How to Determine Market Viability for a Product or Service
Product due diligence is the approach used to evaluate the viability of a given product or service. Common tactics include target market research, industry analysis and competitor analysis. It is also important to assess your internal competencies, along with potential threats, before developing a solution.
Market research is an evaluation of the potential size and characteristics of consumers or companies that might buy your product. The size of the market is the total number of potential customers under-served or not served at all by existing solutions. Identifying the characteristics and buying habits of target markets helps paint the picture of the potential benefits buyers seek. By combining the size of the market with estimates for your reach and frequency of purchases, you can develop a revenue forecast. Projecting revenue allows you to decide whether you will make enough to cover costs and earn a profit.
An industry analysis is a review of the current scope of an industry and the types of goods being offered. A brand-new innovation means you could have first-mover advantages in a new industry. This advantage allows you to appeal to the total potential market. In an established industry, it is important to analyze the number of existing competitors, the solutions they offer and their price points.
Competitor analysis involves a comparison of your product or service features, strengths and weaknesses relative to those offered by competitors. Businesses often develop spreadsheets to lay out each major competitor's offerings. Before entering a market, you need confidence that your intended solution offers clear advantages over existing solutions. Your advantages could include superior quality, elite service, lower prices, patented features or natural materials. Such advantages are necessary to establish a market position and attract customers seeking your distinct benefits.
A SWOT analysis is used to assess your internal competencies as well as external factors that could impact your success. SWOT is an acronym for strengths, weaknesses, opportunities and threats. Your strengths provide the ammunition to develop, promote and deliver a quality solution that is distinct from competing brands. Your weaknesses, or vulnerabilities, offer genuine insight into impediments to success. You can improve on weaknesses or accept them as inherent to your business model. In an honest assessment, you may decide your weaknesses are too great to enter the market. Analyzing opportunities and threats helps you prepare for market entry with a clear vision of how to make money, and how to protect against potential pitfalls.