First part is done
Develop Market Segmentation for Your Idea.
Develop market segmentation for your idea, product, or technology. Brainstorm possible applications, narrow your focus to 6-12 most interesting opportunities, and complete the process with primary customer research.
Strive for specificity. In addition to listing potential industries, also list the markets, market segments, and prospective end users.
Describe what tasks the end users perform, what problems and needs they experience, and what benefits they would attain with your solution.
Primary customer research is king. No market segmentation is complete without it. Interview at least 10 prospective end-users / customers. In the beginning, focus on not only quantity, but also variety of end users. As such, interview end users from across the top industries of
estimate the Total Addressable Market Size for Your Beachhead Market.
By now you have developed the market segmentation for your idea and selected your beachhead market. For the time being, you will focus on this beachhead market and deselect other markets. Focus will take you far.
Now your goal is to estimate the size of your beachhead market. In this course, we use the term Total Addressable Market Size, or TAM.
Follow a Bottom Up approach. The key is to estimate how many end users exist in your beachhead market and identify how much revenue you will earn from each end user on an annual basis. Multiplying the two numbers gives you TAM.
Remember, the goal is not to have as large a TAM as possible. The goal is to have a reliable understanding of the size of the beachhead market, so that you can start planning your very scarce resources around it.
A good TAM for the beachhead market is in the range from $20 million to $100 million. If your TAM is less than $5 million, the market is probably too small and will not be of interest to prospective employees and investors. This doesn’t mean you can’t or shouldn’t focus on a market this small, but do so if you have strategic considerations such as an opportunity to enter much larger markets quickly and efficiently.
If your TAM is greater than $1 billion, you’re probably not being specific enough about who your end user is. In this case, your goal should be to add specificity to your End User Profile and redo the TAM calculation.
Profile the Persona for the Beachhead Market.
By now you’ve developed the market segmentation for your idea. You’ve also selected your beachhead market, developed the End User Profile, and estimated the TAM. You’re in a good place and are one step away from tackling your next adventure, which is understanding what you can do for your customer.
Your task now is to develop your Persona. The persona is the person who represents your end user profile the best. It’s usually the person that comes to mind when you ask yourself the question, “If I could have one person and one person only to represent my target end user/customer, who would it be?” You’re welcome to choose an alias for the Persona, but the Persona should be a real person.
The Persona makes your target customer very specific and unambiguous.
Describe the demographic, behavioral, and motivational attributes of the Persona.
At the very least, by looking at the profile of your Persona you should have clear answers to such important questions as (a) What problems/needs does this person experience in relation my idea? (b) Why does this person experience such problems/needs? (c) What kind of solution would be relevant for this person? (d) At what cost? (e) What are some of the “watering holes”, that is, places where such people congregate – websites that such people visit, TV shows that they watch, events that they go to – and where you could market your solution to them effectively.
Build the Persona Profile based on your prior interview(s) of that person and the End User Profile you already have. Identify what’s missing and interview the Persona again to fill in the gaps.