Fundamentals of Entrepreneurship

Customer Discovery
 Learning Outcomes
At the end of the lecture, you should be able to:

•Understanding Market Segmentation.

•Discuss what Beachhead market is and how it is applied
•Understanding the Primary Market Research & Customer
Profile
•Applying Total Addressable market
•Explaining on Persona
 What is Market Segmentation

• Market segmentation is the research that

determines how your organisation divides its
customers or cohort into smaller groups based
on characteristics such as, age, income,
personality traits or behaviour. 
Types of Market Segmentation
 How do perform a Market
segmentation
• Brainstorming
• Start by brainstorming a wide array of market opportunities. Include even the
“crazy ideas” that you think are longshots, because they are helpful in expanding
the boundaries of possibilities to where some of the most interesting opportunities
might exist.

• Narrow
• You have by now identified numerous potential end users and applications for your
idea or technology. This is where you focus on only a specific group
 Approaches in Narrowing

• 1. Is the target customer well-funded?

• 2. Is the target customer readily accessible to your sales force?
• 3. Does the target customer have a compelling reason to buy?
• 4. Can you today, with the help of partners, deliver a whole
product?
• 5. Is there entrenched competition that could block you?
• 6. If you win this segment, can you leverage it to enter
additional segments?
• 7. Is the market consistent with the values, passions, and goals
of the founding team?
 Primary Market Research

• Market research
– Market research is the process of determining
the viability of a new service or product
through research conducted directly with
potential customers.
– Allows a company to discover the target
market and get opinions and other feedback
from consumers about their interest in the
product or service.
 Key factors that are integral to
collecting accurate information:

• You must have a high level of intellectual curiosity.

• You must be fearless about getting on the phone, in the car, or
on a plane to pursue this information.
• You must have an ability to listen and get people to talk.
• You must be open-minded and unbiased, and never presuppose
a solution (inquiry, not advocacy).
• You must have the ability to explain what the essence of your
proposed offering might look like while also being flexible.
• You must have time and patience to devote to this important
step.
 Customer Profiling

• End User: The individual (a real person!) who will use your product. The
end user is usually a member of the household or organization that
purchases your product.
• Decision-Making Unit: The individual(s) who decide whether the customer
will buy your product, consisting of:
• Champion: The person who wants the customer to purchase the
product; often the end user.
• Primary Economic Buyer: The person with the authority to spend
money to purchase the product. Sometimes this is the end user.
• Influencers, Veto Power, Purchasing Department, and so on: People
who have sway or direct control over the decisions of the Primary
Economic Buyer.
POTENTIAL CHARACTERISTICS TO
INCLUDE IN YOUR END USER
PROFILE
• What is their gender?
• What is their age range?
• What is their income range?
• What is their geographic location?
• What motivates them?
• What do they fear most?
• Who is their hero?
• Where do they go for vacation? For dinner? Before work?
• What newspapers do they read? Websites? What TV shows do they watch?
• What is the general reason they are buying this product? Savings? Image? Peer
pressure?
• What makes them special and identifiable?
• What is their story?
 Beachhead Market

• A beachhead market is the place where,

once you gain a dominant market share,
you will have the strength to attack
adjacent markets with different
opportunities, building a larger company
with each new following
 How to choose beachhead
market
• 7 criteria for selecting beachhead market
– Customers well funded ?
– Customers accessible
– Customers willing to buy?
– Can you deliver whole product
– Is there entrenched competition?
– Can you leverage additional segments if you win?
– Market consistent w/values, passions, goals of
team
 Total Addressable Market (TAM)

• The Total Addressable Market (TAM), also

referred to as total available market, is the
overall revenue opportunity that is
available to a product or service if 100%
market share was achieved.
• It helps determine the level of effort and
funding that a person or company should
put into a new business line.
 Total Addressable Market (TAM)

• It is important for startups and existing

businesses because the estimates of effort
and funding required allow them to
prioritize specific products, customer
segments, and business opportunities.
• Where there are potential investors and
buyers of the business, company
executives can use TAM to provide a viable
value proposition.
 Importance of TAM

• Essential metrics that startups and existing

companies use to estimate the potential
scale of the market in terms of total sales
and revenues.
• TAM helps in breaking down these
numbers into manageable levels.
Calculating the Total Addressable
Market
Top Down
•This follows a process of elimination that starts by
taking a large population of a known size that
comprises the target market and using it to narrow
down to a specific market segment.
•Can be represented by an inverted pyramid that
shows the large population of a known segment at the
top and the narrowed down segment at the bottom.
•The method uses industry research and reports to
get the estimates of the population.
Calculating the Total Addressable
Market
Bottom Up
•It is a more reliable method because it relies
on primary market research to calculate the
TAM estimates.
•It uses more reliable data on the current
pricing and usage of a product.
 Example
• Basic Bottom-Up TAM calculation:
TAM = (Total # of Accounts) x (Annual Contract Value
[ACV])
• For example, suppose a beverage company sold
lemonade at an average of $30 a case to vendors; they
bought 50 cases per year, on average (ACV of $1,500);
and there are 1,000 vendors on the West Coast in total.
• The calculation of TAM for the lemonade: 1,000 vendors
multiplied by $1500 equals a total market of $1,500,000.
 Persona

• A persona is about perception

• A user (or buyer) persona is a fictional representation
of a business’s ideal customer. They are generally
based on user research and incorporate the needs,
goals, and observed behavior patterns of your target
audience.
Steps in Creating a Persona
Step 1: Do research

Step 2: Segment your audience

Step 3: Decide on the layout

Step 4: Set demographic info

Step 5: Describe Persona’s background

Step 6: Define Persona’s goals

Step 7: Define motivations and frustrations

Step 8: Add other ingredients

Step 9: Create your own Persona

Steps in Creating a Persona
Question and Answer Session

Q&A