3 types of market segments for startups

Recently, a surge of interest in creating start-ups and their development has appeared on Habré. Much has been said about the search for an investor and packaging, so that it is more expensive to sell, but in my opinion, there is still not enough information about the positioning and definition of its market.



We now do start-up carbucks.ru (search for car loans and special offers when buying a car), so understanding the needs of customers is very important to us. As the main market research model, we decided to use Customer Development from Steve Blank ( Steven Blank ), a well-known serial entrepreneur in the Valley, author of 4 Steps to the Epiphany. In the course of development of a startup, we will describe the work we are doing. Today’s article is about defining your market, the first thing to do when creating a project.



To begin, let's look at an example of entering the PDA market of the Palm and Handspring companies, which Blanc cites in his book. Handspring worked in the handhelds market (PDA), in 1999, along with such giants as Palm, HP and Microsoft. The leadership of the startup was tasked with winning 20% ​​of the currently established market, differentiating the company's computers from the rest, showing better performance and expandability. Did they succeed? Definitely yes. A year later, their revenue was $ 170 million. This was possible due to the fact that the PDA market was already existing, and the consumers there already knew what a PDA is and why it is needed. It remains only to show significant advantages over competitors, and the rocket took off.



Palm, unlike Handspring, developed differently. The pioneer of the industry simply could not come in 1996 and take 20% of the market, which at that time did not exist. If Palm would come with Handspring positioning, its sales would be zero. Who needed the CCP in 1996? The company had to “educate” consumers about what it is and how it can help them. Thus, Palm at the time created a new market, which is fundamentally different from the work Handspring.

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The type of market determines how you will assess the needs of the consumer and position the product. It also plays a crucial role in determining the size of the market and the way the product is launched. That is why, before you start marketing, you must clearly understand and validate which market you are in.



There are 3 main types of market:

• existing market
• new market
• re-segmented market (niche or low-cost product intended for a specific group of consumers)

Existing market

Such a market is the easiest to understand. If you are in a well-known market, when customers have experience with a similar product, competitors are known, it is usually necessary to show how your product differs from competitive in terms of better / faster, i.e. what significant improvements a product carries. The emphasis is precisely on the magnitude of such improvements, minor improvements of competitive products do not count. Thus, in the existing market the basis of competition is the product and its characteristics. Before you begin to communicate with customers, ask yourself the question: “Are my characteristics sufficiently different from competitive ones, so that consumers can drop them and come over to me?”. One example of companies entering the existing market is Toolwi , developing various widgets.

New market

The opposite situation arises if you enter a new market with a new product. In this case, you offer consumers a solution to a need that could not be solved by existing means (innovation), or fundamentally reduce product prices, thereby creating a new circle of consumers. For example, Palm, the creator of the PDA market, discussed above falls into this category. It is important to take into account that the term “creator of the market” means not the company that first came to him, but the one that is later associated with him (that is, not Newton, but Palm).



When entering a new market, you need to understand that it will be necessary to “train” customers and convince them that this product is useful. It is here that Moore’s famous book “Crossing the Abyss” and the Technology Adoption Lifecycle curve, which clearly separates the early and mainstream markets, come in handy. As an example, I can do it all : the guys have to “train” people to use voice commands and independently create a market.

Resegmented market: low prices

In my experience, I can say that most startups use a hybrid from the first and second market, actually re-segmenting the market. Such segmentation acquires either the form of work for the low-end (budget) segment, reducing product prices, or the form of finding a specific niche. If you enter this market, ask yourself: “Are there enough low-end consumers who will be satisfied with the functionality of our product?” And “Can I always provide a product at a low cost for myself?”.

For example, we, carbucks.ru , are going to make money on the supply of potential customers at a price that is an order of magnitude lower than current ones.

Resegmented market: finding a niche

A niche product is usually offered to a specific group of customers, who are willing to pay more than for a regular product, if they have at their disposal exactly the one that solves their specific needs. Thus, in this case it is necessary to convince consumers that certain characteristics of the product are quite different from others like it. Again, when entering this category, it is necessary to understand: are there enough users in it for the company to work comfortably. Example - the designer of thematic social networks is all about the topic , deciding the need of specific user groups to create their social network according to their interests.



In the article we reviewed the first introductory stage - the definition of the type of market. Further Steve Blanc invites us to go to the stage of Customer Discovery. If this article is like the habrasoobshchestvu, then I will tell you more about the model itself, I will describe this stage and our experience in it.