How to Choose the Right Market (and Why Bigger Isn’t Always Better)

Lena Baudo
Oct 30
2 min read

Why choosing the largest market is a strategic error

Every leadership team loves a good slide that shows a billion-dollar opportunity. A total addressable market (TAM) that signals scale, ambition, and investor appeal.

But that slide usually hides a blind spot: you don’t win markets because they’re big. You win because you’re relevant to a defined group of buyers.

Market size says nothing about entry barriers, differentiation, or customer motivation. Yet those are the variables that decide everything once the product hits the market.

What big markets really mean

A large market signals three things: maturity, competition, and standardization.

Maturity means buying habits are fixed. Customers already have suppliers, pricing references, and integration habits. New entrants face inertia.
Competition means you pay more for visibility: in marketing, in sales, in partnerships. Every acquisition costs more, every message takes longer to land.
Standardization means the market has decided what “good enough” looks like. You’ll spend your first year trying to prove why you’re different.

Large markets make forecasts look easy. You take the total population, apply an adoption rate, and multiply by your price. That exercise builds a growth story. But it’s not a market strategy.

What’s missing is evidence of:

Who switches and why
Where you can enter without high customer acquisition cost
What triggers early adoption
How fast those segments renew or expand

How market analysis prevents product-market misalignment

A real market analysis doesn’t just measure demand. It explains accessibility.

It tells you:

Which segments are open to change
Where competitors underperform
How buyers define value
What messaging and pricing logic move the market

This data reshapes the conversation from “how big is it” to “where can we win profitably.”

That shift is what prevents teams from wasting quarters on a strategy that never gains traction.

The advantage of a smaller market for your product

A smaller, well-defined market with clear unmet needs will outperform a generic billion-dollar category every time. It lets you:

Target a specific pain point and position clearly
Run focused campaigns with lower CAC
Shorten your feedback loops and improve faster
Build reference clients who accelerate trust in adjacent segments

This is how traction scales. You earn the right to grow by winning one segment decisively.