Module 2: Market & Consumer

The first thing to do in new venture creation is to define the problem you are solving and build a deep understanding of the market and customers. Leading with the solution is a rookie move! A little bit of pre-meditation goes a very long way. Note that some people misinterpret “Lean Startup” as “build it and iterate it until you get to product market fit”, but Lean Startup actually starts with a customer development / customer empathy stage before the Minimum Viable Product (MVP) comes into play. And building knowledge about the market and customer maps to that stage.

In this module, we will cover two sets of activities entrepreneurs need to take on in order to build knowledge about their market and customer.

  • Defining & sizing the market: We will cover problem definition, market sizing and analysis and market segmentation.
  • Understanding the customer: We will cover market selection, customer research and stakeholders / personas.

Market sizing & analysis

When choosing problems to solve in a new venture, one critical question to answer is how big is the market. How many people have this problem? What is this problem worth to them? An hour or two of secondary market research can go a long way towards helping you decide whether you are solving an impactful problem or whether your problem statement is a bit too niche.

In big companies, market sizing involves buying analyst reports for thousands of dollars yet, subscribing to an analyst portal such as Gartner, IBIS World and the like for tens of thousands of dollars. In a new venture we don’t have this type of budget. Here are a few pro-tips on doing quick and dirty secondary market research on a budget.

TAM SAM SOM: - Hubspot

Hubspot has a great article that explains what these terms mean: Total available market (TAM), Serviceable available market (SAM), Serviceable obtainable market (SOM). Typically, investors look at TAM to see if it is big enough to be interesting, and entrepreneurs look at SAM for short term opportunities.

Read the article 

How to estimate your market size with no budget

Read this Knowledgebase article on how you can utilize free resources like the US Census and press releases from premier analysts to quickly size a market with no budget.

Read the article 

Market segmentation

Market segmentation is a frequently overlooked step in venture creation. Entrepreneurs often lock and load on a specific target market without considering their alternatives. This can be expensive – if you pick the wrong area of focus, you could spend years building the wrong solution. Thoughtful segmentation coupled with primary market research to build knowledge about the customer will pay dividends for years to come and is very worthy of a few weeks of investment.

In this module, we will define terms and provide actionable advice on how you might come up with a segmentation framework for your own venture.

"What is market segmentation?" - Qualtrics

Qualtrics has an excellent article demystifying market segmentation and explaining the 5 types of segmentation frameworks. For venture creation we strongly recommend behavioral segmentation followed by firmagraphic segmentation (for B2B) or psychographic segmentation (for B2C).

Read the article 

Segmentation Worksheet from Disciplined Entrepreneurship Workbook by Bill Aulet

Professor Bill Aulet of MIT has provided free access to editable versions of worksheets from his Disciplined Entrepreneurship Workbook. Download the segmentation worksheet here.

Download worksheet

Market selection

Once you have segmented your market, you will need to pick one segment to proceed. This is called the the beachhead market (BHM). The basic idea is to identify, land and get established in a tightly defined market. You can then use that as a strategic base to expand to adjacent markets. This is also known as the land-and-expand strategy.

As a new venture you have very little time and resources. The beachhead market approach enables you to leverage your limited resources in the most effective way possible to help you get established. Following are articles that explain the idea and help you select the BHM for your own venture.

How to define your target market has a recent article that provides an introduction to the thought process for selecting a target market.

Read the article 

Worksheet for beachhead market selection

MIT’s Professor Bill Aulet has provided access to an editable worksheet from the Disciplined Entrepreneurship Workbook that helps you select your beachhead market.

Download the worksheet

[VIDEO] How to select a beachhead market - Bill Aulet

Article: 50 Questions to ask your cofounder

First Round Capital, an early stage venture capital firm, has compiled a fabulous list of questions for you to pose to a potential cofounder.

Read the article 

Customer research

Originally developed at the Stanford and brought into the mainstream by the product design firm IDEO, Design Thinking is a framework that encourages us to solve problems by building empathy with the user / customer to understand their needs, wants and expectations. This helps us define the problem and rapidly prototype and test solutions. This human-centric approach is universally applicable whether you are creating a product, service or user experience.  Note that it is a solution-centric framework that does not typically include business/financial considerations.

Getting started with primary market research

Following are three resources by Professor Elaine Chen of Tufts on primary market research. Enjoy!

How to do lean market research - Hotjar

Hotjar, a data analytics startup, has posted a really excellent article that discusses the ins and outs of primary market research – specifically, lean market research, which is what we need to do as entrepreneurs without hiring an agency.

Read the article 

Landing page & A/B tests

Professor Elaine Chen has published an article on Huffpost on how to use landing pages to gauge purchase intent for new venture creation.

Read the article 

Stakeholders & personas

When you are building a new business, you need to consider the full suite of stakeholders who may be involved in making a buying decision. These stakeholders may include:

  • Economic buyer or decision maker: The person who authorizes the sale
  • Champion: The person(s) who advocate for your solution to the economic buyer/decision maker
  • Influencer: People that the economic buyer or champion consult for input about the buying decision
  • End user: People who use the solution
  • Veto power: People who can shoot down the whole thing

Sometimes one person can occupy more than one stakeholder role. For B2C businesses the end user may be the economic buyer. For B2B, it can get complex.

To build knowledge about each stakeholder, we conduct detailed interviews and/or do shadowing research, then create a fictional, composite description called a “buyer persona” that summarizes key takeaways. Following are some articles that help you create buyer personas.

Four quadrant persona template

Download a simple persona template that provides you with the following structure for describing your persona:

  • General description
  • Demographics
  • Behaviors
  • Needs & Goals

Download template

10 Buyer Persona Examples - Alexa Blog

Amazon’s Alexa Blog has a great article with 10 buyer persona examples.

Read the article 

How to create detailed buyer personas for your business - Hubspot

Hubspot. has a great article about how to create buyer personas for your business.

Read the article 

Additional Resources

Educational Videos

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Self-Guided Accelerator

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Pitching resources

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See our custom curation of templates for executive summaries (aka one pagers) and more