How To Select The Right Market Segment For Your Product?

When a new product is in its early stages of development, there are many unknowns and questions we don't know the answers to. This can create a sense of working aimlessly on an idea that you're unsure if it’ll be profitable.

As a result, many employees report feeling physically and mentally exhausted from the constant, unforeseen challenges. And, while you cannot plan for every scenario, determining your market can help you find your foot amidst an ever-changing environment. There are many ways to achieve success, and for some products, there are a lot of markets that they could fit into. However, as much as you want to consider the different possibilities available to you, keep in mind that this might lead to decision paralysis.

To avoid this and to help with decision-making, you can start by using the PVP Index (personal fulfillment, value to the marketplace, and profitability) developed by Allan Dib.

The PVP Index Framework

This is a framework that deviates from traditional market strategies by focusing on the psychological and emotional aspects of your customers (value) and your personal fulfillment, as well as your perception of the market (profitability).

While traditional market segmentation focuses largely on attributes of individuals and companies, or user behavior in relation to a product, the PVP Index does a great job of acknowledging that consumers do not purchase solely based on their basic needs.

The National Association of Sales Professionals (USA) defines two main needs that people want to satisfy when they are deciding whether to purchase a product or service. The need to avoid pain or loss and the need to gain pleasure.

Depending on how pain-avoidant or pleasure-seeking the customer is, they will place a certain amount of value on a product or service. While this is not the only factor that makes a paying customer, it's one aspect you should consider when selecting a market, as this is closely tied to profitability.

The PVP Index has three different components:

Personal Fulfillment: This refers to how much you enjoy engaging with different types of users. The first few years of a startup are often stressful; there's a lot of unpaid work you’ll have to do and many hats you’ll have to wear. By thinking about the people you enjoy working with, you'll be less likely to develop burnout.

Value: No matter how innovative your product or service is, if your audience doesn’t find value in it, they will not become paying customers. When the values of your business align with those of your audience, you foster a deeper emotional bond and establish trust. Think about the core beliefs, ethics, and principles of your users and whether they align with yours.

Profitability: This part takes a look into the potential earnings within the market segment. Factors such as purchasing power, willingness to spend on the product, and the overall profitability of the group of users can help you assess the economic gain of each market you look into.

Let’s take a look at how the index could look like for a photographer that wants to open their own studio:

If you find yourself with two or more markets that have similar scores, you can dig deeper by asking yourself these questions:

1. Is the target customer well-funded?

2. Is the target customer readily accessible to your sales force?

3. Does the target customer have a compelling reason to buy?

4. Can you today, with the help of partners, deliver a whole product?

5. Is there entrenched competition that could block you?

6. If you win this segment, can you leverage it to enter additional segments?

7. Is the market consistent with the values, passions, and goals of the founding team?

This is the criteria mentioned in the book Disciplined Entrepreneurship by Bill Aulet.

Remember, you want to narrow down instead of going for the largest market. You don’t want to waste the limited resources you have trying to stand out in a sea of competitors that likely have a bigger team and budget.

What's the best way to know if your market is narrow enough?

You want to keep narrow it down until the market meets these three conditions:

1. The market’s customers purchase comparable products.

   
   

2. The sales cycle is consistent among these customers who also look for value in similar ways. This allows your sales team to efficiently transition from one customer to another with minimal impact on productivity.

   
   

3. Customers in this market often engage in "word of mouth" communication, making them effective and valuable references for one another during purchasing decisions. They might be part of the same professional groups or operate within the same geographical area.

   
   

Navigating Business Decisions with Market Understanding

Not knowing your market can result in making decisions based on what you thinks it’s best instead of what the consumer actually needs and wants. On the other hand, you could experience decision paralysis, making taking action more difficult than it has to be.

When you understand your market and have a strong understanding of it, you will have a solid start to follow in all of your business decisions. It will provide the marketing team with a foundation to develop a powerful marketing message. The type of market will also influence the design decisions of your product or service, helping the product team align better with the users.

If you ever get to a point where you want to expand and have adjacent products, you’ll be better equipped to align new offerings with your market. Even if your current customer doesn’t find value in your new proposition, and you decide to enter a new market altogether.

Creative Corner

Creative corner showcases innovative examples to inspire out-of-the-box thinking.

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Strava is a social network for athletes that’s a great example of a company that has identified its target market effectively. They understand that their market is athletes and other sports aficionados, this has allowed them to not only develop the app in the right ways for their users but also to expand in a way that makes sense for them.

In February of this year, the company announced a new feature that allows you to also track your dog's exercise. Not only is this a new feature, but they also partnered with a smart dog collar brand, opening up the possibility of bringing in even more users to the app besides the new revenue stream with the new dog collars.

You can read more about the story here.

The Challenge!

Selecting the right market for you can feel daunting and overwhelming, specially if i’s the first time you do it. One tool you can use is the pomodoro method; by allocating a block of time to each tasks you can break it down and take breaks to keep yourself focused and open minded.

• Download the template and set a timer for 25 minutes.

• Start by writing down all the market segments, Bill Aulet advices to have anywhere in between 6 to 12 markets.

• Take a 5 minute break and grab yourself a cup of coffee.

• Set another timer and start rating each section from 1 to 10.

  
  

At the end, the market with the highest score is the one you should decide to focus on. Repeat as many cycles of 25 minutes as your need, you can always take longer breaks of 15 minutes if you need a bit more time to relax.

💡 ApptimisTip! To avoid anchoring bias, don’t add up the scores until the very end. This way you avoid making a rush decision unconsciously based on the first few results before rating the rest of the markets.

Work With AI

After you finished the challenge you can brainstorm more ideas using AI, here’s a template prompt that can be useful (available only for subscribers)

I am doing a marketing segmentation about ___ industry, my main product/service idea is ___ I am working on a index of potential markets that I could serve. Here are some examples I have thought of so far ___ ,____ ,___. Suggest 5 more adjacent market segments I could serve

PS: Our team at Apptimsit Studio helps businesses with the planning, design and execution of their plan. We help business owners and people with vision to execute their dreams and have beautiful flawlessly working automated systems. Book a free discovery call with us here.

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