Markets and Segments

What is a ‘market’ in this context?

• How do you think about the market size?
• Look at segments, value proposition and market entry
• Segments: For your market or customer hypothesis, you need to understand the market(s) and segment(s) you are serving.
• Notice that these are not black and white, they can be continuums or multi-faceted.
• Types
  • Mass Market: Huge and undifferentiated. Horizontal, e.g. consumers age 12 to 18.
  • Niche: Highly specific: Vertical, e.g. Bicyclists
  • Segmented: your product serves more than one segment. Apple serves the consumer and education market segments
  • Diversified: your product serves very different markets: Amazon serves consumers and software developer
  • Two or multi-sided markets: brings two or more segments together: dating services, newspapers
  • there are others…

Value Proposition:

• For each segment you need to express what value your product or service is creating.
• If you cannot express it than you probably should not be trying to address that market.
• It’s not just that you are offering something ‘new’ to that segment. It could also be:
  • cheaper (to buy or to use)
  • faster
  • more convenient
  • better designed
  • more customized
  • brand
  • safer/less risky
  • more available (segment couldn’t get it, use it, access it before)

Market Entry

• Existing market
  • Your customers (kind of) understand the problem and your solution
  • You have (kind of) competitors
  • Your customers will have to stop using another product
  • Sometimes your entry can grow the number of customers, sometimes you fight it out (e.g. Facebook for Seniors. Is that a new or existing market?)
  • So you can:
    • ENTER an existing market, e.g. Android joining iPhone and compete directly
    • RESEGMENT an existing market - with one of value propositions above, e.g. iPhone joining Blackberry
    • RESEGMENT a market - by going after a sub-component of it, e.g. Tesla entering automobile market
• New Market
  • Your customers may not know they have the problem
  • You have to teach/explain them why your product/service exists
  • They will have to find budget (money) to pay for it.
  • This is a very expensive process for you
  • So you can:
    • CREATE a totally new market, e.g. Palm, creating the PDA market
• Discussion: Let’s see what advantages and challenges each example has
• Exercise:
  • Company and market
    • Barnes and Nobel Nook
    • Tesla Motors
    • Olin College
    • Apple iTunes
    • Raspberry Pi
    • Nest Thermostat
    • Microsoft X-Box
    • Makerbot Replicator
    • Google Android
    • Pocket Hose (google it)
  • 5 minutes: Team up in by classroom table, pick a different product, and answer:
    • what market(s) is this company and/or product in
    • what segment and kind of segment does it compete in
    • what is it’s value proposition is it offering that market
    • how did it attack or enter the market
    • additional observations and/or insights?
• Report out by table