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What Is Selection of Market & Why Is It Important

May 23, 2022 Edwin Kooistra

You might have a trailblazing product that is a game-changer in the industry, but without the right market segment and proper determination, the outcome might not see the success it is destined for. Products and services are also molded according to the market in which they’re supposed to be launched and used.

Product market selection and even selection of a target segment for the service you are providing is not just a critical business or operational decision. The selection and the process entail thorough analysis, sometimes even spanning over years.

Such an effort is put into this process because this ultimately defines the strategic direction of your business. And after all, if you can choose the right market for your product and deliver the relevant value proposition, you can enjoy immense growth and success.

However, if you mess it up, you can suffer from severe losses and even experience a negative impact on your market reputation.

When it comes to pursuing new markets for your product, how do you select which ones to go after first? And once you’ve decided on a market, how do you prioritize the activities that will help you succeed there?  In this article, we’ll outline some tips for selecting and prioritizing markets to pursue for your product.

Let’s get started!

What is Product-Market Selection?

What is product-market selection ? / Definition of Product Market Selection

Determining which markets to invest in and pursue is known as product-market selection. When we talk about product-market choice, we refer to a decision that a business owner or an organization will take according to which markets they will be serving.

One of the essential variables to consider when selecting a market is the market’s potential for growth or the possibility for sales earnings to rise by investing in a particular area.

The most critical decisions in marketing strategy planning are those concerning selecting a market or markets to service. Everything else comes after that. Choice of demand refers to the customer’s preference and the competitive landscape and social contexts in which one chooses to compete.

It is not an easy decision to undo; once decided, the organization develops resources and expertise in the areas it has chosen to serve.

It cultivates a set of client connections that are both a source of support and a source of commitment. The commitment entails the need to provide excellent customer service, remain competitive in technological and product development, and expand in response to rising market requirements.

But all these choices are not made in isolation, and it requires many factors to be considered along with the input of both relevant direct and indirect stakeholders. They are also impacted by the company’s history, marketing, production, and technological strengths, the structure of its relationships with current customers, the research community, and rivals, and other factors.

Importance of Selection of Market for Product Planning 

When an organization or business works on its product line and plans to launch the distribution of the same in the market, the most important decision during this process is selecting the market. Market selection for product planning carries critical importance in terms of business operations and the organization’s strategic direction.

Your product or service might be the best available in the market, but it’s of no use if you’re not targeting it toward the right set of consumers. You will only be faced with disappointment if it is wrongly directed.

But if it is launched in the right market with proper planning and a step-by-step approach where the consumers can adapt to its value proposition. This is because this decision can make or break your growth and success.

Choosing which regions and consumers to target is perhaps the first and most crucial business model choice since it becomes the driving factor of almost everything the company does. In this view, Peter Drucker memorably stated that the goal of a company is “to create a customer.”

Furthermore, a significant body of data demonstrates that selecting the correct markets generates greater value than excellent goods or sales and marketing capabilities.

A recent study by McKinsey & Company, Inc., for example, shows that nearly all development in the big, multi-business corporations evaluated came from rapid growth market segments rather than growth in market share in slower growth sectors.

Market Types for Product Launch

As we have developed an understanding of the product-market selection and why it is so critical for any business when product planning, we should now explore this phenomenon in detail. Here we look at the different market approaches available for a company to plan their product launch and serve the customers accordingly.


When we’re talking about a horizontal market, we’re referring to a market structure where a manufacturer or a service provider can choose between different subgroups of customers to serve or serve them all.

The critical point to note here is that despite choosing, the product offering will be the same across all these subgroups. We’re segmenting the market when using this horizontal approach based on the end-user.

An example of this could be a computer systems manufacturer. This manufacturer can’t decide, given the conditions of a horizontal market, whether they want to sell their product to household customers, small-medium enterprises or even larger organizations. But no matter the choice of the customer group, the product shall remain the same across different segments.


Vertical market selection is the process of choosing a specific market segment to target with your product or service. This can be done by targeting a specific industry, geographic region, or even a specific type of customer.

The key to successful vertical market selection is to choose a market segment that is large enough to support your business, but not so large that you become a small fish in a big pond.

The market level at which the supplier sells is referred to as vertical product/market choices. For example, a steel processing unit can decide whether they want to sell raw or rolled steel pellets or maybe processed steel sheets to a housing corporation.

But as you can see here, the form of the product changes as the industry remains the same.

Questions to Ask Before Product-Market Selection

Information needed before product-market selection.

When we talk about product-market selection, we must cover certain areas in detail before stepping on to the next step. These areas are relevant to the choice of market, the modification of the product, whom the product will serve, and the importance of the product and value proposition in the eyes of the end-user.

We shall explore these critical questions in detail under the following headings.

Choosing Markets to Serve

First and foremost, the question you should ask, especially when deciding on product-market selection, is which markets we need to serve. This decision is not taken in isolation. Instead, it’s an amalgamation of different factors that must be accounted for.

As a business owner, you must look at the industry dynamics and internal strengths and weaknesses. You need to keep in mind the role of different external and internal stakeholders to help you enter a particular market when you have selected it.

You also need to be aware of the skills and resources required by you to serve a particular area or segment. If you do not possess these skills or the necessary infrastructure to cater to a specific market, selecting it just because it seems like a lucrative option does not make sense.

Form of the Product

The second question you need to address here is what form the product should take? The answer to this is not that simple. Products and services are designed to cater to different markets and their needs.

First and foremost, you should know that product marketing strategies should be developed keeping in view the markets, not the products or services you’re about to sell. They should be molded according to the market’s requirements and how the market would react positively to them.

For example, a fruit exporter can decide to export fruit and sell it to selected supermarkets. Or can take on the next step and have it cut and packaged for household consumers or even go into producing exotic juices from the product and have it distributed across the segment.

The market, in this case, would, of course, be the local community that the exporter is ready to serve in one way or the other. But what you must note here is how the exact product has been adapted to serve different segments of the same market.

Value Proposition for the User

Another important question that you must ask here is what should the product be able to deliver for the customer? What pain points should it satisfy?

The “product” is what the product or service does for the customer; it is the bundle of advantages the client receives when they purchase. This covers the functional utility of the item, the customer service provided by the manufacturer, any technical support he may provide to his clients, and the guarantee that the product will be supplied when and when it is needed and in the numbers required.

Another advantage may be the vendor’s brand name and image, which could aid the buyer’s social efforts.

Another set of advantages that the customer can gain from such a purchase would be the development of relationships with the company or, based on the luxury products industry, developing a certain social standing.

We are trying to demonstrate that the value proposition for the customer does not necessarily have to be a tangible benefit and can be intangible offers as well.

Product’s Importance

The last question you need to answer as a business or organization is how the product and to whom is it the most important and would be serving the most utility? The offering will have different meanings for different clients in this larger sense. 

Concentrating on prospective consumer groups that regard the product the highest is strategically favorable for providers. If, for example, technical support is a critical element of what the seller offers, a suitable market may be smaller enterprises with no in-house research and development.

More significantly, more technically savvy consumers with in-house solid research capabilities may place little or no importance on that component of the product line. A product will probably attract the top price among some clients who will benefit the most from it.

Vertical Market Selection

A vertical market is a market that consists of a collection of enterprises and customers that are all linked together by a common interest. Businesses in a vertical market are focused on the specific demands of that market and do not often serve a larger market.

Vertical markets, as a result, often have their own set of business norms. They may also have substantial entrance hurdles for new businesses.

Therefore, when selecting a vertical market for your business, you need to be well assured of your internal sense and skills and how well you would be able to target this niche.

To target a vertical segment, you need to have strong relationships within the industry and foresee a profitable future by focusing on just a particular part and its specific demands instead of servicing a larger market.

An example of a vertical market selection is that of Razer. When it comes to high-performance laptops that provide an accelerating gaming experience, Razer is one of the most sought-after names. It serves a very niche industry and had to go through the vertical market selection and choose the current segment it operates in.

Horizontal Market Selection

A horizontal market is diverse because the items developed may suit the demands of more than one sector. A flatter, horizontal market is where the product item or service is widely utilized and in high demand.

Therefore, producers have low risk in terms of output demand. On the other hand, Producers face much competition in the industry.

When indulging in the horizontal market selection, you need to have varied resources and skills. As you would be serving different segments of customers across the market, having a specialized set of skills is not necessarily vital.

You are catering to a more extensive collection of customers across different demographics.

An example of horizontal market selection is that done by Dell. It not only operates in consumer laptops and systems for households but also caters to larger accounts and businesses.

Not only that, but it also has indulged in the gaming arena under its brand Alienware. So, all in all, Dell is catering to all the different niches present in the laptop and computer system market.

Not Sure How to Select the Right Market for Your Product?

Selecting the right product market.

Selecting the right market for your product to service can be daunting. This selection will impact your business in the long run and, in the current times, leaves you under much pressure.

This is where we come in to help you choose the right market for your product and the one that is the most optimal match with your profile.

We at Chasm specialize in identifying markets, conducting segmentation analysis, determining product-market fit, and even developing go-to-market strategies. With our experts and years of experience backing them, finding the right call for you will not only be rewarding for us but will also produce tangible results for your business.

Our Strategic direction and Validation services are backed by solid market research and analysis that focuses on real-time data. Hence you can be stress-free and enjoy the success of your business while you let us do the sensitive work for you that too with remarkable proven results.


Selection of market is a critical process, especially regarding your business’s strategic direction. When embarking on this journey, it is essential that you consider all the different internal and external factors and your internal mechanisms and industry dynamics.

Given the subject’s sensitivity and how objectivity should be utilized when conducting this exercise, it is recommended that you onboard a third-party consultant or industry expert to help you determine the right product-market fit and direct you towards the proper product-market selection.

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Edwin Kooistra - Product Marketer & Founder

Technology can be a huge differentiator but leveraging emerging technologies can be challenging. After my degree in Business Information Technology I decided to work on the provider side of Technology, because I believe Technology providers play an important role in guiding enterprises on their digital journey. Besides helping tech businesses to optimize their growth and go-to-market strategies, I also like to write about the topic. I hope you find it useful!

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