There are several elements that occur, or should occur, in every good market study. Think of these elements as the foundation, the core infrastructure of the study. And this foundation is constructed of eight critical pillars. These eight components should be found in any market study.
1. Market Size
The first step in determining market size involves putting a border around the market and carefully defining what we are talking about. We are not only concerned with what products or services are included and which are excluded. We also need to be clear about which geographies are being covered, and which time period we are reporting on. A market can be sized both in terms of units of production and in terms of revenue produced.
2. Market Growth
We need to be careful with labels on this aspect of the market study. Are we talking about CAGR, the real growth rate over last year, a change versus the same time period last year, etc? Growth can, and should, be reported in both currency and in units. But growth can also be reported for a specific region, a specific product, segment, channel, or customer type, for example.
3. Market Segmentation
Markets can be segmented by product or service, by channel, by market share, by region, and by customer type. And there are countless other ways to segment a market. Segmenting a market clearly is important because it shows the user of a market study more granular insights than would be seen with merely a top-level view of the market. For example, learning that there are five types of customers and that one dominates is interesting. But going one level deeper and revealing that the largest customer segment is also the most averse to paying a premium for rapid delivery is clearly more valuable.
4. Market Trends, Dynamics, and Drivers
There are four basic kinds of market trends: political (governmental, regulatory), economic (financial), social (driven by consumer or customer behavior), and technological (innovations). Market, customer, competitor, or supplier developments may come in the form of political, economic, social, or technological change. Seeing (and predicting) these changes is important, because some changes will be positive in nature and some will be harmful. For example, in the health care industry, understanding new health care reforms is critical to forecasting the future profitability of the industry.
5. Market Opportunities and Threats
The fifth critical component of an effective market study involves taking a close look at the opportunities and threats of the market, customers, competitors, and sometimes even suppliers. What is occurring that could present a benefit or detriment to the Company? More importantly, what could occur within the foreseeable future that the client could steer its way around? Changing regulatory environments, aggressive competitor strategies and movements, reducing customer reliance on outsourcing, supplier forward integration – these are all future threats to the current status quo of the market. It is obviously essential to pick up, report on, and analyze the impact of, these market shifts.
6. Critical Success Factors
We must understand how to attain success in the market being studied. Customers certainly will have some of the answers to this question. How they choose suppliers, the purchase decision criteria that they use, is important to understand. We also need to understand the competitor perspective on the elements that are required to be successful in the market. Especially if the client is conducting the market study as part of a new market entry decision, it is valuable to understand the barriers to entry in the market. Clients need to compare the critical success factors of the market with their own competencies, or the competencies they could easily attain, and decide if they are suited to play in the market.
7. Customer Needs and Behavior
Assuming they are qualified to play in this market, clients will want to drill deeply into customer needs and behaviors. A good market study will involve more than current customer interviews; it will include conversations with prospective customers and lost accounts, as well. All three types of customers can reveal their unmet needs, buying behaviors, and impressions of the various suppliers. Perhaps most importantly, the market study should reveal the degree of loyalty that customers have for their existing suppliers.
8. Competitive Positioning
In addition to addressing who all of the relevant competitors are in the market, it is important to understand each of their strengths and weaknesses. More than understanding the current capabilities of competitors, we want to understand the directions they are moving in. Where do they see opportunities, and how are they positioning themselves to take advantage of these presumed opportunities? What are the strategies to take them there? Understanding where the real market opportunities and threats are, and comparing these to the intentions of competitors, reveals that some competitors are literally driving themselves off of a cliff. Others are heading straight for the sweet spot of the market. Understanding this is critical, because it then enables you to decide if you want to compete head-to-head against the smartest competitors, or position your company toward the white space of the market where there is far less competition.
Conclusion
Good market studies are not check-the-box exercises. While they may have some common characteristics in their core foundations, they are not cookie cutter products. The best market studies reveal far more than “answers” to these eight issues. They offer options and recommendations to help clients position their companies as effectively as possible, given the newfound knowledge about customer, competitor, market and supplier opportunities and threats. For more information about Acclaro's competencies in conducting market studies, click here.
I'd recommend taking two bottles of water with you too, so you can drink freely during class without worry you'll run out.
Posted by: revenue cycle improvement | August 30, 2011 at 10:03 AM