This presentation is made possible by the support of the American People through the United States Agency
for International Development (USAID). The contents of this presentation are the sole responsibility of Rick
Rasmussen and do not necessarily reflect the views of USAID or the United States Government.
Three Types of Markets
• Existing Market
– Faster/Better = High End
• Resegmented Market
– Niche = marketing/branding driven
– Cheaper = Low End
• New Market
– Cheaper / Good Enough can create a new
class of product/customer
– Innovative / Never existed before
Type of Market Defines Everything
– Market size
– Cost of entry
– Launch Type
• Sales Model
• Sales Cycle
• Chasm Width
• Ongoing Capital
• Time to Profitability
• Faster/Better High end
• Existing markets are fastest for early growth
• Best when customers need the most performance possible
– Highest speed CPU
– Largest capacity memory
– Most enjoyable first-person shooter game
• New customers and upgrades
Existing Market = Linear Sales Growth
• Timeframe is
Issues when entering an Existing Market
• Large established companies almost always win
– Incumbents defend their high-end, high-margin business
• Worry About:
– Network effect of incumbent
– Sustaining innovation of incumbent
– Industry “standards”
• “They’ll never catch up” is a false hope, not a
Two types of Resegmented Markets
• Taking a current market and attacking through differentiation
• Low-end Resegmentation: New, lower cost segment
– Dollar stores
– Freemium games
• Niche: Branding strategy
– Regular goods with high-end brand
– Starbucks coffee, Nike shoes
Resegmented Market =
Complex Sales Growth
It takes time for customers to learn about your
Then comes growth
Year 2 Year 3
• Innovative/never existed before
• Is there a large customer base who couldn’t do this before because of:
– business methodology,
• Sales Channel: Did they have to go to an inconvenient location?
• Are there sufficient barriers to competition from incumbents?
New Market Risks
• New product/service has to be unique enough that:
– There is a large customer base who couldn’t do this before
– They can be convinced they want or need this…
• Company needs to manage adoption burn rate
– Patient investors with deep pockets
New Market =
Hockey Stick Sales Curve
Customers cross the chasm and
growth ends up meeting full potential
Year 1 Year 2 Year 3
Three Types of Markets
Existing Market Re segmented
Customers Existing Existing New/New Usage
Customer Needs Performance 1. Cost
Performance Better/faster 1. Good enough
at the low end
2. Good enough
for new niche
2. Niche strategy
Cash burn rate
Appendix: Market-Type Questionnaire
• Does the customer understand the
business you are in?
• Does the customer understand what you
do at this company?
• Does the customer understand the top
three problems you have?
• Do you believe that the startups product
will solve these problems? How?
• Are there other products in the market that
are similar to the startups?
• If so, how are the startups products
• Which products do you like the best?
• If not, how would you describe the space
the startup is in?
• Are the startup and its products unique? If
• Who do you think the startup will compete
with in its first year?
• Who do you think are the startups ultimate
• What does the startup need to do to win
against these competitors?
• Have you heard the startup describe its
positioning? Do you believe it? Is it right?
Would you change it?
• Have you heard the startups mission
statement? Do you believe it? Is it right?
• What technology/product trends should the
startup worry about?
• Who are the key opinion leaders in this
technology? Whom do you respect?
• What business trends should the startup
• Who are the key opinion leaders in these
business trends? Whom do you respect?