The document discusses market segmentation and target markets. It provides definitions of market segmentation and describes it as the process of dividing a market into distinct groups that have distinct needs, characteristics, or behaviors. It then discusses seven steps for successful segmentation for startups: 1) determine life cycle position, 2) create broad market ideas and sub-segments, 3) create customer profiles, 4) assess and eliminate flawed profiles, 5) assess against selection variables, 6) test target segment, 7) repeat if no segment apparent. It emphasizes using a "problem-need" cycle of iterative customer research, testing assumptions and adapting based on results to identify target customer problems and needs.

1. Market Segmentation
Target Market
Dr. Celen P.Paul

2. 2
Selling System of 21st century

3. “
”
3
Introduction

4. 4
WHO ? : Market segmentation definitions
• Market Segmentation is the sub-dividing of customers into
homogenous sub-set of customers where any sub-set may conceivably
selected as market target to be reached with distinct Marketing Mix –
Philip Kotler
• Market segmentation is the process of dividing the whole market of
goods or services in groups of people with similar needs. By making
this division there is a high chance that each group responds in favour
to a specific market strategy. - Pierre Paul Celen

5. 5
WHO ? = Target segmentation
• Market Segmentation:
• Dividing a market into distinct groups with distinct needs,
characteristics, or behavior who might require separate products or
marketing mixes.
• Target Market
• Consists of a set of buyers who share common needs or
characteristics ( buying behavior, channels,..) that responds well to
the start-up services or offering.
• Evaluating Market Segments
• Segment size and growth
• Segment structural attractiveness
• Level of competition
• Substitute products
• Power of buyers
• Powerful suppliers
• Company objectives and resources

6. 6
Ideal Customer Profile ??

7. 7
• The components of a
•Target Market
segmentation

8. 8
Primary Market
Research
Segment Business
Markets
Target Markets Problem Testing
Rate final
segment
Assess &
Validate
Group Similar
Need markets
Rank &
Prioritize
Start Defining Value
Proposition
Process Target Market search

9. 9
Seven Steps to Successful Segmentation
for Startups
• Step 1: Determine where you really are within the startup life
cycle. Relative position in chasm / demand type
• Step 2: Create as broad idea of an addressable market and then
break it down in to all possible sub-segments. Use CSF’s and
MPRS
• Step 3: Create customers profiles for all remaining sub-
segments. Use problem/Need search process
• Step 4: Assess profiles again critical flaws criteria and eliminate
those that fail
• Step 5: Assess remaining profiles against selection variables
continuously until top segment remains. Define Beachhead…
• Step 6: Test target segment against SWOT and performance
goals
• Step 7: If no segment apparent, repeat process

10. 10
Initial Approach : Search not execute
a structured process for testing business model hypothesis
Think
Plan
ExecuteAnalyse
Adapt
Think
Plan
ExecuteAnalyse
Adapt
Understand Customer
Problem and Need
Develop Validate
Develop Sustainable
Business Model
Adaptive
Learning
When not enough paying customers
GTM
?

11. “
”
11
The components of Target Market segmentation
1. Primary Market Search
Life Cycle Positioning
If you have done the positionig in the Value Proposition Module then skip this step and go
immediately to Step 2

12. 12
PRIMARY MARKET RESEARCH

13. 13
Positioning : questions to ask
• Start is a hypothesis :
• What is my idea ? What is my proposal ?
• Do not suffer from the „ engeneer-syndrom „
• Questions to ask :
• Who is your target customer? Who is my potential buyer ? (IDEAL CUSTOMER
PROFILE module )
• What kind of problem do you solve for them? Is this an important problem for
this customer? Is it an urgent problem? Where is “ Low Hanging Fruit” ?
• How do you plan to solve this problem for the customer? What type of benefits
will it generate.
• Position your solution : here is the process in steps
1. Find out the „ Demand type „ - it will define/ influence the business model
2. Find out in what phase of the technology transfer your market and potential
buyers are ( Chasm-principle ) or the PLC-cycle of your market
3. Summarize a viable MVP, test it and start proposing it to the early adapters

14. 14
Positioning : 1. Demand Type
• Definition of Demand. An economic principle that describes a customer's desire/NEED and
willingness to pay a price for a specific good or service. Holding all other factors constant, the
price of a good or service increases as its demand increases and vice versa.
• Why important ?
• Because yr TOTAL „GTM- / Marketing & Sales plan“ will depend on it
• It will tell you : who to contact, at what org-level, what message to deliver, how to deliver /
style and what probable stage of the buying cycle ( Buyers Journey)
• Types Of Demand
• Steve Blank : ??? incomplete - confusing
• New Market / Existing Market / Redefine Existing Market ( Niche / Low-Cost entrant )
• Sirius Decisions

15. 15
MVP Whole Product
2. Technology Adoption Life Cycle

16. 16
2. Technology Adoption Life Cycle
where and how to sell
Name % Type Character
Sales :
Place / Message
Innovators
3
Technology
enthusiast
Central interest / Curious
Pleasure of exploring new
• Trade shows
• Great Technology
Early
adopters 12 Visionaries
Buy new concept early
Not technologists
First to get the new stuff
• Congress, Trade shows
• You can be the first
• Beat yr competition
Early
majority 35 Pragmatists
Strong sense of practicality
Need PoC(oncept)
• Meetings, Office
• ROI, efficiency, save $$
• Case studies, examples
Late
majority
35 Conservatives
Wait until something has
become an established
standard
Not comfortable with technology
• Awareness Campaigns
• References
Hopefully you prepared yr exit
Laggards
15 Conservatives
Don’t want anything to do with
new technology Just do nothing

17. 17

18. 18
MVP versus „Whole product“
Minimum Viable Product ( MVP )
A Minimum Viable Product is the smallest feature set that lets you start learning about customers.
Don't confuse your MVP with a minimal product. Your MVP needs to address your top customer problems and deliver on your Unique Value
Proposition.
Objective Details Step-by-Step Process
Define the minimum
feature set needed
to solve your top 1-3
problems.
For each of the problems outlined earlier, sketch out
the top features or capabilities that will address those
problems.
• Outline a possible solution for each problem
• Don't spend too much time detailing
• These features will form the basis for your Minimum Viable
Product

19. 19
Create +Test the MVP
Describe the key aspects of your MVP for which you are currently seeking
market feedback.
Answer the following questions after testing the MVP.
• Is our understanding of the customer problem accurate and relevant?
• Does the MVP solve the customer’s problem?
• Does the product solve the problem better than a viable alternative currently
on the market?
• Would they use the product? Can they imagine the product as part of their
everyday life?
• What is their primary concern about buying and implementing the product?
• How much would they be willing to pay for the product?
• What process would the customer employ when deciding to buy such a
product?
• Who is involved in the decision-making process?
• Whose budget will the funding come from?
• Who will be the users of the product?

20. “
”
20
The components of Target Market segmentation
2. Segmenting
Business Markets
Compose the broadest idea for your
Product / Market mix ( Ansoff)

21. 21
Segmenting Business Markets
How can I segment MY hypothetical market
• Demographic segmentation
• Industry : which industries should we focus on ?
• Company size : what size of companies do we focus on (3-Tier Model)
• Location : what geograohical areas should we focus on ?
• Operating variables
• Technology : what customer technologies should we focus on ?
• Usage/non-user status : focus on heavy, medium or light user OR non-users ?
• Customer capabilities : focus on MVP-potentials or “whole product”
• Purchasing approaches / Buying Cycles
• Organizational : highly centralized or decentralized
• Policies : leasing, SaaS-lovers, service-contracts, RFP,…
• Situational factors
• Urgency, specific application, size of order
• Personal characteristics
• Buyer-seller similarity, attitudes toward risk, loyalty

22. 22
Secondary Market Search :
where to find info ?
Secondary
Resources

23. 23
Secondary Market Search :
where to find info ?

24. 24
Secondary Market Search :
How to find info ?

25. 25
Essentials of market research
• What is the size of the market? How large is the target market? Geographic spread ?
• What problems concern the target market?
• Are any of these problems greater than the one you’re addressing?
• What unique need does your TYPE of product/ services meet?
• How does your product or service fix the problem?
• Who will buy your product or service?
• Why do they need it?
• Why would they buy from you? What is the gap un-serviced by current players?
• Who are your competitors? Who are the other key players? How is your product different from
competition?
• What are their strengths and weaknesses?
• What is your demand Type ? Can you make the reference price in the market ? How efficient is
your solution ? Is this segment a price sensitive ? Dou you have a premium?
• How much are customers willing to pay for this product/ service (top/ bottom/average)?
• What is the REAL available market for you? What share of this can you reasonably expect to
get?

26. 26
Requirements for Effective Segmentation
Measurable Size , Purchasing Power, profiles of segments can be
measured
Substantial Segments must be large or profitable enough to serve
Accessible Segments can be effectively reached and served
Differential Segments must respond differently to different marketing
mix elements
Actionable Must be able to attract and serve the segment

27. 27
Key Information about your segment
• What are the key political, regulatory, economic, environmental,
social, cultural and technological trends that affect the space
you are in?
• What are the key issues facing customers in this space?
• Who are the key stakeholders?
• Who are the analyst firms, analysts, journalists, bloggers and
conference presenters that talk about relevant issues and
technology?
• What are the main conferences and events?
• What are the main media outlets that keep people informed
about the industry and its technology?
• Prepare your list of questions and issues to address in your
customer meeting / talk / interview

28. 28
Horizontal vrs Vertical Solutions
• Vertical Business Solutions tend to be specific to a given industry or a specific group of customers within in a given
industry.
• Vertical Business Solutions are generally thus tailored to provide better product or service market fit and as such, may
have a higher adoption rate within their target market though the target markets for the solution may generally be
fewer.
• Geoffrey Moore's "Crossing the Chasm" outlines the strategy of initially attacking and dominating a single vertical, and
then parlaying that success to knock down adjacent verticals (a bowling pin analogy is used) until the company
becomes effectively horizontal.
• Dominating a vertical gives a company brand recognition and customer evangelists that help it "cross the chasm" into
the mainstream market.
• This has been widely hailed as effective technology adoption strategy and has become almost synonymous with the
technology adoption lifecycle.
• Steven Blank says in "The Four Steps to the Epiphany" that it was the best model for startup strategy before customer
development came along.
• Horizontal Business Solutions can be adopted across many different types of industry by many different types of
customers.
• Horizontal business solutions are (relatively) low priced and apply to a generalized, widespread market. Think of
Microsoft Office software.
• Horizontal strategies are difficult to bring mainstream because it's hard to build a critical mass of heterogeneous
customers.
• You might find many customers of different sorts who like your product, but few who *need* your product or have the
requisite passion to evangelize it.
• Segmentation for horizontal solutions is therefore much more needed ( niche market search ) but is also much more
demanding and time-consuming

29. 29
Use MPRS to close in and focus
what are the 3 key criteria why a prospect should buy from you ?
Primary Sectors ( NACE ) Subsectors
Criteria
TOTAL
x y z ??
A - Agriculture, forestry and fishing Crops Animals Forestry Fishing 0
B - Mining and quarrying Coal Petroleum Gas Metal ores 0
C - Manufacturing
Food, beverages,
tabak
Textiles, Leather Paper. Printing
Chemicals,
rubber 0
D - Utilities Electricity Gas Steam Air conditioning 0
E - Water supply; sewerage; waste Collection Treatmnet Waste, sewage
0
F - Construction Building Roads Railways Tunnels 0
G - Wholesale and retail trade Nutrition Household goods IT-equipment Other 0
H - Transporting and storage
Passenger,
Freight
Land, water, Air Warehousing Postal, courriers
0
I - Accommodation and food service Hotels, Resorts Campings Restaurants Catering 0
J - Information and communication Publishing Media Telecom ITC 0
K - Financial and insurance activities
Banks, Monetary
Inst
Lease, Credit
Insurance, Risk
coverage
Pension funds
0
L - Real estate activities Buy and Sell Agencies Renting
0
M - Professional, scientific and techno
Legal,
Accounting, Vets
Consulting,
Advertise
Architects,
Engeneering
Testing,
R&D,Mktng 0
N - Administrative and support service Renting, lease HRM, Call centre
Tourisme, travel
agent
Security,
cleaning 0
O - Governement Defence Social Security Police, Justice Firebrigades 0
P - Education Primary Secundary
Higehr /
University
Other
0
Q - Human health and social work
Hospitals, GP
practice
Residential care Nurses Social Work
0
R - Arts, entertainment and recreation Artistic, creative
Entertainment,Sp
ort
Library, museum Gamble, betting,
0
S - Other services activities
Trade Unions,
Prof. Org.
Repair, Washing
Fitness centre,
well-be
Hairdressing,
Funeral 0
T - Activities of households
Domestic
personnel
Undifferentiate
goods 0
U - Extraterritorial organisations bodies
0

30. “
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30
The components of Target Market segmentation
3. Customer Profiles
Use „ Problem-Need cycle

31. 31
Understand Customer Problem and Need
• What problem causes the pain or frustration? Sketch a scenario in which the
customer attempts a task and feels pain as a result.
• How does the customer try to cope with the problem now?
• What is causing the problem? What is interfering with a speedy solution? What
goes wrong and why?
• How much money is the customer losing, either in additional costs or lost
revenue? Quantify the pain.
• Who is the individual who feels the pain first and how does it “waterfall” up or
down?
• Who else feels the pain? The customer’s customers? Suppliers? Partners?
Investors?
Think
Plan
ExecuteAnalyse
Adapt
Phase 1
Test customers /
prospect‘s perception
• of the problem and
• his urgency / need to
solve it

32. 32
„Problem-Need cycle“
Hypothesis
Assumptions
Product
Ideal
Customer
Market
Type
Demand
Creation
Test Need /
Problem
Relations
Ideal cust.
Interviews
Evaluate
Results
Summarize
/ Adapt
Adapt & Test
Product
Reality
Check
Product
presentation
Customer
visits
Validate
Verify Product /
Market fit
Problem /
product
Iterate
KOL
Create
Business M

33. 33
Explanation „ Problem-Need“ cycle
• This iterative process is for the sake of simplicity presented as a linear process. However the entrepreneur has to be
aware of the fact that it is not, and that findings in a alter stadium of the process might alter, after validation, the
assumptions made in a previous stadium or phase of the process. This means that there should be arrows and short-
circuits from almost every box to eventually any other. As later in the definition of the business model these parameters are
linked together
• One simple example to clarify this complexity : changing the hypothesis will create another ideal customer and then also
another market type in which thze dynamics of demand creation will be different, not to speak about the competition, the
pricing levels or models and the channel
• For now one should understand the general principles of the „ problem-Need cycle „ and how the iterative process works.
1. Starting from our business idea / hypothesis the entrepreneur has to make the assumption about which urgent
problem or need this idea will solve
2. Then he needs to make an assumption about the customers compelling reasons to buy, which decision criteria are
on the basis of his/her decision. What is the urgent problem or need that needs to be addressed
3. By means of an MPRS the economic sectors are evaluated and ranked with reference to their affinity for the 3
parameters above : hypothesis / problem / decision criteria. The highest scores are further taken into further
evaluation. That can be wrong, but due to scarce resource one has to limit the number of test-markets
4. Use Problem/Need search process, which will be broadly discussed in more detail in a separate and explained in a
later presentation.
5. Create as broad idea of an addressable market and then break it down in to all possible sub-segments. Create
customers profiles for all remaining sub-segments. Try to group learned experiences into an MVP-matrix.
6. Assess profiles again critical flaws criteria and eliminate those that fail. In fact a kind of SWOT analysis for all thos
market segments that seem to respond favorable to our proposition / hypothesis.
7. Finally choose a few, the top 5 or top 10, assess them against neutral, pragmatic selection variables until top
segment remains. Define a Beachhead if possible.
8. Test target segment against SWOT and performance goals
9. If no segment is apparent, or the assessment indicates a weak correlation, then repeat the whole process

34. 34
„Ideal“ customer profile
• See also slide “ segmenting business markets
• Identifying your ideal prospects and customers isn’t simply about company size, sector or
location. These traditional demographic-based approaches to segmentation are proving
to be an increasingly inadequate and incomplete means of describing the common
characteristics of their most valuable customers and prospects.
• We recommend establishing an Ideal Prospect Profile for each of your key product or
service offerings, but add structural, environmental, behavioural and situational factors.
• Profiling :
• Demographics : Geo, Size, Industry, Decision Cycle, Buying cycle,etc..
• Psychographics : includes their “values, behaviors and characteristics.”
• The questions you need to ask yourself are; is your customer more interested in: Image,
Innovation or Convenience? Savings or Relationships? Value or Price?
• Frustration, urgent Need, job protection vrs risk-taking, pain scenario ( see workbook ), status
quo vrs ambition, social interaction profile….
• Rank them against your solution offering : what impact will it create ?
• Defining your ideal prospect requires you to look at the characteristics common to your buyers
and the organizations in which they work. This typically includes:
• Company Characteristics — company size (employees and revenue), industry, location,
growth rate, age/maturity
• Buyer Characteristics — job title, level, tenure, attitude, ownership (or lack of) of the
problem, scope of responsibility (buying on behalf of department, function, or company)
• Situational Characteristics — initiatives, triggers, opportunities, threats, regulations,
internal change

35. “
”
35
The components of Target Market segmentation
4. Validate and Assess
Customer Profiles
with Test & Interviews

36. 36
Prepare to talk to customers
• Make list of 20 – 30 customers proportionally spread over 3 Tier and the
business segments under consideration
• Prepare your list of questions and issues to address in your customer
meeting / talk / interview
• Make Script with possible objections or questions ? Prepare also the
answers, eventually train yourself with role-model.
• Describe your product vision : this should be your Value Proposition
• Write a statement that describes your product vision, which identifies one or more of the
following:
• Your target customers and their problem
• The product solution you are making
• How the user goes about their job and will use the product solution
• Customer outcomes and benefits
• Three- and five-year scenarios for your product and company
• Culture needed : NO selling mode !!!
• Search then execute
• Learning and discovery
• Agile development
• No „ fear of failure culture“
• No sales, marketing, bus.development departments

37. 37
Customer Interview program
• Scenario :
• Use questionnaires and surveys
• Use the Internet
• Use Telemarketing / Congresses / Trade Shows
• Who ?
Talk to potential customers
Talk to suppliers / resellers / potential future partners
Talk to competitors
Talk to complimentary services/products
Talk to bankers, lawyers and accountants
• Customer Archetype / Buyer Profile / Persona
Forrester
Siriusdecisions

38. 38
Welcome
•Set stage
•1-2 minutes
Collect
•Collect demografics
•Check/test customer segment
Story tell
•Set problem context
•Few minutes
Problem Rank
•Test Problem
•5 minutes
Explore
•Explore customers world view
•Test Problem – 15 minutes
Wrap Up
•The hook and ask
•2 minutes
Results
•Document results
•5 minutes
Example : Problem Interview in 30 minutes
• Briefly set the stage about how the
talk will work
• Ask introductory questions to test
Customer Segment
• Identify early adapters
• Illustrate top problems
• State top 1-3 problems and check /r
ank with customer
• Test each problem. Ask how they
address today. Listen
• Ask follow-up questions
• Permission to follow-up
• Referrals
• Document Results

39. 39
Asses & Validate :
Scotsman qualification + segment identity
Questionnaire Qualification Yes No
S Solution
Do we have the right solution ?
Does the customer has a lot oft objections?
C Competition
Who is the competition ?
Can we beat him ?
O Originality
USP and does the Prospect agree with it ?
T Timing
Is the time plan agreed and realisitc
S Size
Is the estimated Budget big enough to afford the resources
and do we have the necessary ressources?
M Money
does the customer has a budget ?
I is the project worthfull / profitable for him ?
A Authority
Is our contact person the decision maker ?
Do we know the decision maker? Does our competition
knows ?
N Need
What is the final goal of the customer ? Which problem to solve ?
Do we know his business problems? Do we understand ?
TOTAL TOTAL Number Points in Yes / No column

40. 40
Assess Problem
No Question Fact Assumption
1. Who is your target customer? What kind of problem
do you solve for them?
2. Is this an important problem for this customer? Is it
an urgent problem?
3. How do you plan to solve this problem for the
customer? Describe how your solution will work in
the customer’s hands and the benefits that it will
generate.
4. Who is your competition? How do they solve this
problem for their customers today?
5. What is unique about your way of solving the
problem? Why are you better than anyone else in
solving this problem?
Label each answer as Fact (and list the accompanying evidence) or
Assumption (if you don’t have any evidence at this stage).

41. 41
Test – Validate the assumptions
Assumption Information Where/Who Method
1.
2.
3.
List the assumptions and then make an action plan :
• What key piece of information would validate the assumption? (Information)
• Where does that information reside? Who has that information? (Where/Who)
• What is the best way to gather that information? (Method)

42. 42
Evaluate market feedback
• Is the market problem urgent? Will customers care if the
problem is not solved? Do they have another way to
solve this problem?
• Is the market problem pervasive? Determine if the
identified market problem applies to a significant
percentage of your desired target market.
• Will your buyers pay to have this problem solved?
• On the basis of the answers to the above questions,
which direction should you take?
• Make a list of the interviewed companies : OK or failed

43. “
”
43
The components of Target Market segmentation
5. Validate and Assess
remaining Customer Profiles

44. 44
Create Groups According to Similarities
Unless you have unlimited time and money, rationalize
all the profiles into segment groups
• Out of 50 or so profiles, about 2-3 segments will likely
coalesce
• Look for key similarities
• Vertical markets
• Common problems and pain points
• Similar economic impacts
• Similar groups of users

45. 45
Assess Profiles against Critical Flaws
• Assess each profile against 5 key criteria that can “make or break” your chance of
succeeding in that segment
• Ask and answer a series of questions and rate the answers on a binary scale of yes
or no. Include a sentence or two on why.
• Eliminate any that fail and set aside all related segments
• Questions :
• Do They Have a Reason to Buy? Is the financial impact of the problem severe enough to drive the need of
a solution ? Of all possible ways of solving the problem, is yours the obvious choice
• What Do They Actually Need to Buy to Solve the Problem? deliver the “whole product”?
• Who Else Can They Buy From?
• Can They Buy?
Criteria Yes No Reason
Segment: Produce Reefer Location for Carrier Cies
Compelling reason to buy √
Deliver whole product
√
Buyer with economic power √
No competition
√

46. 46
Assess Variables + Rank them
At What Price Will They Buy At?
How Are They Going to Buy?
Why Should They Buy From You?
Will the Segment Survive?
Are There Adjacent Segments That You Can
Jump To?
Rank each variable on a scale of one to five
Rank all segments and eliminate weakest 50%
• Use totals as an overall indication
• Weight variables according to your
flexibility or ability to change your situation
Repeat ranking exercise until top one or two
segments revealed
Assess Variables Ranking
Example

47. “
”
47
The components of Target Market segmentation
6. Assess „ Happy Few „
against SWOT & KPI

48. 48
Rate Final Segment Against Final
Criteria – Can You Win It?
• Undergo a SWOT exercise in relation to segment
• Involve all internal stakeholders and decision makers
• Rate chances of success against corporate weaknesses and strengths
• Assess segment honestly against core competencies
• Technology bias
• Marketing ability
• R&D ability
• Build one and two year financial models to assess revenue potential,
profitability, share, growth
• Can you live with the risk of failure
• What is the cost of failure?
• Can the company survive?
• Establish Performance Goals / KPI’s
• Rate your chances with remaining customer profiles against KPI
• Update if necessary your Value Proposition

49. “
”
49
The components of Target Market segmentation
7. Next Steps
IN or OUT

50. 50
Create the Business Model or Repeat the
process
Business Model

51. 51
Initial Approach : Search not execute
a structured process for testing business model hypothesis
Think
Plan
ExecuteAnalyse
Adapt
Think
Plan
ExecuteAnalyse
Adapt
Understand Customer
Problem and Need
Develop Validate
Develop Repeatable
Business Model
Adaptive
Learning
When not enough paying customers
GTM
?

52. “
”
52
The components of Target Market segmentation
8. Use Workbook if necessary