The Startup Velocity Question: Segmentation Drives TAM

I see segmentation errors left, right and center.

As such, I see sloppy TAM models left, right and center too.

Segmentation requires a precise profiling of your ideal customer with a host of parameters each of which can individually slash your TAM down by 10%.

Let’s look at a scenario:

• The product is for a black haired woman. TAM = $1 Billion.

• No, the product is for a black haired woman with short hair. TAM = $500 Million.

• Oh no, the product is actually for a black haired woman with short curly hair. TAM = $200 Million.

• No no no, the product is actually for a black haired woman with short curly hair who is of African American origin. TAM = $50 Million.

I’m making the numbers up … but you get my point.

Key Takeaways:

• Inaccurate segmentation leads to flawed TAM models.
• Precise customer profiling is crucial for accurate segmentation.
• Each specific parameter in customer profiling can potentially reduce TAM by 10% or more.
• Accurate segmentation is essential for realistic market sizing.

My Question to You:

Is your customer profile too broad?

If you think you need help, consider 1-on-1 Private Consulting with me. I will diagnose your Market Segmentation problem in an hour. In B-to-B, especially, it is a LOT more complicated than in B-to-C.

Photo by Samantha Sophia on Unsplash

This segment is a part in the series : The Startup Velocity Question