Handout Market Types Context In the previous activity, you learned the differences between a customer and a consumer. Here, you will understand the different types of markets with the help of a class discussion. Instructions Foundational Course in Entrepreneurship 1. 2. 3. 4. 5. This is a class discussion. Go through the 4 market types explained in this handout. You get 10 mins for this. Then, read through the scenarios and identify the market type for each. Discuss the scenarios given at the bottom of this handout. The class discussion will be for 20 minutes. What makes ventures succeed or fail? According to Steve Blank, “90% of ventures fail due to self-destruction and not competition”. Entrepreneurs need to evaluate a few options based on market size and decide the type of venture they want to start and their risk-taking appetite. It is important that you understand the type of market you choose for your venture. The market type you choose will impact multiple aspects of your business including: Market size Sales model Funding necessary for the venture Customers and how much time will it take to adopt them Competition Risks Not knowing what type you can cause challenges in future. Moreover, the market you choose will determine the type of venture you are. Take a detailed look at each market type. Customer and Solution © Wadhwani Foundation www.nen.org Page 1 of 4 For Students’ Use V01 Handout Market Types 1. Existing Market When investors and entrepreneurs go after an existing market – the advantage is that there’s little or no market risk. In this market type: Foundational Course in Entrepreneurship Competitors exist Customers want and need better performance Technology is usually the driving factor The positioning is driven by the product and how much value customers place on its features The risk is to think that competitors are dumb or too slow There is no "chasm" that you need to fill. The chasm is the gap between early adopters and the mainstream customers in a market. 2. New Market In this market type: Customers do not exist in the present, so revenue generation takes years Market size is zero Customers need to be made aware of their needs You must consider what factors can you create that has never been offered The chasm is biggest here because you will only be selling to the very early adopters For a new market to take off, there are many things that you need to consider. For example, who is the customer? and what customer pain/problem are you trying to solve? 3. Re-segmented Market The Re-segmented market is a hybrid between a New market and an Existing market in the sense that it is a New Market created from a small segment from an existing market. The features of this market type are: Low cost New Niche Customer and Solution © Wadhwani Foundation www.nen.org Page 2 of 4 For Students’ Use V01 Handout Market Types In this market type: Evaluate factors that your industry has long competed on and eliminate those Evaluate what factors can be reduced well below the industry standards Evaluate what factors can be increased above the industry standards Evaluate what factors can be created that have never been offered There is a bit of a chasm in this type of market Foundational Course in Entrepreneurship For example, Southwest airlines took on the airline industry by bringing up the traditional hub-and-spoke model and providing just very limited services but for an extremely low price. 4. Clone Market In a Clone market, customers are known because you copied an existing market. It is called a Clone because, in this market type, you are going to localize all those specific issues for your country or region. That said, it takes a foreign business model and adapts it to local conditions. There are no competitors if you are the first one and the risk may be in misjudging the local needs. This market type: Adapts a foreign business model to a local condition (language, culture, import restrictions, and local regulations) Needs a large number of customers, typically >100 million Customer and Solution © Wadhwani Foundation www.nen.org Page 3 of 4 For Students’ Use V01 Handout Market Types Here’s a snapshot of the 4 market types: Market Type Are the Customers known? What does the Customer Need? Associated Risks Competitors Examples Foundational Course in Entrepreneurship Existing Market Known Performance Lack of branding, sales & distribution Many Amazon Re-segmented Market Possibly known Better Fit Market and product re-definition Many Southwest New Market Unknown None Groupon Clone Market Possibly known None Baidu Transformational Evangelism and improvement education cycle Misjudging local Local version needs Source: https://guides.co/g/how-to-build-a-startup/3017 Are you now clear about the different market types? Look at these scenarios. Which market type are these? Your facilitator will run a class discussion around these scenarios. Scenarios 1. 2. 3. 4. 5. Care.com: It is an online marketplace to find babysitters. What kind of market is it? Chewy.com: It is an e-commerce company for pet food. What kind of market is it? Amazon: It started out selling books. What kind of market is it? Globaltranz: It is an online freight broker for trucking capacity. What kind of market is it? SpaceX: SpaceX designs, manufactures, and launches advanced rockets and spacecraft. What kind of market is it? 6. Twitter: Twitter ventured into micro-publishing. What kind of market is it? 7. Groupon: It is in the daily deals market. What kind of market is it? Here are some more links for you to explore: 1. https://steveblank.com/2015/01/06/there-are-4-types-of-startups/ 2. https://www.youtube.com/watch?v=1RTcXwJuCaU 3. https://steveblank.com/category/market-types/ 4. https://www.mentormob.com/entrepreneurship/consumer-web-entrepreneur/markettypes/resegmented-market Customer and Solution © Wadhwani Foundation www.nen.org Page 4 of 4 For Students’ Use V01