The First Task of Planning is to Define the Target Market Segment

The most critical task in any product plan, and the one where most plans fail, is to define with great precision the market segment the company intends to attack.

If you cannot define who the customer is, it is impossible to invent a complete product that will satisfy their needs.

The Failure of Broad Market Definitions:

• "Small Fish in a Big Pond" is a Losing Strategy: Stating a plan to capture a tiny percentage of a massive market (e.g., "2% of the $50 billion computer market") is a plan for failure. Success requires achieving a commanding position in a smaller, defensible submarket.
• Generic Market Data is Useless: High-level market data from research firms is like a compass; it tells you the general direction but not where you are or how to get to your specific destination.
• Inability to Define the "Complete Product": Without a clear definition of the target customer, the list of required features, services, and support becomes impossibly long and self-contradictory. The product will never be completed because the company is trying to be all things to all people.

The Power of a Precise Definition:

A precise market segment definition allows a company to:

• Tailor the product to the customer's specific needs.
• Estimate the barriers to entry and the cost of overcoming them.
• Focus its resources on a winnable battle.

Nine out of ten business plans fail to do this, which is a primary reason why nine out of ten new businesses fail.