In an effort to meet the diverse needs of today's highly competitive global marketplace better, many companies are utilizing product families and platform-based product development to increase variety, shorten lead-times, and reduce costs. Current research in the area of product family design mostly focuses on the cost benefits of the platform-based approach and does not sufficiently examine broader enterprise considerations (e.g., profit, market share). Few existing design methods integrate market considerations (e.g., customer preferences, competition) with product development efforts in their formulation. In this work, in addition to integrating market considerations with traditional product family concerns (e.g., modular design, decisions regarding shared parts and processes), the scope of the product family design problem is expanded to include the product line positioning problem, i.e., the problem of determining the appropriate market segment/niche for each product variant in the family. The novel Market-Driven Product Family Design (MPFD) methodology proposed here is introduced to systematically examine the impact of increasing the variety in product offerings across different market segments and explore the cost savings associated with commonality decisions. The demand modeling approach used in this paper models the dissimilar impacts of competition in different market segments and plays a significant role in determining the appropriate platform leveraging strategy. The design of a family of universal motors is used to demonstrate the proposed approach.