Market Type

Definition

Every startup falls into one of four Market Types — a new product in an existing market, a new product in a new market, or a new product resegmenting an existing market as either a low-cost or a niche entrant — and "Market Type changes everything a company does": customer needs, adoption rate, market size, sales cycle, launch type, and how much capital and time the company will burn before profitability.

In the Book

Chapter 2's central illustration is Donna Dubinsky, who ran both Palm Computing (1996, creating the PDA market from nothing) and Handspring (1999, entering the now-established PDA market against Palm, Microsoft, and HP) with essentially the same kind of product and team. Told to "win 20% of the market in 12 months," Handspring could execute a features-and-positioning sales strategy and hit $170 million in revenue; Palm using that same playbook three years earlier would have produced zero sales, because no customer yet understood what a PDA was — Palm's job was to educate, not compete. Chapter 1 places Webvan in the hardest category (new product resegmenting or even creating a market) and shows its fatal error was applying existing-market cash and marketing assumptions to it. The book also cites In-N-Out Burger as a case of niche resegmentation — reclaiming a market's abandoned core (a simple, high-quality burger) rather than competing on McDonald's expanded 55-item menu.

Why It Matters

It kills the assumption that a "good playbook" transfers across situations that merely look similar on the surface. Two products can be nearly identical and still require opposite strategies, timelines, and funding levels, because the real variable isn't the product — it's whether the audience already has language and demand for what you're offering, or has to be taught that the need exists at all. That distinction — pre-existing demand and vocabulary versus none — generalizes to any effort to introduce something new into a population, not just product launches.