Opportunities for new business/product exists all around us. New technologies are constantly emerging and the market is always changing.
A Product manager should be able to proactively evaluate which opportunities are promising and which are not; which ones look attractive enough to be pursued and which ones are better left for others to go after; and finally which ones are not yet ready for productization.
The “Product Opportunity Assessment” is a necessary step as it not only underlines what are the prerequisites for the success of a good opportunity but also prevents time and money wastage on poor opportunities. For Product Opportunity Assessment following are the considerations to be taken –
1. The Problem — What are the exact problems that the product will solve?
Start off by writing down the problems that your intended users face. Once you’ve written those problems, determine whether they are a Tier 1 problem.
What is a Tier 1 problem? — the problem you are looking to solve is one of the top 3 problems that the potential customers are experiencing. Example, for a CEO of an e-commerce business, the problem list (arranged in order of importance) would look like this –
1. Get more sales
2. Better manage deliveries
3. Better customer support
4. Optimize marketing spends
5. Increase product selection
6. Outsource legal & payroll services
7. Easy cash-flow management
8. Sourcing hassles
If you are planning to launch a vendor management portal, it wouldn’t be something that’s on top of the CEO’s mind. They’ll be so fixated on solving their first few problems that they won’t have time or budget for your solution (even if you have the greatest product).
Experts say that you should definitely avoid building product that solves a “nice-to-have” problem — that’s what is termed as a vitamin. It’s nice to have, but not absolutely necessary for your customers to pay for a solution.
You should always aim to develop solutions that are Pain-Killer, rather than Vitamin.
To validate this, reaching out and interacting with your core target users is the best way to find out. Post your interactions, you’ll have a knowledge of how your core target group handles the problem. It might be a product or a manual process or simply using some kind of hacks through a bunch of tools.
It is important to understand the whole workflow so that you could search for the pain which could be-
– or just Frustration
The following graph (inspired by Dean Olsen) gives an accurate illustration on how to rank the opportunities –
2. Target Market — Who are the core users for whom the product solves the problem?
To identify your best users, you need to get deep into the market landscape and understand what all users are present along with their behavior.
The are four main approaches to segmenting your users are –
a. Demographic-based segmentation
It uses quantifiable data such as age, gender, marital status, income, education level, geography, etc. Suppose you want to develop an app for moms to get information and track vaccination for babies easily. You could describe your target customers demographically as women 25 to 40 years old who have one or more children under the age of three.
However, do keep in mind that this segmentation technique might provide information only at a surface level.
b. Usage (Behavioural) based segmentation
This segmentation technique uses Decile or Pareto analysis to drill down and segment users based on the usage of an existing solution.
Say we want to segment users of an Online Bill Payment & Recharge App. There would be two things that the company would like to encourage their users.
One, they’ll want users to do as many Non-Promo transactions as possible. Second, they’ll want them to use the app for multiple use-cases (e.g. if a user pays the phone bill, they’ll also want the user to recharge DTH or pay electricity bill through the app).
In this case, user can be classified using the following matrix –
c. Attitudinal based segmentation
This technique creates customer profiles based on psychological factors such as attitudes, opinions, values, and interests. Creating such clusters is difficult because of limitations on available data; however, an attitudinal based cluster if established can provide deep insights on the motivating factors behind purchasing decisions of your users.
Let’s dive into a B2B product example. Say, we want to understand users of a marketing content creation tool. We’ll create segmentation based on users having different attitudes as shown to zero in our best target.
d. Need-based segmentation
It uses conjoint analysis to divide the market based on customer needs. It helps separate groups based on functional performances.
A very good example can be a wireless Wi-Fi security camera (like Dropcam). It can be used by working parents to keep track of their child, for homeowners for security usage or for pet owners to keep a check on their pet while they are away.
Even though these users share a high-level need; however, they have different actual needs. Dropcam understands this difference and tailors different product features and marketing techniques suited to different users in each segment.
3. Market Size — How big is the opportunity?
Determining the size of the market helps us understand –
– Whether a market opportunity would justify the investments
– What should be the benchmark (against the competition)
– Set appropriate business goals
There is two main approach to market sizing. The standard approach consists of —
- Referring to published data (which might not be available for small markets or unorganized sector).
- Rolling up competitors sales (possible for concentrated markets). One can refer to financial filings or sources like Dun & Bradstreet, etc.
- Using customer surveys (to determine spends in a certain market).
However, for many cases, the above standard approaches are not feasible or are too costly. In that case, one can make use of alternative approach which relies on using estimation to round up the market size in volume or units.
The model relies on two types of inputs:
Basis data — Quantitative data available from published resources or a previously conducted survey.
Relational data — The quantitative data that provides the link between the basis data and the target market size.
There are two approaches for using the estimation (alternate)technique —
The top-down approach, where we generally consider broader data (population in a region or number of production facilities, etc) as our basis data and then postulate relational data based on fraction of the market of our interest; and vice-versa for the Bottom-Up approach.
Example of Top-Down approach: Say we want to estimate the market size of Home AC in India. This is how we estimate the market size —
Example of Bottom-Up approach: Say we want to estimate of Revenue from a Burger King Outlet. This is how we calculate the estimates —
4. Competitive Landscape — What are the alternatives/solutions present in the market?
The only thing that’s good about ever growing competition is that you have a great amount of data to understand the current market.
A good starting point is a blank Google Sheet. That’s because, taking notes would help you organize the inputs while you’re jumping between browser windows, collecting information on the competitive landscape.
So, let’s start with a hands-on method — Suppose you’ve come up with an idea for a live chat software (used as Help Desk) and want to research how does space look like.
A good starting point can be a simple Google Search — “Live Chat Softwares”.
The search results would populate the ads by companies targeting the keywords as well as direct link to the companies operating in the space.
It is yet another source to find what solutions exist in the space as shown in the following screenshot –
This website is a gold mine for PMs, Entrepreneurs or simply any person interested in tech.
The good thing is once you do a simple search on Product Hunt and select a product, you get a list of related products which you could check out.
Example, I did a search using “Live Chat”. This is what I get –
I’ll select (say) LiveChat. I’m navigated to the product page where I have access to a number of related products (as shown in the list to the right in the following screenshot). This could help me provide a list of similar solutions or products existing in the market.
Next, you can make use of sites providing information on similar product or companies –
It is not the only site of its kind; however, it is one of the most complete and really useful websites available. When you search for something (a single company), you get a number of alternative possibilities, most of which you’ll never know that they exist in the market.
If you want to research solutions for businesses, these two sites would be the best bet.
You can get a detailed information on Company profile, Reviews, Product Features, and Pricing.
It can help you specifically on getting information on a company profile, investment, etc.
What next?? — This is when you start browsing the app or sites of each of these competing player and start listing down all these companies along with profile, pricing, and feature set into a table.
Look at TechCrunch Deadpool list — if companies or products like yours have failed, why do you think they failed.
Once, you’ve identified your core competing products or solutions, you could make use of following websites like similarWeb or Alexa to build further intelligence on the traffic.
This site can help you provide information about traffic and traffic-acquisition strategies. It would enable you to determine how the competing companies are acquiring audience and what are the typical touch-points of your audience to help you discover ways of tapping into your target market.
Following is the information that I got for Intercom –
You could also check — Alexa, Semrush, Google Keyword Planner.
Whether your target users use any existing product or not, It’s really important to look for pain in the existing solutions or process work-flows.
You need to develop a thorough understanding of what your users dislike about the current process flow. What do they need to make their job easier or faster?
You would not want to launch a “me too” product.
It’s okay to have a similar feature as a baseline, but that should be less than 80% of your product. The rest 20% should be distinctly better from the existing solutions.
5. The Verdict — GO / NO-GO
Finally, you can make use of a pretty good screening process (as discussed in this HBR article) that talks about developing RWW matrix.
R — Is it Real?
W — Can we Win?
W — Is it Worth doing?
Next chapter, we’ll be diving into understanding user needs and how to conduct user research.