Selecting Your Beachhead Market

If everyone says they love your product, but no one is buying, you’ve made the mistake of trying to please multiple markets. You need to focus on one beachhead market and de-select all others. Be the best in your beachhead market and don’t try to please everyone.

MARKET SEGMENTATION
The purpose of market segmentation is to identify all the possible markets that may be interested in your idea and then narrow those options down to the best possible target for launching operations. Entrepreneurs have limited time and resources. Narrowing your target market through market segmentation ensures all your efforts are focused on understanding, reaching, and servicing your customer. Customer intimacy and iteration to find product market fit is your primary objective.

To segment your market, start by brainstorming all the possible markets and industries that could use your solution. Open up your imagination and think outside the box. If brainstorming on a team, give a prize for the wildest idea. You want to look for new market opportunities, not just try to capture a piece of a currently existing market

The next step is to narrow the list down to 6-12 markets based on selection criteria like:

• Does the customer have a compelling reason, extreme pain, and sense of urgency to buy your solution?
• Does the customer have funding to buy your solution?
• Is there accessibility to the market by your sales force?
• What is the strength of, or is there, entrenched competition?
• Is this a strategic market that, that if won, can lead to other follow on markets?
• Does it align with the values, passions, and goals of the founders?

BEACHHEAD MARKET
To select a beachhead market, continuing using the same criteria as before: do those customers have money and a reason to spend it, can your reach them and continue to iterate the development of your solution, what possibilities does it opens up in future markets, and does it alignment with your passion and values. Pick a beachhead market that you can dominate quickly and one that is strategic for access to follow on markets. Your beachhead should be small enough to win but big enough to matter.

With limited time and resources, it will be critical to pick just one beachhead market and deselect all others. You need to focus all your sales and marketing resources on one target. Don’t make the mistake of providing an 80% solution that creates interest but nobody buys. People must LOVE your product and in order for that to occur, you need to focus your time and energy.

Ultimately, you are looking for a homogeneous group of buyers that think, act, and buy similar products for similar reasons, in a similar way, with a similar value, and most important – that they talk to one another. Creating word of mouth (WOM) in a single beachhead market is critical to early success and growth. Your goal is to pick a small enough beachhead market so that you can dominate it quickly, create cash flow, gain credibility, and continue to refine your solution.

TOTAL ADDRESSABLE MARKET
Total Addressable Market (TAM) is the amount of annual revenue you could earn if you achieved 100 percent market share in your beachhead market. TAM can be calculated by multiplying the total number of users by revenue per user. Estimate the number of users using both bottom-up (customer lists, trade associations) and top-down methods (market reports) to verify. Estimate revenue based on what your customers spend already and how much value you’re providing. You should aim for a TAM of $20-100 million. If it’s more than that, you need to segment further. If it’s less, your beachhead market may not be worth going after.

A few things to consider:

1. Pick a beachhead market that is small enough to dominate quickly so you can gain cash flow
   experience, credibility, and word of mouth promotion.
2. Use the “bowling pin” strategy to identify follow on markets that can be engaged once you win
   your beachhead market.
3. If everyone says they love your product, but no one is buying, you’ve made the mistake of
   trying to please multiple markets. You need to focus on one beachhead market and de-select all others. Be the best in your beachhead market and don’t try to please everyone.
4. You’re better off finding a new market for your product than trying to win a small percent of an existing large market.