Lecture 6: How to Do Market Segmentation

What this lecture covers

This lecture explains the practical process behind market segmentation, a step in Aulet's disciplined entrepreneurship framework. It covers how a team should generate a wide list of possible target markets through brainstorming, then narrow that list down using direct customer research rather than secondary sources.

Watching this gives you a concrete process to apply when deciding which markets to pursue for a technology or idea, and why talking to real customers matters more than reading reports.

Key ideas

• Start from what customers already do: if a technology already has users, ask them directly what they use it for.
• Brainstorm broadly: lay out every possible market opportunity as a team, without dismissing ideas that initially seem too crazy.
• Primary customer research: go out and talk to real potential customers rather than relying only on internal assumptions.
• Understand customers holistically: grasp their needs rationally, emotionally, and socially, not just their stated problem.
• Narrow in stages: cut a long list of markets, such as twenty, down to a manageable six to eight through a first pass of research, then research again more deeply.
• Distrust secondary sources: do not rely solely on internet research or third-party reports; go see for yourself.

Before you watch

• Watch "Varieties of Innovation" and "Three Ways to Start a Company" for context on how a market segmentation exercise fits into building a company around a technology or idea.

Check your understanding

1. Why does Aulet recommend brainstorming a large, even unrealistic, list of markets before narrowing it down?
2. What is primary customer research, and how does it differ from reading a market report?
3. Why does the lecture warn against trusting a report from a source like Gartner?
4. What are the three dimensions Aulet says you need to understand about a customer beyond their stated problem?