Understanding the market is a crucial step in launching a new product. But knowing how to conduct a market assessment is a complicated process. It involves gathering and analyzing information about the new market and competitors and assessing the potential demand for the product.
In this article, we will provide an overview of the process of conducting a market assessment and explain why it is important for the success of a new product.
By the end of this article, you will better understand the steps involved in a market assessment and be equipped with the tools and knowledge to conduct one for your product.
And if you’d like to explore how 10EQS can help you with your next Market Assessment, click the button below to contact us.
A market assessment is gathering and analyzing information about a particular market to determine the feasibility of launching a new product. It involves a comprehensive evaluation of the market environment, including customer needs and preferences, competitive landscape, potential demand, and pricing strategy.
A market assessment is an important part of product development research when launching a new product because it provides critical information about the market landscape, which helps businesses make informed decisions about product development, marketing, and sales. Here are some specific reasons why a market assessment is important:
- Identifying Customer Needs: A market assessment helps businesses understand the needs and preferences of potential customers. Crucial for developing a product that will meet those needs and be successful in the market.
- Evaluating Competition: A market assessment helps businesses understand the competitive landscape and identify potential gaps in the market that the new product can fill. Essential for developing a product that will stand out from competitors and attract customers.
- Assessing Market Demand: A market assessment helps businesses determine the potential demand for a new product for a specific market and factors that may affect demand, such as economic conditions or seasonality. Critical for setting realistic sales and revenue goals.
- Developing a Pricing Strategy: A market assessment helps businesses determine the perceived value of the new product to customers, as well as competitors’ pricing strategies. Essential for developing a pricing strategy that is competitive and profitable.
- Identifying Distribution Channels: A market assessment helps businesses identify the most effective distribution channels for the new product and the efficiency of different distribution options. Important for developing a distribution strategy that maximizes sales and revenue.
Overall, a market assessment is essential for businesses that want to launch a new product successfully. It helps businesses understand the market landscape, identify opportunities and challenges, and make informed decisions.
Now let’s jump into the steps of how to conduct a market assessment for a new product.
Step 1: Define the Target Market
The first step in a market assessment is defining the new product’s target market. This involves identifying the product’s ideal customer and their demographic, geographic, and psychographic characteristics. To define the target market, the following steps should be taken:
This involves conducting market research to understand who the product is designed for and what specific needs it addresses. For example, if the product is new generative AI software for back office automation, target customers may be Human Resource professionals who want to automate performance review analysis.
Market characteristics include the target market’s demographic, geographic, and psychographic characteristics. You’ll need to collect data on the age, gender, income, location, lifestyle, values, and interests of the target market.
For example, the target market for back office automation may be primarily Fortune 1000 Chief People Officers at tech companies with a distributed global workforce. Tech companies might be more likely to adopt automation using generative AI.
This involves a market analysis to estimate the number of potential customers in the target market, their purchasing power, and potential demand for the product. Market sizing can be done through quantitative research combining data from surveys, focus groups, or industry reports.
Use a market segmentation analysis to identify distinct groups of customers with specific needs and preferences. Divide the market into smaller groups based on common characteristics like age, income, or behavior. This can help to identify different target customer needs and preferences and tailor marketing strategies to each group.
For example, back office automation may be marketed differently to B2B tech companies than financial services firms.
By defining the target market in this way, a company can better understand the customer base for the new product and tailor marketing and product development strategies accordingly.
Step 2: Analyze the Competition
The success of a new product can depend heavily on the competition in the market. Therefore, it’s important to analyze the competition thoroughly through primary and secondary market research. Competitive analysis involves benchmarking existing products that compete with the new product, analyzing the strengths and weaknesses of competitors, and identifying gaps in the market that the new product can fill.
The first step in analyzing the competition is identifying existing products that compete with the new product. This can be done through market research and analysis of the specific industry landscape. Identifying direct and indirect competitors and any potential new entrants to the market is important.
Once competitors have been identified, the next step is to analyze their strengths and weaknesses to uncover relevant qualitative data. This can be done through research and analysis of their products, marketing strategies, distribution channels, and customer feedback. You can also gather some relevant data by analyzing online reviews.
Understanding competitors’ strengths and weaknesses can help identify areas where the new product can differentiate itself and provide unique value to customers.
In addition to analyzing competitors, it’s important to conduct research and identify gaps in the market that the new product can fill. This can involve analyzing customer needs and preferences not currently being addressed by existing products.
It can also involve identifying areas where the new product can provide unique benefits or solve problems not addressed by existing products.
Using tools such as Porter’s Five Forces analysis can help to provide a more comprehensive view of the competitive landscape and inform strategic decision-making. This framework helps to identify the market’s competitive forces and assess the industry’s potential profitability.
The five forces include the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitutes, and the intensity of rivalry among competitors. Using Porter’s Five Forces analysis, a company can better understand the competitive landscape and identify potential risks and opportunities.
Evaluating the competition is a critical step in conducting a market assessment. By identifying competitors, analyzing their strengths and weaknesses, and identifying gaps in the market, a company can develop strategies to differentiate the new product and increase its chances of success.
Step 3: Determine Market Demand
Market demand refers to the quantity of a product or service that consumers can buy at a given price and time. Estimating market demand is critical in conducting a market assessment for a new product.
In this section, we will explore the key components of determining market demand, including analysis of market trends and consumer behavior, estimation of demand, identification of factors that affect demand, and conjoint analysis to understand how customers make trade-offs between different product features.
To estimate market demand, it’s important to analyze market trends and consumer behavior related to the product and the market. This can involve looking at data on sales, pricing, and other market indicators and conducting an online survey, focus groups, or other research to understand consumer preferences and behavior.
For example, at 10EQS, we supported a client in analyzing the Emerging Trends in Skin Care & Cosmetics to spot early market trends so that the client could develop products that are on trend and not late to market.
Once market trends and consumer behavior have been analyzed, estimating the potential demand for the new product is possible. This can involve looking at secondary research data on historical sales of similar products and projecting future sales based on expected market growth and other factors.
Many factors can affect demand for a product, including seasonality, economic conditions, and changes in consumer preferences or behavior. It is important to identify these factors and assess their potential impact on demand for the new product.
For example, a highly seasonal product may have lower demand during off-peak times, while a product targeted at a specific demographic may be more sensitive to changes in that group’s preferences or behavior.
Conjoint analysis is a specific research technique to understand how customers make trade-offs between product features. This can be particularly useful for estimating demand for a new product that has not yet been released.
By presenting customers with different combinations of product features and asking them to rate their preferences, conjoint analysis can provide valuable insights into which features are most important to customers and how different combinations of features might affect demand.
Using conjoint analysis to understand customer preferences, it’s possible to develop a more accurate picture of the potential demand for the new product. This information can then inform the product development process and marketing to increase the chances of success in the market.
Step 4: Conduct Customer Research
Customer research is critical in conducting a market assessment for new product research. It involves gathering primary research, such as feedback from potential customers, and analyzing their preferences, opinions, and behaviors related to the product and the market. Companies can develop products and marketing strategies tailored to their target audience by understanding customer needs and preferences.
One way to gather customer feedback is through surveys. Surveys can be conducted online, over the phone, or in person. They can ask customers about their perceptions of the product, buying habits, and overall experience with the market. Surveys can also be used to gather quantitative data that can be analyzed to identify trends and patterns.
One of our specializations at 10EQS is customer research through Voice of Customer (VOC) analysis. VOC analysis involves gathering qualitative research from direct customer feedback on their preferences and opinions about the product and the market.
We conduct VOC analysis by interviewing customers and industry experts. VOC analysis can be especially useful for identifying trends and patterns in customer feedback and gaining insights into how customers perceive the product and the market.
Focus groups are another way to gather customer feedback. A focus group typically brings together customers to discuss their perceptions of the product and the market.
Focus groups can be useful for gathering in-depth feedback from a diverse group of customers. They can also provide insights into how customers interact with each other and perceive the market as a whole.
Customer research is critical in conducting a market analysis for new product research. By gathering feedback from potential customers and analyzing their preferences and opinions, companies can develop products and marketing strategies tailored to their target audience.
Once target customer feedback has been gathered, it must be analyzed to identify patterns, trends, and insights that can inform product development and marketing strategies. This may involve coding and categorizing data, identifying common themes or topics, and summarizing key findings. The analysis should be guided by the research questions or hypotheses developed at the outset of the research.
Step 5: Determine the Pricing Strategy
Determining the pricing strategy for a new product is a critical step in the market assessment process. Pricing strategy can affect the product’s perceived value, demand, and profitability. This section will cover three important steps for determining a pricing strategy.
A. Analyze the Pricing Strategies of Competitors
One way to determine the pricing strategy for a new product is to analyze competitors’ pricing strategies in the market. This can provide valuable insights into what target customers are willing to pay for similar products and how the new product can differentiate itself from competitors.
Key questions to consider include:
- What is the price range for similar products in the market?
- Are competitors using a pricing strategy based on cost, value, or another approach?
- Are there opportunities to price the new product differently from competitors (e.g. lower, higher, or with a different pricing model)?
Another important pricing strategy consideration is the product’s perceived value to the target audience. This involves understanding how customers perceive the benefits and value of the product and what they are willing to pay for it.
Key questions to consider include:
- What product features or benefits are most important to the target audience?
- How does the product compare to competitors regarding quality, performance, or other factors?
- Are there opportunities to increase the product’s perceived value through marketing, branding, or other strategies?
Based on the analysis of competitors and the perceived value of the product, the next step is to select a pricing strategy that is competitive and profitable.
Key factors to consider include:
- The costs of production, distribution, and marketing
- The desired profit margin for the product
- The pricing strategy that is most aligned with the perceived value of the product and the target market’s preferences
Possible pricing strategies include cost-based pricing, value-based pricing, penetration pricing, or skimming pricing, depending on the product and market. Testing and adjusting the pricing strategy over time is important to optimize profitability and customer satisfaction.
Determining the pricing strategy for a new product involves a careful analysis of competitors, the perceived value of the product to the target market, and the selection of a pricing strategy that is competitive and profitable. By taking these steps, product marketers can increase the chances of success for the new product and achieve their desired financial outcomes.
Step 6: Determining Distribution Channels
Once you’ve identified your target market and evaluated your competition, it’s time to think about how you will get your product into the hands of customers. This is where distribution channels come into play.
Distribution channels refer to how products are made available to customers, such as through retail stores, online marketplaces, or direct-to-consumer sales.
Several factors must be considered when determining distribution channels for your new product. Here are some key steps to help you choose the most effective distribution channels:
The first step in determining distribution channels is identifying which channels will be the most effective for your product. You can learn from your competitors and voice of customer analysis.
Your distribution channels will depend on factors such as the nature of the product, the target market, and the competition.
For example, suppose you are selling a luxury product to high-end consumers. In that case, you may want to focus on distribution channels such as high-end boutiques or online marketplaces that cater to upscale customers.
On the other hand, if you are selling a low-cost commodity product, you may want to focus on mass-market retailers or online marketplaces that offer low prices and high volume.
Once you have identified potential distribution channels, the next step is to analyze the cost and efficiency of each channel. This will involve considering factors such as shipping and handling costs, marketing costs, and the overall cost of sales.
You’ll also need to consider each channel’s potential revenue and profit margins.
For example, selling through a third-party retailer may result in lower profit margins due to fees and commissions. Still, it may also offer lower marketing costs and greater exposure to new customers.
Finally, it’s important to understand the customer journey and how different distribution channels fit into that journey. Customer journey mapping involves identifying the steps customers take in learning about, evaluating, and purchasing products.
By mapping out the customer journey, you can identify which distribution channels are most likely to reach customers at different journey stages.
For example, suppose your product is one that customers need to see and touch before making a purchase decision. In that case, you may want to focus on distribution channels that offer in-person product demonstrations or samples.
By taking these steps to determine distribution channels, you can ensure that your product reaches the right customers. You may even find potential channel partners to help you distribute your product. Remember to monitor and adjust your distribution strategy to stay competitive.
Step 7: Conduct a SWOT Analysis
A SWOT analysis is crucial for a market assessment of a new product. It involves analyzing the internal and external factors that affect the success of the product or company. Here are some key steps to conducting a SWOT analysis:
- Identify the key strengths of the product and company, such as unique features, strong brand recognition, or a talented team
- Identify the key weaknesses of the product and company, such as poor distribution channels, limited resources, or a lack of experience in the market
- Analyze how the strengths and weaknesses of the product and company will affect the ability to succeed in the market
- Identify the key opportunities in the market, such as growing demand for the product or a lack of competitors in a particular market segment
- Identify the key threats in the market, such as new competitors entering the market, changes in consumer behavior, or changes in regulations that may affect the product
- Analyze how the opportunities and threats in the market will affect the ability to succeed in the market
C. Develop Perceptual Mapping to Visually Represent Customer Perceptions of Different Products in the Market
- Develop a visual representation of how customers perceive the product and its competitors
- Identify key dimensions that customers use to evaluate the products in the market, such as quality, price, or features
- Analyze how the product compares to competitors on each dimension and identify potential areas for improvement
By conducting a SWOT analysis, market assessors can better understand the internal and external factors affecting the product’s success in the market. This information can inform product development and marketing efforts that capitalize on strengths and opportunities while mitigating weaknesses and threats.
Ultimately, the success of a new product in the market depends on various factors, including its features, target market, pricing, distribution channels, and marketing strategy.
By conducting a thorough market assessment incorporating a SWOT analysis, companies can increase their chances of success and make informed business decisions about bringing their product to market.
Step 8: Develop A Market Assessment Report
After completing a comprehensive market assessment for a new product, developing a report summarizing the key findings and recommendations is essential. This report serves as a guide for decision-making and provides actionable insights that can inform marketing and product development strategies.
Here are some key considerations to keep in mind when developing a market assessment report:
The first step in creating a market assessment report is to summarize the key findings and recommendations clearly and concisely. This should include information on the target market, competition, market demand, pricing strategy, distribution channels, and any other relevant information gathered during the assessment process.
By presenting the information in an organized and easily digestible format, stakeholders can quickly understand the most important takeaways from the assessment.
To ensure that the report is well-supported and credible, it’s important to include supporting data and analysis. This can include charts, graphs, or other visual aids to help illustrate trends and patterns, as well as detailed explanations of the methodologies used to gather and analyze the data.
By providing this level of detail, stakeholders can better understand the basis for the conclusions and recommendations presented in the report.
The ultimate goal of a market assessment report is to provide actionable insights that can inform decision-making. As such, it’s important to clearly articulate the implications of the findings and recommendations and provide specific guidance on implementing them.
For example, the report might suggest specific product features, marketing campaigns, distribution channels, or other tactics to increase the chances of success in the market. By providing concrete recommendations, stakeholders can more easily translate the insights from the market assessment into tangible action items.
Developing a market assessment report involves summarizing key findings and recommendations, including supporting data and analysis, and providing actionable insights for decision-making.
By following these guidelines, companies can make more informed decisions and increase their chances of success in launching a new product.
Conclusion: How To Conduct A Market Assessment
Launching a successful product requires a comprehensive market assessment. Following the steps outlined in this article will give you the necessary market research tools and knowledge to conduct market research and make informed decisions about your product’s target market, competition, demand, pricing strategy, and distribution channels.
Conducting a thorough market assessment is crucial to the new product development process. Understanding the market, competition, and customer needs will enable informed decision-making on product development, marketing, and pricing strategies.
Remember that a comprehensive market assessment is an investment in the long-term success of your product and company.
If you’re interested in learning how 10EQS can help you with your Market Assessment, click the button below to get in touch.