Even though the way Steve presents this analysis is simple, it is not easy. You will need to have as much information as you can gather about your primary competitors and your potential customers. As a summary here are the basic steps.
Step 1: Product & Markets
The first step in segmentation and targeting is to identify the product classes in your marketplace, meaning solutions that solve similar problems for your potential customer. As an example, in the vacuum market you might have: standard home vacuum cleaners, shop vacuums, portable vacuums… you get the idea.
Step 2: Competition
Create a diagram with the product segments of your target market listed on the header. Now visualize the top two competitors in each product segment. Steve did this as a bubble roughly relating their size to their percentage market cap in that market. This helps you recognize the competitive pressure within a given customer segment.
Step 3: The Emerging Market
The best way to approach a market is to target the emerging opportunity within a sector. Think about where the market is going to be in a 5 year time frame. Where your market will be five years from now is typically where the emerging market is today. Create your products accordingly.
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