Psychosizing is a form of market analysis where the size of the market is guessed based on the targeted segments’ psychographics. In that respect, according to psychosizing analysis, we have five types of markets: microniches, niches, markets, vertical markets, and horizontal markets. Each will be shaped by the characteristics of the underlying main customer type.
Mapping the existing context or the potential context a company’s business model is developed into, is critical. Your market type will be the initial box where your company will operate. It will also be the foundation to move to larger markets, that can develop as a result of wider adoption (market development) or as a result of you taking more space within that existing market (market expansion).
Market sizing is the estimation of the potential of a market. Incorporating market research, market sizing is useful for businesses looking to introduce a new product or service to evaluate the business opportunity. Market sizing also helps investors to understand the value of the potential opportunity within the target company’s business plan.
Types of markets in Psychosizing
In traditional economics terms markets can be broken down in four main types as shown below:
A market type is a way a given group of consumers and producers interact, based on the context determined by the readiness of consumers to understand the product, the complexity of the product; how big is the existing market and how much it can potentially expand in the future.
However, for the sake of psychosizing we want to understand how big might be the market based on the main customer types. For the sake of it, we’ll draw into the technology adoption curve, to understand the main types of customers we might have in a tech-driven economy.
In his book, Crossing the Chasm, Geoffrey A. Moore shows a model that dissects and represents the stages of adoption of high-tech products. The model goes through five stages based on the psychographic features of customers at each stage: innovators, early adopters, early majority, late majority, and laggard.
Innovators
Innovators are the first to take action and adopt a product, even though that might be buggy. Those people are willing to take the risk, and those will be the people ready to help you shape your product when that is not perfect. Innovators usually represent a small niche, what we can call a microniche.
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.
Early Adopters
Early adopters are among those people ready to try out a product at an early stage. They don’t need you to explain why they should use that innovation. The early adopter has already researched it, and she is passionate about the innovation behind that. In this case, early adopters will help you take advantage of a larger subset of a market, a niche.
Early majority
The early majority is the psychographic profile made of people that will help you “cross the chasm.” Here you move past the niche and enter into a more developed market, still small but yet with a defined customer type that goes beyond the innovator and the early adopter.
Late Majority
The late majority kicks in only after a product is well established and it has a more skeptical approach to technological innovation and it feels more comfortable in the adoption only when a product has gone mainstream. In this case, you might be able to draw into a larger market, even though still mostly vertical. This means that there is still a primary customer type driving that market and a primary commercial use case.
A vertical or vertical market usually refers to a business that services a specific niche or group of people in a market. In short, a vertical market is smaller by definition, and it serves a group of customers/products that can be identified as part of the same group. A search engine like Google is a horizontal player, while a travel engine like Airbnb is a vertical player.
Laggards
Laggards are the last in the technology adoption cycle. While the late majority is skeptical of technological innovation, the laggard is adverse to it, unless there is a clear, established advantage in using a technology those people will hardly become adopters. Here the market size will have achieved its highest in terms of potential size, and you might be able to draw into a horizontal market, able to adapt to many commercial use cases and many potential customer types.
By definition, a horizontal market is a wider market, serving various customer types, needs and bringing to market various product lines. Or a product that indeed can serve various buyers across different verticals. Take the case of Google, as a search engine that can serve various verticals and industries (education, publishing, e-commerce, travel, and much more).
Key takeaways
We can analyze the market by using various psychographics and determine the potential market size. This model is a simplification of how real markets look like and only useful to understand the existing potential of a company’s business model a define a clear short-term strategy.
Key Highlights
Psychosizing Market Analysis Overview:
Psychosizing is a form of market analysis that estimates market size based on the psychographics of targeted segments.
It identifies five types of markets: microniches, niches, markets, vertical markets, and horizontal markets.
Each market type is shaped by the characteristics of the main customer type within that segment.
Market Context and Types:
Mapping the context where a company’s business model operates is crucial.
Market types serve as initial boxes for a company and can expand through market development or expansion.
Market sizing estimates the potential of a market and helps evaluate business opportunities and investment potential.
Types of Markets in Psychosizing:
Traditional economics defines four main types of markets.
Psychosizing uses technology adoption curves to categorize markets based on customer types.
Geoffrey A. Moore’s model divides technology adoption into stages: innovators, early adopters, early majority, late majority, and laggards.
Innovators and Microniche:
Innovators are early adopters of products, even if they are imperfect.
They shape the product and represent a small microniche.
A microniche is a subset of potential customers within a niche.
Early Adopters and Niche:
Early adopters try products early, having researched and understood the innovation.
They contribute to a larger subset of the market, forming a niche.
Early Majority and Developed Market:
The early majority helps “cross the chasm” from niche to a more developed market.
This market still centers around a primary customer type and commercial use case.
Late Majority and Vertical Market:
The late majority adopts after mainstream adoption and has a skeptical view of innovation.
The market might expand, still being primarily vertical with a defined customer type and use case.
Laggards and Horizontal Market:
Laggards are the last to adopt and are adverse to technological innovation.
Market size reaches its highest potential, potentially forming a horizontal market.
A horizontal market serves various customer types, needs, and industries.
Key Takeaways:
Psychosizing market analysis estimates market size based on psychographics.
It simplifies real market complexities and helps define a clear short-term strategy for a company’s business model.
Case Studies Based on Psychosizing Market Analysis
1. Tesla’s Electric Vehicles
Market Type: Microniche
Overview: Tesla, led by Elon Musk, entered the electric vehicle market when it was still in its infancy. At the time, electric cars were considered niche products with limited consumer appeal due to concerns about range, performance, and infrastructure. Tesla targeted innovators and early adopters—tech enthusiasts, environmentalists, and forward-thinking consumers—who embraced sustainable transportation and cutting-edge technology.
Strategy: Tesla focused on building high-performance electric vehicles that appealed to early adopters’ desire for innovation and environmental responsibility. The company invested in research and development to overcome technological barriers, such as battery limitations and charging infrastructure. By positioning itself as a pioneer in the electric vehicle industry, Tesla created a loyal customer base and generated buzz around its products through word-of-mouth marketing and media coverage.
Outcome: Tesla’s focus on the microniche of electric vehicle enthusiasts and early adopters paid off as the company achieved significant success and disrupted the automotive industry. The innovative features, sleek design, and performance capabilities of Tesla’s electric vehicles attracted a broader audience over time, leading to market expansion and mainstream acceptance of electric cars.
2. Netflix’s Streaming Service
Market Type: Early Majority
Overview: Netflix revolutionized the entertainment industry by introducing a subscription-based streaming service that offered on-demand access to movies and TV shows. In the early 2000s, traditional media consumption relied on physical media (DVDs) and scheduled television programming. Netflix identified an opportunity to cater to tech-savvy consumers—early majority adopters—who sought convenience, variety, and affordability in their entertainment options.
Strategy: Netflix strategically positioned itself as a disruptor in the home entertainment market, leveraging advancements in streaming technology and content licensing agreements to deliver a superior viewing experience. The company focused on user-friendly interfaces, personalized recommendations, and exclusive content to appeal to the preferences of early majority consumers. By investing in original programming and global expansion, Netflix accelerated its growth and captured a significant share of the streaming market.
Outcome: Netflix’s emphasis on serving the early majority segment propelled its rapid growth and market dominance in the streaming industry. The convenience, accessibility, and value proposition of Netflix’s subscription model resonated with a broad audience, driving subscriber growth and subscriber retention. As streaming became the preferred method of content consumption worldwide, Netflix expanded its reach and solidified its position as a leader in the digital entertainment landscape.
3. Zoom’s Video Conferencing Platform
Market Type: Late Majority
Overview: Zoom emerged as a prominent player in the video conferencing market, catering to businesses, organizations, and individuals seeking reliable communication solutions. As remote work and virtual collaboration gained traction, Zoom targeted the late majority segment—skeptical adopters cautious of technological innovation but open to proven solutions that address practical needs.
Strategy: Zoom focused on simplicity, reliability, and scalability to address the concerns of late majority users regarding ease of use, security, and compatibility. The company prioritized intuitive user interfaces, seamless integration with existing workflows, and robust security features to build trust and confidence among late majority adopters. By offering free basic plans and affordable subscription options, Zoom lowered barriers to adoption and encouraged widespread usage.
Outcome: Zoom’s strategic approach to targeting the late majority segment propelled its rapid adoption and widespread acceptance as the go-to platform for virtual meetings and remote collaboration. The platform’s user-friendly interface, stable performance, and comprehensive features appealed to businesses, educational institutions, and individuals transitioning to remote work and distance learning. As Zoom became synonymous with video conferencing, the company experienced exponential growth and market expansion, establishing itself as a dominant player in the communication technology sector.
4. Robinhood’s Commission-Free Trading Platform
Market Type: Laggards
Overview: Robinhood disrupted the brokerage industry by offering a commission-free trading platform that appealed to novice investors, millennials, and individuals previously excluded from traditional financial services. As online trading gained popularity, Robinhood targeted laggards—risk-averse adopters hesitant to embrace financial technology but attracted to accessible and low-cost investment opportunities.
Strategy: Robinhood focused on simplicity, accessibility, and gamification to attract laggard users who were intimidated by traditional brokerage platforms and high fees. The company offered a user-friendly mobile app, intuitive trading interface, and educational resources to empower novice investors and build confidence in their financial decision-making. By leveraging social media, influencer marketing, and referral programs, Robinhood engaged with laggards and demystified investing, making it accessible to a broader audience.
Outcome: Robinhood’s innovative approach to democratizing finance resonated with laggard users seeking alternative investment platforms. The commission-free trading model, fractional share investing, and community-driven features attracted millions of users, driving unprecedented growth and market expansion. Despite regulatory challenges and controversies, Robinhood’s disruptive business model disrupted the brokerage industry and reshaped the landscape of personal finance for future generations.
5. Peloton’s Connected Fitness Platform
Market Type: Early Adopters
Overview: Peloton revolutionized the fitness industry by offering a connected fitness platform that combines live-streamed workouts, interactive technology, and community engagement. Targeting early adopters—fitness enthusiasts, tech-savvy consumers, and affluent urban dwellers—Peloton redefined the home fitness experience and disrupted traditional gym memberships.
Strategy: Peloton differentiated itself by delivering immersive and personalized workout experiences tailored to the preferences of early adopters. The company invested in proprietary hardware, software, and content creation to create a seamless and engaging fitness ecosystem. By fostering a sense of community through social features, live classes, and virtual challenges, Peloton appealed to early adopters seeking motivation, accountability, and social connection in their fitness journey.
Outcome: Peloton’s innovative approach to connected fitness resonated with early adopters seeking convenience, innovation, and premium experiences. The platform’s combination of high-quality hardware, dynamic content, and interactive features drove rapid adoption and customer loyalty.
A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.
Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.
Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.
A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.
The Monte Carlo analysis is a quantitative risk management technique. The Monte Carlo analysis was developed by nuclear scientist Stanislaw Ulam in 1940 as work progressed on the atom bomb. The analysis first considers the impact of certain risks on project management such as time or budgetary constraints. Then, a computerized mathematical output gives businesses a range of possible outcomes and their probability of occurrence.
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.
The CATWOE analysis is a problem-solving strategy that asks businesses to look at an issue from six different perspectives. The CATWOE analysis is an in-depth and holistic approach to problem-solving because it enables businesses to consider all perspectives. This often forces management out of habitual ways of thinking that would otherwise hinder growth and profitability. Most importantly, the CATWOE analysis allows businesses to combine multiple perspectives into a single, unifying solution.
It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.
The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.
A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.
In corporate finance, the financial structure is how corporations finance their assets (usually either through debt or equity). For the sake of reverse engineering businesses, we want to look at three critical elements to determine the model used to sustain its assets: cost structure, profitability, and cash flow generation.
Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.
Value investing is an investment philosophy that looks at companies’ fundamentals, to discover those companies whose intrinsic value is higher than what the market is currently pricing, in short value investing tries to evaluate a business by starting by its fundamentals.
The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.
Financial accounting is a subdiscipline within accounting that helps organizations provide reporting related to three critical areas of a business: its assets and liabilities (balance sheet), its revenues and expenses (income statement), and its cash flows (cash flow statement). Together those areas can be used for internal and external purposes.
Post-mortem analyses review projects from start to finish to determine process improvements and ensure that inefficiencies are not repeated in the future. In the Project Management Book of Knowledge (PMBOK), this process is referred to as “lessons learned”.
Retrospective analyses are held after a project to determine what worked well and what did not. They are also conducted at the end of an iteration in Agile project management. Agile practitioners call these meetings retrospectives or retros. They are an effective way to check the pulse of a project team, reflect on the work performed to date, and reach a consensus on how to tackle the next sprint cycle.
In essence, a root cause analysis involves the identification of problem root causes to devise the most effective solutions. Note that the root cause is an underlying factor that sets the problem in motion or causes a particular situation such as non-conformance.
A break-even analysis is commonly used to determine the point at which a new product or service will become profitable. The analysis is a financial calculation that tells the business how many products it must sell to cover its production costs. A break-even analysis is a small business accounting process that tells the business what it needs to do to break even or recoup its initial investment.
Stanford University Professor Ronald A. Howard first defined decision analysis as a profession in 1964. Over the ensuing decades, Howard has supervised many doctoral theses on the subject across topics including nuclear waste disposal, investment planning, hurricane seeding, and research strategy. Decision analysis (DA) is a systematic, visual, and quantitative decision-making approach where all aspects of a decision are evaluated before making an optimal choice.
A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.
The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
Activity-based management (ABM) is a framework for determining the profitability of every aspect of a business. The end goal is to maximize organizational strengths while minimizing or eliminating weaknesses. Activity-based management can be described in the following steps: identification and analysis, evaluation and identification of areas of improvement.
PMESII-PT is a tool that helps users organize large amounts of operations information. PMESII-PT is an environmental scanning and monitoring technique, like the SWOT, PESTLE, and QUEST analysis. Developed by the United States Army, used as a way to execute a more complex strategy in foreign countries with a complex and uncertain context to map.
The SPACE (Strategic Position and Action Evaluation) analysis was developed by strategy academics Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler. The particular focus of this framework is strategy formation as it relates to the competitive position of an organization. The SPACE analysis is a technique used in strategic management and planning.
A lotus diagram is a creative tool for ideation and brainstorming. The diagram identifies the key concepts from a broad topic for simple analysis or prioritization.
Functional decomposition is an analysis method where complex processes are examined by dividing them into their constituent parts. According to the Business Analysis Body of Knowledge (BABOK), functional decomposition “helps manage complexity and reduce uncertainty by breaking down processes, systems, functional areas, or deliverables into their simpler constituent parts and allowing each part to be analyzed independently.”
The multi-criteria analysis provides a systematic approach for ranking adaptation options against multiple decision criteria. These criteria are weighted to reflect their importance relative to other criteria. A multi-criteria analysis (MCA) is a decision-making framework suited to solving problems with many alternative courses of action.
A stakeholder analysis is a process where the participation, interest, and influence level of key project stakeholders is identified. A stakeholder analysis is used to leverage the support of key personnel and purposefully align project teams with wider organizational goals. The analysis can also be used to resolve potential sources of conflict before project commencement.
Strategic analysis is a process to understand the organization’s environment and competitive landscape to formulate informed business decisions, to plan for the organizational structure and long-term direction. Strategic planning is also useful to experiment with business model design and assess the fit with the long-term vision of the business.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
Discover more from FourWeekMBA
Subscribe now to keep reading and get access to the full archive.
