If your innovation has a wide range of applications, how do you ensure that you choose the right market or customer group?
Choosing the best market or customer group to target when your innovation has many potential opportunities - without wasting time and money - can be tricky. Here’s one simple market segmentation exercise that can really help.
It’s one of many offered as part of the Innovate 2 Succeed (i2s) programme and has generated significant results. I have recently seen a company, which had spent months trying to break into one particular market, reassess its strategy and save itself considerable time and money as well as reduce its risk.
Firstly, select three to five different markets or customer segments that might be suitable for your product. While you should always be as narrow as possible in marketing, it’s OK in this test to cast your net wide. So it could be a sector (such as aerospace) or a demographic (Instagram users in the south-east), but they should be a group of clients that share a given characteristic.
Value, access, growth and test - score these four
Then write down these three or more customer segments as a list, alongside four columns, headed Value, Access, Growth and Test. Score each of your selected segments in these four categories from 1-5.
Value: how much would this customer segment value your product? Does it represent something that’s missing for them? Does it have qualities that would enhance their day-to-day life or business? A score of 5 says they would derive a lot of value from your product; a 1 shows you think there’s less demand.
Access is related to how easy it is to access this sector. If you’re a B2B medical product supplier for example, is it easier to access private practices or public sector organisations such as the NHS? How would you score the difficulty of gaining the attention of this segment?
Growth ranks how fast this sector or client group are growing in number. We have an increasingly ageing population for instance, but we are losing population in rural towns. Does this have an impact on the demand for your product?
Test ranks the ease of testing each segment to see if it is a good match for your product. Do you have access to representatives from this group to let them sample your MVP (Minimum Viable Product) and provide feedback?
Then add up the four scores for each segment. You will have a score from 5 to 20 for each of your segments. The highest score indicates which segment should be your focus.
Clients are often surprised at the results of this short test – don’t let your preconceived ideas prevent you from trying this out. You might learn that it will save you time, money and reduce risk to pivot your focus towards an unexpected market.
As a result of going through this process during i2s, one high-tech manufacturing company decided to focus entirely on a smaller market that was growing rapidly – and they have since hired new staff to keep up with demand.
Enterprise Europe Network can help you discover how to enter a new market. Our specialist sector guidance has been indispensable to a number of different businesses, helping them to grow.