MaRS Startup Toolkit
New Guide: ESG 101: An
Implementation Guide for Startups
Learn five key steps that will help your startup
implement ESG.
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Identifying and understanding
your target customer and
market segments
Many startups offer products that appeal to different
market segments and target customers. But given a
startup’s limited resources, you should prioritize which
customers to target first.
Narrowing your focus allows you to gain more wins
earlier on and build a strong reputation with early
adopters. It also enables you to have a truly customer-
focused business, which makes it easier to know which
new products and segments to pursue next.
How to segment your market
Leverage market research to better divide your market
based on similarities among groups of customers. Your
goal is to identify the most attractive customer
segments in each of your potential markets.
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* Continuous customer research is essential to validate
whether the market you’ve chosen to pursue is, and
continues to be, the right fit.
Step 1: Create a list of potential target
segments
Generate a list of potential target segments you think
have the greatest need for your product. It’s helpful to
have a hypothesis, but be careful not to predefine your
target market without proof points.
For business-to-consumer (B2C) segmenting, there are
different methods you can combine and use.
Method Segmentation factors
Country, state, city and market
Geographic
size (consider culture)
Age, gender, education,
Demographic occupation, income and marital
status
Psychographic Attitudes, values and beliefs
Habits, usage, thought
Behavioural processes, and occasion and
frequency of use
User needs and the desired
Pain points
solution from your product
B2B versus B2C
For business-to-business (B2B) markets, startups should
understand who purchases their product and who are its
end-users, as the decision maker can be more difficult
to determine in comparison to B2C. In large
organizations, decision making may be performed by
groups of different people or committees, while in
smaller companies, one person may be responsible for
the purchasing decision.
With B2B segmenting, think firmographics instead of
demographics and buying approach instead of
psychographics.
Method Segmentation factors
Industry, firm size, global or
Firmographics
regional and ownership
Buying Purchasing policies, budget and
approach involvement of decision makers
Volume, purchase frequency,
Behavioural attitude toward risk, loyalty and
urgency
Step 2: Validate current thinking &
assumptions with market research
Secondary research will be relevant when it comes to
the geographic and demographic methods, but primary
research is essential for understanding customers’
values, habits and pain points. So ensure you speak to
current and potential customers, and let the data and
insights they provide guide you. Look for patterns in your
data, and group customers with similar attributes (for
example, preferences, pain points and demographics)
into your target customer segments.
Step 3: Narrow your list to the most promising
segments
If you have several customer segments, you should
assess the attractiveness of each one based on:
Market size
Potential profitability (market growth)
Barriers to entry (competition, regulations)
Ability to meet the demand (capabilities, resources)
Step 4: Select the target customer that offers
the most near-term potential
When selecting your target customer segment, think of
these three aspects.
1. Near-term versus long-term market
opportunities: In many cases, you may want to
consider which segment might be a smaller market
you can easily enter now and plan to enter larger
market segments after you’ve gained traction.
2. Product–market "t
"t:: Decide which market segment
will have the highest product–market fit and where
your value proposition will resonate the most.
3. Positioning: Consider which target segment you can
best position your product to. This includes pricing,
marketing, sales and distribution methods.
Key takeaways
Companies may segment the same market differently
depending on how they view their customers and the
value they offer. Regardless of your company’s
approach, without segmentation, you risk overlooking
opportunities and will lack direction to better serve
customers’ needs. Remember that continuous customer
research is essential to validate whether the market
you’ve chosen to pursue is, and continues to be, the
right fit.
Pui Yi Ng
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