Beachhead Market

A Beachhead Market (also called a Beachhead Segment) is an initial market segment that a new product can capture, allowing it to expand and grow so that it can start capturing customers in other market segments. Using a beachhead segment allows new entrants to break into an established market with an early version of a product that is not at parity with market leaders.

Bill Aulet coined the term Beachhead Market in the book Disciplined Entrepreneurship, drawing parallels with military strategy. A beachhead is an initial starting point for an amphibious invasion, providing a strong and secure foothold and allowing the invaders to expand further into enemy territory. Similarly, a beachhead market is an initial segment to serve as a solid base for further expansion. The idea with selecting a beachhead market is to keep segmenting the customers until you can find some group where you can provide enough differentiating value with an early product version, causing customers in that segment to start adopting the product in parallel or instead of the existing solutions.

In the Hierarchy of Powers model, a Beachhead segment allows a product to establish market power, while it is still not able to generate offer power in a wider market.

For example, Paypal started as a way to transfer money via mobile Palm-Pilot devices, then shifted to online transfers for eBay auctions, then expanded into a generic payment processing system (see Founders at Work by Jessica Livingston). The eBay auctions segment was not served well by high-street banks, allowing a small company to gain a significant audience and a stable revenue stream to keep building the more generic product.

Key guidelines for choosing a beachhead market

According to Aulet, the beachhead market needs to be relatively small so the needs of the customers in that market can be addressed effectively with an early version of a product, but it needs to be big enough for a product to prove the value proposition and gain credibility before it can start expanding to new segments.

Aulet points out there are 3 critical factors for selecting a beachhead market:

  1. the customers within the market should all buy similar products
  2. the customers within the market should have a similar sales cycle and expect products to provide value in similar ways
  3. the customers within the market talk to each other, and there is a high probability of word-of-mouth refferals, where customers can serve as a “compelling and high-value references for one another in making purchases”.

When selecting a beachhead market, it’s important to find a viable option, not necessarily find the best possible one.

In almost all cases, there are multiple paths to success, so it is not imperative to choose the singular best market.

Bill Aulet, Disciplined Entrepreneurship

Amazon started selling books online, became dominant there, and then expanded to “the everything store”. In a 1997 video interview taped at the Special Libraries Conference, Jeff Bezos explained that he picked books as “first best product” to sell online after reviewing about 20 different products. Primarily, the books were “first best” (music was number 2) because there were so many individual books in print that a physical store could not compete with an online store in inventory range. The web was still an emerging technology at that point, and people preferred to buy books in physical stores. Bezos estimated that there were about 3 million different book titles in print at that point. Amazon was keeping only a “couple of thousand” in its own warehouses, but they had quick access (“almost-in-time”) to 400,000 more titles from wholesalers, and could access 1.1 million titles from publishers (a couple of weeks to get), and a million out of print books that Amazon would try to specifically locate for customers. Bezos suggested that Amazon succeeded because it did something new and innovative that actually had a real value for customers, which caused newspapers to write about Amazon, customers to talk other potential customers, creating a “huge word-of-mouth fanout”, which drove and accelerated the business. In that way, books were the “first best” market for Amazon because they fit all three rules set by Aulet.

Learn more about the Beachhead Market