Product Management Gyan: Market Segmentation

At a startup or when finding new TAM's in an organizaiton, as a Product Mangaer you find yourself at the helm of building a new product. One of the very first step is doing Market Segmentation

/ɡjɑːn/ [uncountable] (Indian English) ​information or knowledge, especially related to spiritual or religious matters. It was believed that gyan would lead to peace.

When finding new TAM's in an organizaiton or if you find yourself starting a new startup; as a Product Mangaer you find yourself at the helm of building a new product. One of the very first step is doing Market Segmentation - this is assuming that you either have an idea for a product or technology that users would benefit form (i.e. solve a problem for the end user).

When embarking on the journey for Market Segmentaiton, there are a few things to remember that can really help you keep on track:

  1. The single most important condition for a product (or business) is to have a paying customer.
  2. Identify (or create) a market that you know you can dominate.
  3. Always remember that a paying customer can also lead you astray - you're not trying to solve all of their problems (yet).
  4. Identify your Primary and Secondary Customers if your product needs one (For example, eBay has buyers as well as sellers).

Once you have these points in mind, you can start your Market Segmentaiton exercise. I like to break my market segmentation into three steps:


Like any other brainstorming session you would have done, this is no different. Cast your net as wide as possible in terms of market opportunity, including long shots or the crazy idea that you can think of. Doing this is helpful as it helps expanding the boundaries of possiblities to where some of the most important or rather interesting opportunities might exist.

Be open and creative.

Identify potential different industries that will benefit from your product. Once you have this list, write down who will benefin in each industry from your product. Forcs on end users, not the customer because you will need a committed group of end users to have a business.

Narrow Your list

At this point you would have identified about 8-12 potential end users for your product. Now for these users we need to find interesting market opportunities which consist of a specific end user and one or a handful of use cases. As you further dig deeper into your market research, you wil start noticiing that the specific use cases you have in mind may not be what the end user is looking for; so focus on the end user solely and their probelm areas.

As you are narrowing down your list, always ask yourself these quetions:

  1. Is the target customer well funded?
  2. Is the target customer readily accessible to your sales force?
  3. Will your customer have a reason to buy?
  4. Can you deliver a product that will help customer with 1 or 2 use cases?
  5. How many competitors are there in the same space?
  6. (The most important) Does the new product have the ability to increase your TAM in the future?

Time for Primary Market Research

Before you being this step, you should now have narrowed down your market opportunties. This is your boundary. Do no go outside this boundary. It is time to now focus on customers.

When I was working as a UX Researchers, we were tried to observe more than to ask questions. Thre are two reason for this:

  • Users have a tendency to state a probelm statement and immediately follow up with a solution
  • It is also very common that customers would state a problem using an application or process but they execute this applicaiton or process differently.

You always wnat to encourate the flow of ideas. This means don't restrain them or try to gain a commitment. The goal of this research is to understand their pain, points first and later desing a solution - not discuss a solution.

According to Bill Aulet ther are three important caveats when conducting your primary market research:

  1. You do not have "the answer" for your potential customers and their problems and use cases.
  2. Neither does your potential customer have the answer for you.
  3. Talk to your potential customers in "inquiry mode" and not as a sales person. Listen and don't try to get them to buy anything.

Organize your Research

After you spekaing to several of your potential cusotmers it is time to organize your market research. I like to organize this into the follwoing:

  1. End User (or Persona): This is typically your champion who will use your product and also work with you to on board your product successfully in their organization.
    I have always struggled with Persona in this case cuase it also encompasses several other characteristics. Part of the reason why I like to stick with End User.
  2. Product/Application: What is the task that your product or applicaiton will do that will solve users problem(s).
  3. Benefits: What will the end user grain using your produc. For example, save time, save money, reduce MTTR etc.
  4. Lead Customer: We tend to forget this almost always. But you have to identify this one customer who will be the lighthouse customer. These are customers who are respected in the industry and the industry tend to follow them. They are not technology enthuisiasts.
  5. Market Characteristics: What about this market will help or break its adoption?
  6. Partners: Which vendors in the idnustry will your work with to integrate your product. For example, ServiceNow for ITSM support.
  7. Size of the Market: There should be two numbers here. How many customers and potentially how much ARR can you generate at 100% market penetration.
  8. Competition: Consider both real or perceived. This is from your customer's point of view.
  9. Complementary Assets: Does your cusotmer need something in order to use your product. If yes, think about budling your product.

Do your market research for as long as you need to until you have good data points to achieve above. But do not prolong it. I have seen market research go on for months. Remember, you are not the only one trying to solve customer problems. There are other players also in this rat race. The idea is to just get an accurate assessment of your market opportunity so that you can move on to your next step.

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Jamie Larson