Suppose you have an idea for a great new offering you hope will become a hot seller. Before you quit your day job, you’ll need to ask yourself, “Does my idea satisfy consumers’ needs and add value to existing products?” “Who’s going to buy my product?” and “Will there be enough of these people to make it worth my while?”
Certain people will be more interested in what you plan to offer than others. Not everyone needs homeowners’ insurance, not everyone needs physical therapy services, and not every organization needs to purchase vertical lathes or CT scanners. Among those that do, some will buy a few, and a few will buy many. In terms of potential buyers, not all of them are “created equal.” Some customers are more equal than others, however. A number of people might be interested in your product idea if it satisfies a need, adds value, is priced right, or if they are aware when your product exists in the marketplace.
Your goal is to figure out which people and organizations are interested in your product ideas. To do this you will need to divide or segment the people and organizations into different groups of potential buyers with similar characteristics. This process is called market segmentation and involves asking the question, What groups of buyers are similar enough that the same product or service will appeal to all of them?Bruce R. Barringer and Duane Ireland, Entrepreneurship: Successfully Launching New Ventures, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2010). After all, your marketing budget is likely to be limited. You need to get the biggest bang for your buck by focusing on those people you truly have a shot at selling to and tailoring your offering toward them.