One of the first things you do when starting the customer development series quest with your startup is to have an assumption of what “market type” you are. Depending on which category you fall into leads to drastically different strategies when developing your startup.

Briefly there are 4 market types:

• Existing market - you need to be faster/better than your existing competitors
• Resegmented market (price) - you need to be lower cost and just good enough for your customers
• Resegmented market (niche) - you need to identify a group of existing customers with specific needs not being addressed by existing competitors
• New product in a new market - you need to create a product that gives your customers the ability to do something which couldn’t be done before

Here are two personal examples.

My startup Jobshoots is initially focused on helping companies hire hyper local talent faster and more efficiently using Twitter. Our initial assumption was that we were resegmenting a market into a existing niche but through lots of discussions with customers and industry innovators we changed our market type assumption to existing market with a bit of price resegmentation (since we are cheaper than competitors).

This change in assumptions allowed us to focus on what our current customers are really concerned about: time to hire (speed) and cost of job postings. What’s also beneficial to us is we clearly know who are competitors are, what they base competition on, and an assumption on how to position ourselves.

My second example is my friends startup Santasti (www.santasti.com) the worlds first palette cleansing beverage. Their product is allowing wine tasters to do something they have never done before, cleanse their palette with a water type beverage. Their assumption is they are in a new product in a new market and much of their time has been spent on educating their consumers on what Santasti is and why they need their product.

For more inspiration on this subject and to begin to understand what market type you are in check out http://steveblank.com/2009/03/26/supermac-war-story-4-repositioning-supermac-market-type-at-work/