Doing Market Analysis - Easy Right?

For anyone involved in product strategy, one of the key milestones to accomplish is market research. At it's best, it uncovers that diamond in business and market research - an opportunity for a strongly profitable product. At it's worst, it's a bunch of statistics in a sales presentation - after the product has launched because it seemed cool to build at the time.

Looking at the definition of market research on Wikipedia, and you'll get a generic look at 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 you begin digging around and buying a bunch of research or conduct your next customer survey you may investigate available frameworks in providing market analysis. Here's a review of a few I've tried...

Approach #1: Just dig around and find something good...

Also know 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 or more I'm digging through literally hundreds of pages of research on the [Insert Industry here] Landscape , market trends, market dynamics, competitors, and the technology, product and/or consumer landscape. Not only is it haphazard, the outcome is more a business report on "I found out that there's a bunch of information out there, and we have 20 competitors, and have a big market opportunity." While interesting, it is neither providing an opinion on where the product roadmap should be, nor validates some hunches on where 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 have used 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 a SWOT an 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 the features lacking or underdeveloped? Are their 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 loose market share?

In my estimation, SWOT tends to focus mostly on your product and the competitors around it. This framework is bit too close, in looking purely on how an organization can meet objectives set for a product and narrow in looking only your product vs. the competition. Often market research is sought in determining the objectives themselves, and this is where it can be limiting.. .Often the organization looks to 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 are used to evaluate 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:
1) Competition for your product.
2) New entrants that would compete in your space, often with new business models.
3) End users/Buyers and their bargaining power on influencing price, integration, and concentration.
4) Suppliers of raw materials, components and services for your product and and their bargaining power on business strategy.
5) Substitutes products and those factors that influence it (cost of product, perceived value, cost to switch, etc).
6) Complementary products/ The government/ The public. This 6th factor takes into account either strategic alliances are put in place, and how the government or public can influence business strategy for a particular product.

This is a great framework to investigate what is out there in an industry for a potential product. It's a great whiteboard exercise as well in that it lets you reference the dynamics that are 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 marketshare).

What Next?

For market analysis, I do both the 6 forces and the SWOT analysis as a framework to start my market research. I'm not by any stretch a purist, but both approaches can uncover some market dynamics that can shape your product strategy, and uncover where market research is needed. This realistically may keep your head from spinning in a bunch of research! Usually the 6 forces first to look for the product opportunity, and SWOT too more closely look at the competitive landscape for a product. These usually uncover where additional market research is needed in investigating a product strategy.