Selecting Beachhead Market
So, this is a post I’ve been meaning to write for a while: selecting beachhead market. Very often when I discuss this topic with entrepreneurs, the discussions are unnecessarily blurry and unstructured. They don’t have to be, and this is what I would do to avoid it:
Before I jump into the details, note that this framework is more useful for entrepreneurs with a “solution looking for a problem” than the opposite . What I find is entrepreneurs most often are somewhere on a spectrum between these two extremes, so my thinking is this should be helpful for many early-stage founders.
As a founder, you have to figure out “who to approach first?”. You have a total addressable market, and it can be sliced and diced (aka segmented) into many pieces. Figuring out which piece to approach first is not always trivial.
While not always intuitive, I strongly believe it’s better to pursue one segment 100% rather than multiple in parallel. This does not mean picking the first one you find, but rather to quickly review the possible segments and quickly decide on one.
Now let’s say you have different segments where your product might be useful, how can you decide on one segment more quickly? The decision should be made with incomplete data (otherwise your decision making is too slow), but I believe you could aid your decision making process by mapping out your market segments. Here’s a walkthrough of how I would do it:
- Figure out which market segments you theoretically could approach first - and put them on a list.
Figure out which criteria you should use to evaluate the markets. This might vary, but if I were making the assessment I would include the following:
- Decision speed: How quickly are you able to go from initiating contact to a purchasing agreement. Quicker is obviously better. One of the most important things in my opinion, and the reason why I rarely recommend going after entreprise-sized clients while you’re a young company - they’ll choke you.
- Market size: How many customers are there? How much is each customer willing to spend on your product.
- Competition: How many alternatives does your customers have?
- Product differentiation: How significantly is your customers’ pain reduced if they switch to the current version of your product.
- Founder-market fit: To what degree are you able to approach this market? Do you have preexisting network, understanding, experience in approaching it. Are you motivated to approach it?
Rate how important you believe each criteria is. Base level is 1, and if you believe one criteria is twice as important you rate it 2 etc. I don’t have a blueprint on how this should look, but I would probably weight them like this:
- Decision speed: 2
- Market size: 1
- Competition: 1
- Product differentiation: 1
- Founder-market fit: 2
Assess the critera for each market segment on a scale of 1-3.
Some would probably argue you should reach out to your potential segments and do some research first, but I think it’s sufficient to take your best guess. I haven’t seen anyone build real confidence around a segment through a short research period - getting to know a market takes a long time. The point is getting to the segment you should thoroughly research more quickly.
Either way, you’ll end up with a table looking something like this:
What you now have, is your best guess at what is the most attractive beachhead market segment. But as you are inputting every variable, you already understand you can make this look any way you want.
In other words, what you really have is a better overview of what to take into account when deciding on which segment to focus on. If one segment scores really low, it could mean either that you shouldn’t focus on that market - or that you’ve weighted and assessed the segment poorly. You have to be the judge of which one it is.
The purpose of this framework is not to make the decision for you. Rather, it should make it easier to discuss your alternatives, and thus decide more quickly on which one market to target. And once you have have decided - don’t second guess it all the time, commit to that plan until you succeed or you have clear evidence you should do something else. To end with a Henry Kissinger quote;
“The absence of alternatives clears the mind marvelously.”
Side note: once you decide on one segment, I find this framework to be really good to bring into customer meetings. Eg; if you chose the market because you believed their decision speed was really high, make sure you actively pay attention to this as you talk to your customers. Is that hypothesis strenghtened or weakened as you go on? Should you double down on, or reconsider market segment?
Side note 2: if you’re looking for more on this topic, I highly recommend this article on how SuperHuman built an engine to find product-market fit. An extremely structured approach to the problem, and afaik the results have been remarkable so far.