Have an unfair advantage by targeting the key segment to your market entry.
<aside> đź’ˇ How Can This Help?
In one of accelerator workshops, while talking about how to pick the right early adopter, one entrepreneur shouted, “what if I have multiple early adopter segments? Which one to pick?”
The answer wasn’t convincing to me nor to this gentleman. The answer was “Trial & error”, just randomly pick one and go test the potential of matching the problem with such segment. Keep trying all potential early adopter segment until you find the best one, the one that shows high response.
This sounds solid and experimental, but in the same time a waste of time if the first segments weren't a fit. And as we know by now what matters in startup building is “SPEED”.
I knew there should be a better way, so I developed this framework that can help you pick the best promising early adopter segment.
This is the segment that most refer to as “beachhead market” segment, which can be defined as a small market with specific criteria that make it an ideal target to sell a new product or service. Many experts identify the choice of such segment by analyzing the compatibility between the resources available, the product, and the market itself.
However, there was no hands-on practical framework to help startups do that. In terms of resources, with today’s tools and the concept of the validation process that we’ll explain later that will help you validate most of the ideas regardless of their complexities, this factor plays a secondary role for your decision. The product is also something that we don’t have a clear idea for since we’re still in the Customer/Problem phase and we need to focus on customer needs now. You’ll also see in later stages, how the practice of MVP development can help you launch any complex products in an agile way.
The missing piece of the puzzle was the “Market” or in another way, the NEED, and there’s no enough information into how to identify that. So, we developed the Sharp Framework to help you identify the “Sharpest Market Segment”.
So, what are the criteria that help us identity the sharpest segment.
The size answers two crucial questions: How big is the segment? And how underserved?
It’s not enough to identify how big a segment is, but it’s also important to study how underserved it is. By underserved we mean a segment that most competitors are not addressing their needs and pains. This segment usually contributes very small to the total market share and that’s one of the reasons why the majority of the competition are not looking at.
It’s usual for any company to follow the big chunk of the market share resulting in a fierce competition that as a startup with limited resources, you’re not ready for. So, what does a smart entrepreneur does? They target the beachhead market, the unnoticed segment, the undeserved pains. Do that and you already have an unfair advantage.
Size is crucial, but when compared, underserved segments tend to have different measures towards the problem. That’s why here’s it’s key to analyze two crucial criteria: How severe and frequent is the problem to this segment? In a nutshell you want to identify if the target customer has a compelling reason to buy.
It’s not enough to say this is an underserved segment, but it’s more than important to compare it with others and identify how severe is the pains for this segment. As we go, we’ll help you identify exactly of painful a problem is to a particular segment, but for now a simple research and rating is enough.
But the intensity of the problem is not all that matters. Frequency also plays an important role. A headache is less severe than a heartache but a more frequent pain an average person is expected to encounter. It’s the sweet spot of having a severe problem with high frequency that makes incredible product to sell without the need for a single dollar spent in advertising.
Finding a segment that’s experience an intense and frequent problem or pain doesn’t necessary means that they’re aware of it. Here we identify the awareness spectrums with two key end points: Knowing and Searching. So, we ask do they know they have the problem? And are they searching for alternatives?
Customers who experience pain usually ranges from those who know they have it to whether they’re doing anything to solve it. Many smoking individuals know the harm of citrates but not a lot know the harm of consuming packages foods. So it’s not enough to identify a segment that has experience an intense and frequent pain, but it’s always also ideal to pick a segment that knows and are educated enough about the problem, its pain and its consequences.
A segment that even expands on that and search and try available solution for the sake of eliminating the problem is also a very important characteristics for your sharpest segment. That’s why it’s always easier to sell to those people posting a concerns or inquiry in any forum platform, because that tells you they’re looking for a solution.
There’s a saying in the entrepreneurial ecosystem that goes like “Most of the failed startups have product. Rarely do you find them have customers”. The reach characteristic to your segment is vital to tell you whether it’s the sharpest. By Reach we tend to keep in mind two crucial element which are Access & Cost.
Ask yourself “do I know where exactly this segment can be found online and offline?” and you uncover how your knowledge or the difficulty of accessing this segment becomes. It’s very easy to access students by simply dropping by the schools but it’s not so trying to target stay-at-home moms, at least offline. With students also, it’s not easy to access them by dropping to their schools due to the gate keepers compared to reaching them through TikTok. This puts an emphasis on analyzing segments based on how easy or difficult it is to reach them with your offer and let them know you exist. Can you today, alone or with the help of partners, able to solve the problem?
Not all access points or channels are equal. Easy access channels tend to be attractive for most companies to spend to attracting the attention of their customers making it an expensive one. That’s basic economics. With increase in demand comes a challenge to you of increase in price. That’s why, it takes analysis and smart thinking in picking access points of channels that has growing demand but is still cheaper compared to the others.
The final crucial identifier of a sharp early segment is the proof that they’re paying for an alternative to solve their problems. To clearly answer that, we’re going to look into two important things: Frequency & Value
A segment paying on a weekly basis has a higher frequency than a segment who pays once a year for a solution. Frequency determines how frequent the pain occurs and how frequent the customer is willing to pay. But without the other element which is “Value”, you’ll never get the full picture. Note that the paying frequency is not the same as the pain frequency we mentioned above in the “Have the problem” aspect. For StartHack, for example, we found that professors encounter the struggle to effectively get the students engaged in a practical way explaining product/market fit nearly in every lecture that teach. However, when analyzing their options, the current alternatives like books are purchased once with a frequency of one. The paying frequency usually examine the market solutions and their price offering.
The same segment which pays $300 once a year for a solution, as mentioned above, is sharper in terms of monetary value than the segment that pays $10 per month. Hence, the combination of both these factors plays an important role in determining the sharpest among your segments. Within sales strategies, it’s essential to think of customer’s fit to a particular sale using the BANT—an acronym for Budget, Authority, Need and Timing. Identifying the average frequency and monetary value of your target segment with the current solutions and alternatives while trying to solve the problems answer the BANT in all ways. Paying customers triggers their budget and authority to make the payment and the amount and frequency paid determines their willingness to pay which is the best indicator that there’s a need.
If you notice here, we didn’t mention anything related to the features of the solution that each segment is using because it’s very important for us not to identify a segment to initially target to enter a specific market. Later in this phase we’ll dig deep and uncover more elements that will add to our decision to what segment to focus and target.
As mentioned in the customer segmentation chapter, never try to please anyone. Which means it’s very important tp pick one segment, start niche then scale big. The catch is to identify the right the customer segment you should target first to hit big, enter the market and make it easy for you to scale up.
Even after picking the right segment, until now, you just have a guess that you need to prove. That’s why we always recommend analyzing 3 segments or more. This will tell you the top segment based on your assumption but will give you the option of at least 2 optional segments to test with in case you find out later that your main assumption was invalid.
Of course, at the end, apart from ranking the segments and identifying the sharpest, what matters the most, is whether or not the sharpest segment is one that you’re passionate to support, which we call Customer-Founder fit.
From all the potential Target customers you brainstormed during Customer Segmentation exercise, list minimum the 3 potential segments by writing the name of each segment with a quick and short description about each one.
To describe the segments, it’s always better to use a behavioral attribute like, “investors who place 10 or more stock trades per week” or a need-based attribute, like “busy entrepreneurs who want to guidance in how to get to Product-Market fit”
Later in this phase we’ll find the exact quantifiable evidence for all our assumptions. However, as a simple measure, simply answer how many customers are experiencing the pain and rank each segment from 1 to 5
You can’t know the exact number now and it’s fine, just provide an estimate. It will always be better to provide a supporting data for your assumption or why you made that assumption. There should be a reason behind every rank. Hence, the wide space you have for each column. If you have data, write it down, otherwise just state why you think so.
One more thing to note here, always determine the rank of each segment in relative to all other segments to have a better comparative analysis. You can do that after writing down all your estimates for all segments, then compare each one and adjust as you see fit.
Under “Underserved”, rate each segment based on how their needs are not fulfilled in the market, in other words, their satisfaction with current alternatives. You can only know that after doing some competition analysis to find out current solution and how they’re addressing the customer needs.
Use this quick measure to aid your rank:
2) Have the problem with high Intensity & frequency (Pain)
Having a problem is essential for the segment to be an early adopter. However, to know which segment is better, rank the segment based on the problem pain intensity and frequency.
Just rank each segment based on how intense and frequent the pain occurs. A simple measure for frequency can be,
<aside> đź’ˇ SAMPLE CHAPTER
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