Markets Are Audiences and Needs
To defne a new market opportunity, look at the intersection of needs and audiences
We think of markets as geographies, product categories, target buyer groups, or some combination of the three.8 Though necessary, these common market delineators are insufficient to accurately assess an opportunity or define an actionable go-to-market strategy.
Needs, not product categories, create a market. Mobile phones met the need for mobile communication that had previously been addressed by phone booths. Of course, mobile phones also meet the need for communication in general. As a result, land lines are rapidly following the phone booth into oblivion. Once a need is met by another product category, the market for the old category disappears, while the market to address the need remains and often expands. Companies like MCI that identified too strongly with the product category (fixed-line telephone networks), rather than with the need (communication), have found themselves in dire straits. Kodak has met a similar fate. The company identified so strongly with the camera film product category that it was unable to move quickly into digital photography, despite internal analysis showing that the need to record experiences would soon be met entirely without film.
We also define “market” in terms of groups of buyers, as in, “the North American market” or “the small and medium business market.” Categorizing audiences provides insight into needs and can guide definition of product road maps and go-to-market strategy (rule 9). To accurately size the addressable opportunity, look at the intersection of needs and audiences.
Figure 3: Markets as Intersections of Audiences and Needs
There are growth opportunities in every region of the audience-needs matrix, but the strategies for pursuing them are very different. Growing sales to your existing customers by better meeting a consistent set of needs [quadrant I] is likely to involve tactics such as cross-selling and upselling that raise revenue per customer. You might introduce product or service enhancements, but new offerings will closely relate to those you sell already. To meet new needs of your existing customers [quadrant II] will likely require new lines of business. Recruiting new customers who have the same needs as those you already serve [quadrant III] places an emphasis on sales and marketing rather than on new product development. The competitors you face in each quadrant may be different as well. To find and pursue the most relevant growth opportunities, evaluate the intersections of needs and audiences in terms of both the size of the opportunity and your company’s ability to execute (see rule 7).
There is less risk in moving one step at a time, rather than jumping simultaneously into addressing needs you have never met for target buyers to whom you have never sold. When introducing new products in the same category as your existing offerings, evaluate whether they are truly complementary—that is, whether they address a common need or audience.