.
What value/gains are these list of customers looking to derive in regards to this problem/feature? How did the customer expect their lives to be better with your product/feature?
Step III: Understand the Marketplace
What is the market size of these clusters that you have identified? Most important is TRM )Total relatable market is simply the number of people who could potentially become your customers because only you serve them at this point.
What regulations/trends are affecting them today that you need to be aware of?( Climate Change, Soil Conservation, Water Conservation, Plastic Reduction, antitrust laws, Labor laws, etc.)
What social trends are affecting these clusters of customers that may fasten the process of buying your offering? (Short form content, Community building, influencer, side hustles, etc.)
What sorts of things or opinions are becoming popular or unpopular? (Abortion, LGBTQ rights, Movie opinions, Book debates)
Are there any economic trends that might affect customer shopping behaviors?(Inflation, deflation, gig economy, rising interest rates, unemployment rate, consumer confidence in economy)
Step IV: Analyze the Competitors both Direct and Indirect ones
(Make a table for each competitor as well as any indirect competitor)
What are the businesses that offer comparable products/features?
Who else is targeting these clusters of customers that you have identified?
What is their offering/features ?
What is their marketing strategy? What channels are they using?
What prices are they offering?
What good and bad reviews do each of them have?
Step V: Prioritize the Market Segments (Top 3 Criteria that matter to me)
Which sub-cluster/sub-segment within a cluster is underserved, unhappy by competitors today? How can you serve this niche in a differentiated way? Does it fit with the capabilities of your offering/feature?
Does this segment have the urgency to solve this pain point/problem? Would your product or service be something they really need today and help them solve ongoing pain points? Can you be a Painkiller rather than a Vitamin for them?*
Does this segment have the budget to satisfy your revenue goals?
Is the total relatable market/sales opportunity good enough to meet your business revenue goal?
Can you find some early adopters who are an influential group of customers/business leaders/have a social media following/ frequently share opinions in this cluster that can help my business get a head start through social boost?
Once you are able to map out the following data points, you will understand which segment you should prioritize now, tomorrow, and next!