Market Segmentation Phase 2: End User Ranking

Based on a secondary research, end users must be ranked so that the team can
identify the priority end users and conduct deeper analysis on their characteristics,
needs and requirements.

Below are some important considerations in choosing end users to prioritize:

1. Well-funded - If the customer does not have money, the market is not
attractive because it will not be sustainable and provide positive cash flow for the
new venture to grow.

2. No entrenched competition - Rare is the case where no other competitors

are vying to convince a customer to spend their budget on some product to meet
the identified need. How strong are those competitors, from the customer’s
viewpoint (not your viewpoint or from a technical standpoint)? Can the
competition block you from starting a business relationship with a customer? And
how do you stand out from what your customer perceives as alternatives?

3. Willing to buy - Would the customer buy your product instead of another
similar solution? Or, is the customer content with whatever solution is already
being used? Remember that on many occasions, your primary competition will be
the customer doing nothing.

4. Accessible to sales force - You want to deal directly with customers when
starting out, rather than rely on third parties to market and sell your product,
because your product will go through iterations of improvement very rapidly, and
direct customer feedback is an essential part of that process. Also, since your
product is substantially new and never seen before (and potentially disruptive),
third parties may not know how to be effective at creating demand for your
product.

5. Can be used to enter to other user segments - If you dominate this market
opportunity, are there adjacent opportunities where you can sell your product with
only slight modifications to your product or your sales strategy? Or will you have
to radically revise your product or sales strategy in order to take advantage of
additional market opportunities?
Consistent with values, passions, goals of team - You want to make sure that the
founders’ personal goals do not take a back seat to the other criteria.

These aspects of the end users are used in the table below to rank them. Criteria is
rated from 1 to 10 with 1 as lowest while 10 as the highest. The criteria is also
weighted with being well funded as the most important having 40%.

Can be
Consisten
used to
No t with
Well- Willin Accessibl enter to
entrenched values,
funde g to e to sales other Total
competitio passions, Ran
End User d buy force user Scor
n goals of k
segmen e
(40%) (10%) (10%) team
(20%) t
(10%)
(10%)
Design
Engineer
7 8 7 5 9 9 7.4 3

Assembly
Engineer
7 8 7 6 8 9 7.4 3

Maintenanc
e Engineer
8 6 8 7 7 9 7.5 2

Auto
9 6 9 8 7 9 8.1 1
Enthusiast

Based on the results above, auto enthusiast ranks first. This means that auto
enthusiast is deemed as the end user with the best market opportunity. So now
you can go ahead and prioritize in studying further the characteristics of auto
enthusiast even in other higher segment levels such as non-electric, hybrid and
electric. This doesn’t mean though that the rest of the end users must already be
scrapped. It still largely depends on your team and the research result as to how
to treat all other end users. If based on your study, the other end users have only
slight differences in terms of needs-that they can still use the same product and
solution being offered, then it is completely reasonable to include them and their
needs in the design of the product or solution. We only have four total end users
in our example but usually, there would be more than ten (10). This prioritization
exercise could help trim down the list to save time and resources which will be
spent in the in-depth research of each end user. Six end users are more than
sufficient.

Note: If you have a multi-sided market, you will have to consider them as
different end users and conduct a primary market research for each side of the end
users.

Two-sided or multi-sided market is when you need multiple target end users or
customers for your business to exist. eBay is a good example, because it needs
both sellers and buyers (supply and demand) to participate in its auctions to be
successful.