Identifying the Target Market Segment
Micro level market assessment:
1. Market Domain/Micro Level: Sector Market Benefits and Attractiveness
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?
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?
The macro market test
1. What sort of business is sought? One with potential to become a huge business, or a small lifestyle operation? This along with the answers to the following question will determine the need for venture capital. A high potential business in a huge, rapidly growing market will require venture capital whereas a small lifestyle operation in a niche market will not need any.
2. How large is the market?
3. How fast can it grow?
4. How quickly can it grown in the next six months or two/three/five years?
5. What economic, demographic, socio cultural, technological, regulatory or natural trends can be identified and how will it affect the business?