A market can be thought of as the collection of contexts in which you might sell your product. You can split your market into a set of market segments. Each of those segments represents a group of customers, each of whom shares a set of problems for which they would pay for solutions.
Customer-Centric Market Model
I’ve been developing a model for describing markets that emphasizes the critical customer-centric perspective that product managers need to have. This article is a first draft of that model – I’m sharing it here in hopes of getting feedback to improve the model and my approach for communicating it.
Key goals of the model:
- Provide a framework that helps product managers make decisions about products.
- Establish an outside-in bias that encourages product managers to think first about customers and second about implementation.
- Encourage teams to design products that solve real problems that people will pay to solve.
- Support both Agile and Waterfall development processes.
A Model for Markets, Segments, Customers, and Problems
A market can be thought of as the collection of contexts in which you might sell your product. You can split your market into a set of market segments. Each of those segments represents a group of customers, each of whom shares a set of problems for which they would pay for solutions.
Markets and Market Segments
Market segments are traditionally defined based on aggregate data that makes it easy to operationally address groups of customers. Business-to-business (B2B) and business-to-consumer (B2C) markets are typically divided using the same approach, with a few data sources that are uniquely relevant for each type of company-to-customer relationship.
Larger view of market segmentation approaches
Business-To-Business (B2B)
When defining market segments for B2B products, your customers are companies. Groups of companies are defined, and organizational structures are built around those segmentation models. Different factors and combinations of factors are used to define the different market segments. Common B2B segmentation factors include:
- NAICS Industry Definitions – A standard taxonomy for defining the different businesses in which your customers engage.
- Demographic Data – For companies, this can be number of employees, annual revenue, corporate structure, or other characterizing metrics that are relevant to your product.
- Transaction History – The history of purchases by the company. Absolute magnitude, frequency, and recency of purchases can all be used.
- Geography – Where a particular company is located. While not always correlating with variation in companies, it may serve as an effective way to “split the work” for internal organization – such as geographic sales teams. This type of segmentation can also help when business rules or policies vary by geographic region – such as tax, policy, and other legal variations that apply either to your company or your customer.
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