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How to Assess Market Opportunities for Digital Products

Billy Collins
  • Billy Collins
  • April 12, 2019
How to Assess Market Opportunities for Digital Products

Profitability and growth are never guaranteed in the digital world. There’s always a competitor or or clever startup or team in an adjacent field waiting to steal market share or, in the best cases of product success, create a whole new customer market where none existed. To grow your company, you need to constantly assess market opportunities. But just how to assess market opportunities can feel daunting.

At its core, Punchkick is in the business of building customer experiences, which means we need to assess markets constantly. Pretty much everything we build happens to take the form of custom software (most of it mobile), and ancillary services like API development exist to support our clients’ customer-facing software needs.

This world of product development is a dynamic one. Dozens of decisions need to be made every day for every product we create or support. Each decision comes with a set of tradeoffs that, if miscalculated, could spell doom for our clients’ business in the form of negative App Store reviews, app abandonment, or poor KPI performance.

To ensure we’re making the right decisions, everyone at Punchkick is charged with thinking about product decisions as if they were investors evaluating whether to fund a new company or not. This way of thinking typically involves some level of opportunity assessment to ensure that decisions are both correct and evaluated, with a mature understanding of how the decision can further differentiate our abilities from our competition.

What is an Opportunity Assessment?

An opportunity assessment is a set of activities used to help people make decisions about whether to pursue a product or service offering idea or not. Practically, it’s a process we can use to help us stop making decisions based on intuition alone, instead looking at product-market fit, thereby making better decisions all around.

For product managers, understanding the impact of an opportunity assessment as well as the necessary steps to conduct one will serve as a key differentiator in the long-term success of your products.

At a minimum, an opportunity assessment should answer three critical questions:

  1. Who is the audience and what problem are they experiencing?
  2. What is the size of the addressable audience?
  3. How might our organization successfully solve this problem given current hurdles or alternatives?

In my experience, decision makers at established companies frequently skip the first two questions, assuming that customer adoption is a given. This attitude is dangerous, and if you’ve read even one book on disruptive innovation, you know it’s the kind of attitude that could eventually cause your brand to close up shop. Always remember that it’s not just about you—other competitors might be looking at opportunities in the same space, and if they’re asking smart questions that you’re not, they could come in and take over what should be your market share.

How to Assess Market Opportunities, Step by Step

While the opportunity assessment framework is most frequently applied to the development of new products, it can also be put into practice for lower-risk decisions.

Step 1: Who is your audience and what do they need?

Understanding the needs of an audience is the most important—and most difficult—step to get right. Misunderstanding the audience has a domino effect on the rest of your assessment, causing you to potentially over- or underestimate the opportunity size and improperly identify your competition. Therefore, it should be no surprise that the best opportunity assessments rely on high quality research.

If you’re exploring an entirely new opportunity, there is no substitute for primary, generative research. Other types of research, such as journey maps or user personas, as well as targeted secondary market research, can help a great deal, but they will only provide hints or allow you to further refine existing hypotheses without necessarily helping you answer your questions.

Understanding the needs of an audience is the most important—and most difficult—step to get right.

When conducting research for your assessment, there are several questions you’ll want to answer before moving onto the next stage.

  1. What characteristics describe the people experiencing the problem?
  2. What context is the problem experienced in?
  3. How would solving the problem improve their lives?

Finding the answers to these questions is harder than it sounds, but a good whiteboarding session with a few key stakeholders is always a great place to start.

Step 2: What’s the size of the addressable market?

It should be no surprise that market sizing is crucial for completing your opportunity assessment. Without an estimated size, it’s impossible to convince others to support your decisions and see them through if your company chooses to explore the opportunity. Market sizing also helps you quantify and estimate the ROI of any solutions proposed at the end of the process.

Again, the best source to estimate a potential market size is primary research. Established companies, more likely than not, conduct opportunity assessments with their current audience in mind. This means that research on the size of the impacted market is often readily available.

Assessing the size of an entirely new market or a market that your company isn’t yet fully familiar with is a different story. It’s important to remember that sizing a potential market does not have to result in a fixed number, such as 5 million potential customers. In fact, a range is often more appropriate for decision-making, since it will give you and your team a range to estimate resource allocation within. It’s also important to forecast where the market is headed. Is it growing? Is it evolving? How and why? But again, back this up with research, not your own perceptions of a given market based on news or social media chatter (a very common pitfall).

There are a variety of secondary research firms and a wealth of publicly available white papers and the like that can help you begin to make market sizing estimates. Additionally, tools like Google Trends can help you gauge trends within your topics of interest.

Step 3: Why is your organization the best to pursue this opportunity?

Completing the first two steps will give you a better idea of whether an opportunity truly exist or not. Once you’ve established that foundation, you need to create a path to be successful in pursuing the opportunity. To do this, you need to answer questions about your competition, context, and core capabilities.

Opportunities do not exist in a vacuum. More likely than not, the problem you’ve uncovered within the target audience is already being solved by another company, either in whole or in part, in the way you imagined or a different way. As part of your assessment, you need to dig into the competition, understand how they work to solve the problem, and identify weaknesses that you can exploit with a potential solution.

Additionally, viable alternatives for solving the problem probably exist. These alternatives serve to create context around the problem that you need to be aware of. Regardless of how inconvenient those alternatives may be to your audiences, potential customers will still pay a switching cost—cognitive or otherwise—when dropping the alternative in favor of your product.

Finally, any solution, no matter the attractiveness of the opportunity, risks falling flat if the organization is incapable of supporting it with resources. As a decision-maker, it’s important to ensure that you’ve framed the opportunity with your organization’s core capabilities in mind. Telling a compelling story about the future opportunity is only a part of the process. The other part is planning a roadmap to capitalize on the opportunity.

Where Do We Go From Here?

The tasks required to conduct and create a compelling opportunity assessment aren’t a secret, but now that you know how to assess market opportunities, you might have even more—but hopefully smarter—questions. As a Punchkick strategist, I’ve conducted dozens of assessments for companies in every industry, so I understand how simple it is to find free resources that will help you conduct an assessment yourself. The opportunity assessments that result in exponential growth, however, utilize industry leading research and product development capabilities like those offered at Punchkick.

What opportunity are you particularly excited about pursuing? How can we help? Reach out and let us know.

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