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Step 1 Market Segmentation + PMR MIT Global Startup Labs Peru 2018 Peru 2018

Segmentation + Market PMR Step 1 Perugsl.mit.edu/media/pmr.pdf · Complex Paying Customers: Two-sided Markets Two-sided Markets You need multiple target customers for business to

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Step 1Market

Segmentation + PMR

MIT Global Startup LabsPeru 2018

Peru 2018

Nucleation is doneYou have your initial idea

You have your initial team

● Set up Google Drive for all of your team documents● Set up WhatsApp groups for communication● Get to know each other more outside the class● Make sure there are energy amplifiers who have a Common Vision, Shared

Values, and Complementary Skills

Now what?

Both idea & team could change throughout the

summer!!!

Step 1: Market Evaluation

What is the singular necessary and sufficient condition to have a

company?

What is the singular necessary and sufficient condition to have a

company?

A PAYING CUSTOMER!!!

Paying Customers● Paying Customer = End User + Economic Buyer

○ Sometimes End User + Economic Buyer are the same person

○ Focus on the End User for now. Because you’ll be solving their problem with your product.

● Target Customer: “a group of potential customers that share many

characteristics and would have similar reasons to buy a particular product”

○ Same Product

○ Similar / same sales process → the most expensive startup cost (don’t want to re-tool)

○ Word of mouth → want customers to sell your product for you by sharing their experience

Complex Paying Customers: Primary & Secondary● Primary (end users) and Secondary (economic buyers) Customers

○ Primary customer charged at below cost (or free)

○ Secondary customer, a third-party, pays for access to the customer or the customer’s

information

○ Example: Google

Complex Paying Customers: Two-sided Markets● Two-sided Markets

● You need multiple target customers for business to exist

● Supply and demand: you need sellers and buyers

○ Example: eBay

● In this case, you will need to do PMR for both sides; you will likely find that one side of the market needs more attention than the other

Market Segmentation

Stage 1: Brainstorm

Stage 1: Brainstorm● Try to come up with 5-10 markets● Get the right people in the conversation● Be clear on the dual purpose● Get in the right place with the right tools● Get the right rules (IDEO – Defer judgement, 1 Conversation, Stay focused on

topic, Encourage wild ideas, Build on ideas of others)● Facilitator● Right Mood● Specificity● Get the ideas out!

ExampleIf you are expressing your idea as “I want to create an online social network for high school teachers and parents to communicate about their children’s progress in school,” you may lock yourself into a path that does not produce a sustainable business.

Start instead with “I want to improve education with technology.”

Who would be your end user? Teachers, administrators, parents, and students are all potential end users. Each category can be further subdivided.

Are you focusing on end users in universities or in grade school? What different types of schools are these end users associated with? Which countries and regions do the end users work and live in?

Next, identify the different tasks your end user performs. For a high school science teacher in a suburban area, these tasks may include teaching, grading, preparing lessons, training, discipline, dealing with parents, ordering chemicals, and more. An elementary school teacher in a major city may not need to order chemicals, but may need to buy classroom supplies, sometimes out of pocket.

A useful question to ask is why the consumer would purchase a product in a particular industry segment. For the education segmentation above, why would a parent purchase a product that improves education?

Stage 2: First Pass Narrowing of FieldStart with your 5-10 market list

Narrow to 2-4 markets, by ranking them using the following categories

● Well funded?● Readily accessible to our sales force?● Compelling reason to buy?● Whole product?● Entrenched competition?● Leverage to additional segments?● Consistent with passions, goals & assets of team?

Stage 3: Primary Market Research● Start now …● And never ends● Underlies almost every single step of 24 steps

Example: SensAble TechnologiesMarket Segment Name Entertainment Industrial Design

End User ● Animator ● Stylist● Designer

Task/Application● Sculpt● Animation● Paint

● Sculpt● Paint● Modeling

Benefits ● Ease of use● Reduce cycle

● Reduce cycle● Increase accuracy

Lead Customers● Disney● ILM● Dreamworks

● Toyota● Ford● Rollerblade

Market Characteristics● Early adopters● High-priced talent● High growth

● Dislike CAD & computers● High-priced talent

Partners/Players● Alias● Soft Image● Discrete Logic

● GE● Siemens● Picker

Size of Market ● 40,000 ● X0,000

Competition ● Watcom ● None yet

Platform ● SGI● Windows

● SGI● SUN

Complementary Assets Required● NURBS● Stylus● Dynamics

● NURBS● Stylus

PMR I - What is it and what is it not?● Direct interaction with potential customers; “bottoms up”● Secondary research - do homework before talking to end users● You are in INQUIRY mode not sales mode● Qualitative and Quantitative

○ Start with qualitative - open ended questions, interviews, exploration

○ You want to encourage the flow of ideas

● Ethnographic research - learning through observation○ Outside of economic or rational reasoning

○ People are bad at explaining their habits

● Customer discovery and customer development○ Watering holes are those places where your target customer congregates physically or digitally.

PMR II - Goal of PMR● Understand the customer in all dimensions● Not up to them to design the solution, that is your job● Pure gold ...

PMR III - Biggest Obstacles to Success● Lack of a structured process - TODAY’s goal!● Not getting started● Confirmation bias - asking questions to get the result you want● Selection bias - how are you selecting who to interview?● Social acceptability bias - people will say what they think you want to hear; they

have a tendency to not say things that will reflect poorly on them

PMR IV - Structured Process1. Write out the goals and objectives of the research, and a detailed description of

the research technique2. Define recruitment criteria for interviewees3. Develop a recruitment questionnaire4. Develop supporting content (e.g. discussion guide, landing page, online survey,

etc.)5. Recruit subjects6. Run the research program7. Digest results, next steps

PMR V - Results● See the pattern● Create another hypothesis to test● Trust but verify● Never ends

PMR VI - Techniques used ● Customer interviews● Observational research● Immersion● User tests● Focus groups - too expensive● User-driven innovation

○ Workarounds used by user with most pain

● Outcome-driven innovation analysis ○ People have to meet certain results at work/home and they find innovative ways to get there

PMR VII - References and Resources● Elaine Chen - A Primer on Primary Market Research● Talking to Humans Book Takeaways

○ Detective

■ Not asking to design the product

■ Not selling

■ Looking for clues to confirm or deny assumptions

○ 3 approaches

■ Day in customer’s shoes → pain

■ Observe a customer → honesty

■ Talk to the customer → motivation

PMR FAQs

Time to work on brainstorming your market and preparing for PMR

PMR Activity● Sit with your teams● Work through these two worksheets:

○ Market Segmentation Worksheet

○ A Practical Guide to Primary Market Research

● Goal: 30 PMR interviews by end of week