Break Down

I spent last Friday coaching a well funded start-up on the fundamentals of market segmentation.

Yes, in Silicon Valley you can still romance venture capitalists without a complete go-to-market strategy.

marketing_strategy_stack_w350Segmentation is the second most fundamental marketing strategy activity, and one that founders rarely contemplate while running headlong into a market. Granted, between technology vision and early adopter myopia, there is little reason to segment market in the earliest phases of corporate life. But go beyond the early days and quick sales to innovators and early adopters and you will see a company flounder as sales slow and individuals attempt selling to anyone. Since new products don’t fill anybody’s whole product definition, selling to everyone means selling to almost no one.

Next comes an entry in the dead pool.

Founders tend not to segment for several reasons, none of which are rational:

Ignorance: Some founders don’t know what market segmentation is or why it is critical. This includes otherwise smart people who have read the standard books about technology marketing (Crossing the Chasm, et al) and should have grasped segmentation’s importance.

Technology Vision: Founders tend to be technologists and see the beauty of design. Their tech vision obscures market vision, and they design products for their perception of niche needs, not from identifying a part of the broad market and designing for it.

Serve Everyone: Founders often suffer from the mistaken notion that they can design a product that suits all buyers. Even IBM doesn’t do this because they can’t either.

Early Adopter Myopia: Success with early adopters blinds some founders to the realities of the majority market and how they must pick a point therein (a segment) to anchor their fortunes.

The time to segment your market is after you have proven that your generic product has early adopter success and before you seek funding. Showing that you know the difference, have broken down the market and have selected a beachhead segment will help land investors.

The way to wisely segment your market is very easy.


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