Why Market Segmentation Makes Me Crazy

Hypothetically, there are two customer segments we are considering targeting for new product development. We haven’t really started searching for the product idea yet. First we’d like to decide which segment we’d prefer. Let’s suppose one customer segment is a small, hard to reach market that doesn’t have much money and the other customer segment is a huge market with deep pockets that’s easy to reach. Now imagine the product solution we eventually come up with for the smaller market revolutionizes the world of that customer but the best product idea we can come up with for the bigger market is just a so-so, nice-to-have.

Which market should we choose to pursue? It’s not even a contest. Go for whichever market you have a revolutionary product for. Even if that market doesn’t have much money and they are hard to reach. If the product rocks their world they’ll crawl over broken glass to get it. We can build on that passionate adoption and branch out to more products and even cross over to adjacent markets. Do you know how many people on food stamps somehow find the money to support a $1,000+/yr iPhone habit? Create the right product and customers will find the money. Create the right product and you don’t have to reach the customer, they will find you. Google has still never run a product ad.

Here’s what makes me crazy, that anyone spends days and weeks researching every detail of each market sub-segment, how addressable it is, what the average spend is, how it breaks down by employee count, and so on before they have any idea what the problem or product is. I have actually been in a product presentation where the first 40 minutes and dozens of slides were focused on this kind of hyper-detailed, obsessive-compulsive, analytical navel gazing. I’m sitting there still clueless as to what the customer problem is or what the proposed product solution might be. Here is my message to my dear marketing friends,  “Please stop obsessing about market segments, spend and personas before you even have a clear vision of the product idea”. It’s not a bad thing to look into market size for maybe an hour or two. Just long enough to get a rough estimate that the market is reasonably sizable and then stop. Why? No matter how favorable we think one of these markets is over the other, the difference in response between a great product for an average market versus an average product for a great market will obliterate any difference between them. All this analysis is meaningless without a clearly defined problem and a product solution hypothesis. Seriously. As long as the market is remotely sizable, all that really matters is the depth of the customer’s problem and the unique value of the solution.

Great product concepts are rare. It’s not like we get to go outside in the storm and point our wand at the exact tree where we want lightning to strike. We don’t have the luxury of carving down our possibility space and dictating that we only want our product innovation to strike in this exact segment for this exact type of customer. It doesn’t work that way. If we are fortunate enough that the fickle gods of innovation choose to bless us with a great product solution for one of these markets, then that’s the market to pursue – even if it isn’t the one we intended to target.