How You Define Your Market Matters

Definition of a market: “A medium that allows buyers and sellers of a specific good or service to interact in order to facilitate an exchange.” – Investopedia.

Note that this definition is based on existing products and services. Consequently, it should be no surprise that many executives define their markets according to the products or services they sell. This is fine if you’re trying to determine the historical revenue generated by an offering. But what if you’re trying to determine how large the market is for a new offering that doesn’t even exist yet?

It’s important to remember that people buy products and services to get functional and emotional tasks done, not because they want our offerings. Hence, your offering doesn’t just compete with other similar products and services, it competes with anything that your target customer might use or do to get the same task done. For example:

• If you offer public accounting services, you’re competing with anything that your target customers use or do to get their financial and accounting tasks done including internal accountants, software, and tax attorneys.
• If you offer cardiovascular surgery services, you’re competing with anything that patients might use or do to treat their cardiovascular condition such as special diets, exercise, drugs, etc.
• If you’re a casual sneaker manufacturer, you’re competing with anything that your target customers use or do to accomplish what they want to get done with casual sneakers.

The trick is to determine what tasks your target customers are trying to accomplish with your offering, and which of those tasks are highly important to get done but going unsatisfied by current solutions. Once identified, you know what the best opportunities are, in rank order. A highly important and unsatisfied task is an opportunity. The greater the importance and less satisfied a task is, the great the opportunity for you to create new value and differentiate. This is how leading forms figure out where to focus and what to do to drive innovation, differentiation, and growth.

Leaders should never define their business by the offerings they sell, but rather by the customer needs they satisfy. This is especially important in turbulent times when products come and go. The only reliable compass for guiding companies today is your customers’ needs. Staying committed to satisfying specific customer needs is the only way to stay relevant and navigate these disruptive times.

A better definition of a “market” that enables leaders to look into the future and determine the demand for an offering that doesn’t even exist yet is “a group of target customers and the common task they’re trying to accomplish.” This is a non-financial, non-product-oriented definition that is based on the customers’ point of view instead. When we define markets in this manner and discover where the customers’ important unsatisfied tasks lie within this market, then we can invest in the development of new and improved offerings with confidence.

The biggest opportunity for growth for many companies is to redefine their markets this way, identify the important unsatisfied tasks customers are trying to accomplish, address those needs where you have a relative advantage, and thereby convert non-customers into customers. How you define your market matters!