How do you prioritize between segments for a given market opportunity? This article discusses a framework that I have found useful to drive consensus on picking the top segments to pursue. The essence of the framework is to balance market attractiveness attributes of segments with the ability for your organization to deliver on requirements dictated them.
To make this real, recall the example from a prior article. Recall that the market opportunity described in that article was for “a product that allows non-technical users to build websites quickly. While such products have been around for a long time for building static/”brochure-ware” sites, you want to assess underserved/unaddressed opportunities. In particular, you believe online marketers might be an opportunity worth exploring further”. The table below duplicates the three segments mentioned in the prior article and discusses how the framework helps determine the top segment to pursue for this product.
The two dimensions in the framework are:
- Segment attractiveness factors: a list of factors that correlate with the potential of each segment to drive revenues. These include the size of the segment, growth rates, competitive intensity and so on. Each factor has a “relative importance” weight based on how your organization views the importance of each of these factors towards driving a decision. In the table below, we use a weight of 10 to denote a factor that is highly important to drive decisions and lower weights for factors that are less important. This is a subjective exercise. In any case, what matters are the weights in relation to each other rather than their absolute values.
- Segment requirements: a list of product requirements. Each requirement is also rated on the ability of your organization to meet it. The table below uses a score of -10 for requirements that are gaps and will take a lot of effort and time for your organization to deliver on. A score of 10 is used for requirements that are already met by your product/organization.
The first step then is to list the segment attractiveness factors and segment requirements and drive consensus on their weighting and rating. The next steps are to score each segment on:
- each market attractiveness factor. As before, use 10 if the segment scores highly on a given factor and less if it is less attractive.
- each requirement based on how important it is to a given segment. Use 10 if the requirement is “table stakes” and less if it is less important.
Finally, compute the total score for each segment by adding the segment attractiveness and segment requirements score.
As the table shows, for the example before, the “conversationists” segment is the most attractive.
Rating segments based on market attractiveness and requirements
