Finding your most promising market segments and niches is crucial for business development. It helps you focus your resources, tailor your value proposition, and differentiate yourself from competitors. But how do you identify and validate the best opportunities for your business? Here are some steps you can follow to discover and evaluate your potential markets.
Before you dive into market research, you need to have a clear picture of who your ideal customer is. This is the person or organization that has the most urgent and valuable problem that your product or service can solve. To define your ideal customer, you can use a tool like a customer persona, which is a fictional representation of your target customer based on data and assumptions. A customer persona should include demographic, psychographic, behavioral, and situational characteristics, as well as goals, pain points, and motivations.
Here's an approach that works well for small service-based business owners: identify your current favourite clients who you love to work with or excel at creating results for... look for more like them ;-)
What I've found to be very valuable when mapping out the ideal customer is identifying pain points and motivations that are shared by most or all of a brand's customer personas. This common ground presents an excellent foundation for large scale, broad campaigns.
In the age of ML, I encourage our product owners to use ChatGPT and likes extensively. It will save a lot of time to craft the rough personas, so you can spend more time refining and fine-tuning them.
Once you have your ideal customer in mind, you can segment your market based on different criteria that relate to your product or service. Market segmentation is the process of dividing a large and heterogeneous market into smaller and more homogeneous groups of customers who share similar needs, preferences, or characteristics. You can use various bases for segmentation, such as geographic, demographic, psychographic, behavioral, or firmographic. The goal is to find the segments that are most attractive and relevant for your business.
I'd suggest focusing on the seemingly most hard segment of the market. This is a great field for trial and error because you were going to tackle it much later anyway. On the other side, if you manage to master the most challenging segment, imagine how easier it will become for you to conquer the more accessible ones.
Segmenting your audiences is critical in ensuring that you get the right message to the right person at the right time. However, be wary of overdoing it. If you have too many segments, it can be difficult to manage and ultimately, there's a point of diminishing returns on the effort required to manage them all. The best way to avoid confusion is to clearly document your segments, the criteria for them and how they align with your customer personas. You can then look at the marketing activities for each as you nurture them through to purchase.
A niche is a specific and narrow segment of a larger market that has a distinct set of needs, problems, or preferences that are not fully met by the existing competitors. Finding your niche means finding the gap or opportunity in the market where you can offer a unique and superior value proposition to your customers. To identify your niche, you can use tools like a SWOT analysis, a competitor analysis, or a value proposition canvas. These tools can help you assess your strengths, weaknesses, opportunities, and threats, as well as your competitors' offerings and your customers' jobs, pains, and gains.
You can niche by audience, service/offer, or unique process and methodology. Some of the most profitable small businesses are niched across all three - despite thinking that this limits opportunity, it actually makes it very easy to identify and target ideal clients.
The final step is to validate your assumptions and hypotheses about your market segments and niches. You don't want to invest time and money in developing and marketing a product or service that no one wants or needs. To validate your market fit, you need to test your value proposition with real or potential customers and collect feedback and data. You can use methods like surveys, interviews, landing pages, prototypes, or minimum viable products (MVPs) to measure the demand, interest, and satisfaction of your target customers.
1. Talk to people corresponding to your persona to validate you've created the right one. 2. Ask them for money. Even a $1 deposit would suffice - this is by far the best validation metric.
Speed is more important than quality at this stage. In most cases, it's better to test, fail, iterate a few times instead of spending the same amount of resources on conducting a super-duper market research, analysis, customer development interviews, etc.
It's amazing to use data to make decisions but don't forget that common sense, anecdotal information from your business and current client set, and observing market trends + opportunities can all help move the needle faster than a reliance on data only.