Doing Market Analysis - Easy, Right?
Look at the definition of market research on Wikipedia, and you see a generic display of primary and secondary research to 'discovering what people want, need, or believe.' That's great, but how do you do it?
Market Research Frameworks
Before digging around and buying a bunch of research, or conducting your next customer survey, you may end up investigating available frameworks that provide market analysis. Here's a review of a few approaches I've tried.
Approach #1: Just dig around and find something good...
Also known as 'What Framework?' This 'dig and report' method is what I started with in product management. It begins:
Executive: "Do some market research around the product."
Me: "Okay. I'll report on what I come up with."
Then for about 3-4 days I dig through literally hundreds of pages of research on [Insert Industry here] landscape, market trends, market dynamics, competitors, technology, product and/or consumer landscape. Not only is it haphazard, the outcome looks like more of a business report on "I discovered there's a bunch of information out there, and that we have 20 competitors, and a big market opportunity." While interesting, it does not provide an opinion on what the product roadmap should be, nor does it validate hunches on how a product should strategically be positioned.
Finally, it ends in analysis paralysis — my head spinning with charts, graphs, and statistics. This is why I sought out a framework to investigate market research.
Approach #2: SWOT Analysis
Organizations use SWOT analysis to assess a product in its competitive landscape. This 'quick and dirty' planning method is great to whiteboard a realistic picture of where your product is, as well as where the competition may head next.
I use SWOT analysis to generate and assess the assets and liabilities of a product. So let’s say I have X product. I would look at our product and the top competitors and ask:
Strengths: What are the product strengths that differentiate it from the competition? What organizational strengths do we bring to the table?
Weaknesses: Where are features lacking or underdeveloped? Are there alliances or organizational weaknesses that erode market share?
Opportunities: Where can we differentiate the product? What strategies can we put in place to gain greater market share?
Threats: How could this product fail? What factors in the market or the roadmap can bring it to obsolescence or lose market share?
In my opinion, SWOT tends to primarily focus on your product and the competitors around it. This framework is a bit too close when looking purely at how an organization can meet objectives set for a product and narrow when looking only at your product vs. the competition. Often market research is sought in determining the objectives themselves, and this is where it can be limited. Often the organization looks to the product to set the objectives of the product — or at least recommend them. SWOT will not help you set the product objectives because it assumes they have already been set.
Approach #3: The 5 and 6 Forces Model
The 5 and 6 Forces Model look at product as 5 (or 6) key forces that shape a business strategy.
This framework goes deeper into the market dynamics of where you are investigating a product.
Each of the forces evaluates the competitive intensity of a market. If there is intense competition, there is both strong interest from potential buyers to purchase a product, and business model(s) that ensure companies make a profit to meet this demand.
The forces include:
- Competition for your product.
- New entrants that would compete in your space, often with new business models.
- End users/Buyers and their bargaining power on influencing price, integration, and concentration.
- Suppliers of raw materials, components and services for your product and their bargaining power on business strategy.
- Substitute products and those factors that influence it (cost of product, perceived value, cost to switch, etc).
- Complementary products/ The government/ The public. This 6th factor takes into account strategic alliances and how the government or public can influence business strategy for a particular product.
This framework investigates what is out there in an industry for a potential product. It's a great whiteboard exercise that lets you reference the dynamics shaping the product strategy.
There are some drawbacks to this approach, however. For example, it doesn't see the relationships in how buyers, suppliers, and competitors work together to influence the business environment. In technology and software for example, there are a myriad of strategic alliances that may cause a buyer to switch — not because of your product feature set, but because your product "plays well with others" (Salesforce.com might be an example). Secondarily, the value of the product seems to be in creating barriers to entry by competitors in this framework, which is not always true (take the iPod for example, low barrier to entry in MP3 players, yet they gained tremendous market share).
For market analysis, I use 6 Forces and SWOT as a framework to begin market research. I'm not by any stretch a purist, but both approaches can uncover market dynamics that can shape your product strategy, and uncover where market research is needed. Try 6 Forces first to look for the product opportunity and SWOT to more closely look at the competitive landscape for a product.
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