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.

1.Createalist 2.Validate 3.Narrowyour 4.Selectthe

ofpotential current listtoyour targetthat
target thinkingand most offersthemost
segments. assumptions promising potential.*
withmarket segments.
research.

  * 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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