Business

What is Market Opportunity Analysis and How to Conduct it?

Market opportunity analysis is the study of the market situations to understand how and when to pitch your product or service. You cannot just simply start working on a new idea until you have a good idea about how its execution and results would be. That is where the role of market opportunity analysis becomes primary. Through this blog, get deeper into Market Opportunity analysis, how it benefits businesses, why product managers need to know about it, and the processes.

What is Market Opportunity Analysis?

Market Opportunity Analysis is the process of thoroughly analyzing the possible benefits, returns, and risks associated with an investment. It also involves identifying competition, understanding the target audience, and anticipating potential risks. It enables the business to consider the external, internal, and financial environments and decide whether or not to go ahead with an idea.

Why should Product Managers know about Market Opportunity Analysis?

The most straightforward explanation for this would be that since Product Managers are involved in a product’s life cycle more closely and extensively than anyone else, it is natural that they need to understand when to produce and sell the product.

The benefits of market opportunity analysis for product managers boil down to two main points:

1. Ensuring product-market fit

As a product manager, you must be sure that the product you are building is built at the right time and caters to the target audience. If you do not have the desired product-market fit, your product is bound to fail.

2. Saying No to unprofitable ideas

You will be stormed with ideas throughout your product management career. The reason? People love to share their opinions about how you should take your product ahead. In such a scenario, if you cannot say no to the unprofitable ideas, you will develop a product that you and the business will only incur losses from.

How does Market Opportunity Analysis Benefit Businesses?

You might think that taking out time just for analysing the market will not be worth all the effort, but the truth is very far from this. Below is a list of benefits that will explain how:

1. Evaluate the demand for your product or service

If you are about to build or have built a product, you must know how much and by whom the product will be valued. A market opportunity analysis will help you understand your product’s potential selling power.
If you find out that there is a demand for your product, nothing like it. But even if you conclude that there is no market for your product, you can try and create it. But to do either of the above two, you will first need to analyze the market.

2. Identify Potential Marketing Strategies

The process of market opportunity analysis enables businesses to understand who their target customers are, what they want, and how they make their buying decisions. And with the knowledge of these factors, you will be able to determine a marketing strategy that hits home with your potential customers.

3. Make Better Long-term Decisions

Multiple factors impact a business, and if you are not aware of them, your success will always be limited. Hence, it becomes necessary to conduct a market opportunity analysis. It will give you an idea about what is trending in the market right now and provide insights into the future.

4. Anticipate and Navigate Potential Hindrances

Identifying the weaknesses and possible shortfalls of your business/product strategy will be key in ensuring that any problems are handled well if and when they occur. No matter how good you are, there is a chance that your idea might not be perfect. But if you have analyzed your plan and its roadmap in the market well enough, you will be able to execute it to perfection.

5. Find Further Research Opportunities

When you study the market, you are highly likely to end up knowing a lot more than you earlier did. So, if you want to find avenues of further research, some new ideas to explore, or another customer problem, you need to conduct a market opportunity analysis. A good product manager or anyone who wants to grow in their career must always be ready to grab new opportunities.

How to Conduct a Market Opportunity Analysis?

1. Identify Potential Opportunities

Naturally, determining which opportunities merit further investigation needs to be the first step. Connecting the possible advantages of entering a market with the objectives of the current business plan will help you decide which changes to investigate. Since resources are limited, it is crucial to avoid entering new markets without concrete reasons. You must use them on the best choices.

The types of opportunities that you will be looking at will include:

  • How to break into a new market
  • Ways to reach new customers
  • Meeting customer needs that haven’t been met
  • Improving your current product

*A bonus piece of information – As a product manager, you will likely have the help of upper management in making this decision.

2. Comprehend the Customers’ Needs

Being consumer-focused is the Product Manager’s foremost duty. Fully understanding the customers is one of the first things you should do while investigating a new market.

As a PM, one of the worst mistakes you can make is assuming that your new consumers would be the same as your current ones when launching a product or service in a new area. Imagine you run an eCommerce app for a shoe company. “Shoes are shoes, and shoppers are shoppers,” you would believe. However, your new potential customers’ purchasing patterns, expectations for customer care, and level of digital literacy may be different from those of your current clients.

The following are the ways you can use to understand your customers better:

  • Customer Interviews
  • Surveys
  • Demographic Data

3. Competitor Analysis

Being the first is usually considered more important than being the best, as anyone in the technology sector would attest. It will take more resources to set yourself apart from your rivals if they are already meeting the need or finding the solution. You need to ensure that your USP (Unique Selling Point) is strong enough to ensure you can get a market share if you’re entering a crowded market. Also, make sure to analyze your competition in your market opportunity analysis. What they are doing well, what they are doing poorly, and how you can set yourself apart to attract clients.

Keep the following points in mind while conducting a competitor analysis:

  • Your competitors’ value proposition
  • The difference between your product and theirs
  • How are their reviews
  • Are there any gaps that they have left and you can fill
  • Possibilities of new competitors coming up

4. Be aware of both external and internal factors

To know what to study among external factors is pretty easy. There is a method called STEEP, which can be used for this purpose.

  • Social
  • Technical
  • Economic
  • Environmental
  • Political

The above factors determine how your product will perform in the market based on its impact on it/its impact on them.

And for the study of internal factors, you need to explore the capabilities of your own company. Do you have the people, technology, financial resources, and expertise necessary to invest in a new product? Will you be able to find employees with the required expertise if you’re launching an extremely creative product? To manage this new opportunity, what additional departments or teams would you need to establish?

Conclusion

So that was a deep dive into Market Opportunity Analysis and how it can be conducted. I hope we have also been able to explain why you, as a product manager, should never launch a product without the due homework.

If you want to know more about skills a product manager needs to be proficient in, you can check out the PG Program in Product Management and Analytics. The program will take you through a comprehensive study of product management and prepare you for a promising career in the industry.

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