You have a hypothesis: There is a problem you want to solve, and you’re pretty certain you can envision a solution that provides more value than everything already on the market.
Like a scientist, you need to test that hypothesis to ensure you’re on the path for success. In this case, you’re doing market opportunity research rather than an experiment.
Market opportunity research identifies if there is a market, if there is a need, and if it will be profitable.
Look Before You Leap
The best time to conduct market opportunity research is when you’re entering a new market and you haven’t had any experience selling to that audience yet.
Doing this research early on will tell you if you should spend the time and money building out your solution. You’ll find the answers through asking the following key intelligence questions:
- Is this market big enough to be ‘worth it’?
- Who should you pick for your ideal customer profile (ICP)?
- Do these customers agree that this solution solves their problem?
- What would solving this problem do for their business?
- How many potential customers are there?
- What would their budget be for this kind of solution?
- Do they feel there are other vendors who already solve this problem?
- What proof points would a new vendor need to provide to make the short list?
- What gaps in the space are ripe for seizing?
Market Opportunity Research: Applied
Once you’ve explored these critical questions, you’ll be equipped with the knowledge needed to make your next move. Backed with your research, you can decide if it makes sense to enter this market space or remove yourself from it.
A small business may decide that going head-to-head with an enterprise who already dominates the market might not be the best approach. Perhaps they decide to step back and find a niche.
Conversely, a large enterprise who sees an emerging startup develop a competitive product may decide that the threat is not large enough to warrant doing anything at all.
Sometimes It’s Better Not to Play
In the classic movie Wargames, NORAD’s computer decides that nuking the world is a bad option, and the best move is “not to play.”
One of our enterprise clients recently faced this same decision. They wondered if they should play a game they weren’t sure was worth playing, or simply walk away. Instead of using guesswork, we were able to give them an objective viewpoint through market opportunity research.
Our research showed that a competitor’s market was full of price-conscious buyers who were not able or willing to pay more than the startup would charge. The startup was also selling a barebones version that addressed only the most important of a buyer’s Jobs-To-Be-Done (JTBD). Additionally, our enterprise client couldn’t build a solution that would be profitable at the price point the competitor was offering.
We suggested that our client simply ignore this small competitor because the market wasn’t a smart one for them to address today.
“It was a perfect example of them spending a relatively small amount on research instead of spending likely millions of dollars going after this market where they would never get their money back.”—Scott Swigart, co-founder and Chief Research Officer, Cascade Insights.
When is it Time to Stay in the Game?
Clearly, attempting to sell a product without a market or to the wrong market is a costly mistake. As Kenny Rogers once said, you need to know “when to hold them and when to fold them.”
However, if your bet is correct, your company could become an amazing success story, like Salesforce.
Salesforce began with a vision to bring a CRM service to the masses and make it available 24/7 via the cloud during a time when there was no cloud CRM market.
No one thought much of the startup at first, especially as this idea was nothing like how the traditional, on-prem CRMs operated at the time. In 1999, the year of Salesforce’s founding, Sibiel, who dominated CRM sales at that time, said that there was “no-way” that big companies like General Motors would use Salesforce.
“At this point, Salesforce.com is nothing more than an ant at Siebel’s picnic. With 150 customers to Siebel’s 1,000, it can hardly be considered a threat yet. Web applications are a compelling story for small startups. But for big companies like General Motors and Microsoft–no way,” says David Schmaier, Siebel’s senior vice-president for products. “To be sure, Salesforce.com isn’t for big corporate customers that want all of Siebel’s market-analysis features.”
This isn’t exactly how the story turned out. By 2014, articles about Siebel systems had headlines such as “Lessons Learned from the Death of a Tech Giant.” In contrast to Siebel, year after year, Salesforce grew its customer base and acquired other companies to better serve those customers, eventually becoming the giant it is today.
Is it Worth a Nickel?
So, at what point is a solution valuable enough for businesses to make that purchase?
Is it user-friendly? How much easier will it be for people to do their jobs if they go with your solution? Does it integrate well with existing systems the company already has in place?
At face value, a solution that increases employee efficiency sounds worth investing in. But how much of an increase is being offered? Will it save millions of dollars in productivity time or just a few nickels?
No one is going to buy a solution that provides only a slight advantage over what they’re already using.
Say you’ve created a new SaaS app that essentially competes with a program like Excel. What features will make your app stand out and force legions of Excel users to switch? If you don’t know, it’s time to do some research.
Slay Uncertainty with Market Opportunity Research
Market opportunity research isn’t just about the decisions you say “no” to; it’s also about leaving you time to say “yes” to others.
“You’re not just saving money through marketing opportunity research; you also prevent your company from missing the boat that other people are going to get on. So you always want to be doing market opportunity research.”—Philippe Boutros, Director & Chief of Staff, Cascade Insights
The next time you have a product planning meeting ask yourself, “How do we know what we know?” If those insights are not based on research, give us a call. You’ll either save money or end up with a whole lot more. Either way, it’s a win.
With 15 years of experience in the B2B technology sector, Cascade Insights can help you define what your market opportunities are and where to find them. Learn more about our market research services here.
Special thanks to Scott Swigart, Cascade Insights President & CTO, and Philippe Boutros, Cascade Insights Director & Chief of Staff, for advising on this piece.