Segmenting markets is the most important thing your organization can do because it answers the question, WHO are our target customers? In other words, your market segments are the basis for all critical decisions because they form the common bulls-eye that focuses all product, marketing and sales activities to common customer needs and goals.

Market segmentation is especially important when quantifying new product ideas because it doesn’t force you to rely on sales forecasts or sales commitments which are highly volatile. When your target markets aren’t clearly defined (segmented), every product idea looks like a great opportunity because, on the surface, it has unlimited potential. The Playbook:

Segment your markets according to how customers think of themselves — banks, utilities, manufacturers, etc. This gives you the ability to assess the total size of each market and quantify their adoption rates for certain product categories. You’ll quickly distinguish the pretender ideas from the contender ideas because you’ll be able to determine their market potential according to true market demand in each segment.