How to conduct market analysis - a roadmap for startups. Presented at Software Development Forum March 31, 2009. Steve Tennant, Tennant Consulting, www.tennantconsulting.com. Tip of the hat to Scott Schwertly from Ethos3 Communications for "Meet ____" presentation format.
15. Assessing Susan’s Market Opportunity
• Will customers
leap at the
Compelling
Unmet
chance to own
Need
your solution?
• Can you easily
explain how
Explainable
Uniqueness
you’re
different?
Revenue
Potential
• How large is
“the pie”, and
Market Size
and Growth
how fast is it
growing?
• With how
many others
Competition
must you
share the pie?
16. Why do new products fail?
Primary Causes of Product Failure
Inadequate Market Analysis
Product Problems or Defects
Lack of Effective Marketing Effort
Higher Costs Than Anticipated
Competitive Strength or Reaction
Poor Timing of Introduction
Technical or Production Problems
All Other Causes
0% 10% 20% 50%
30% 40%
Percentage of Companies Citing (n=233)
Source: Conference Board as cited by R.G. Cooper, Winning at New Products
17. How Susan Can Save Time and Money
Without
With Market Analysis
Market Analysis
(Best case)
Money Saved
Difference in
% of
Payback
cash Breakeven
flow 3
1 2
First Customer
First Customer
Failed Project
(50-80% probability)
Time (Years)
17
19. Stuff Susan Might Do
Market Analysis
Market Research
Market Sizing Focus
Groups
Opportunity
Interviews
Assessment
Competitive Surveys
Analysis
20. Best Practice
When Should Susan Do It?
Today
Idea Screening
Product
“Quick & Dirty” Market Analysis Concept Review
Development
Preliminary Technical Assessment Process
Detailed Market Validation
Business Case Review
Business & Financial Plan
Post
Product/Service Development
Development
Review
In-House Tests
Customer Tests
Trial Sell
Trial/Pilot Production
Launch
Pre-Launch Business Analysis Decision
Production Startup
Launch
Source: Robert Cooper, Winning at New Products
21. Do It Multiple Times
Friends & Family First product
Version –
3 customers
Angel Round Second product
Version –
10 customers
Third product
Series A
Version –
50 customers
22. The roadmap:
A three stage, iterative process
Two days
1
Two weeks
2
Two months
3
24. Idea Screening:
1
1.1 Define Your Business Concept
- Who are your customers
- What are their important problems?
- How do you solve their problem
better than anyone else?
25. 1
Idea Screening:
1.2 Estimate the market size
37. “Quick and Dirty” Market Analysis
2
What you can do
from your desk, a
trip to the library,
and the coffee shop
38. “Quick and Dirty” Market Analysis
2
Free article: Ten steps to increase your market success.
- Clarify your research objectives
- Define your ideal customer and possible market segments.
- Identify how customers solve the problem today.
- Size the market – demand and supply.
- Identify market, technical, industry, societal and regulatory trends that
affect spending on your category of solution.
- Identify what you imagine to be your customer’s selection criteria and
buying process.
- Talk to 3-5 “friendlies” to validate your customer’s goals, problems and
evaluation criteria, how they would buy, and alternative solutions.
- Identify your customers top three goals, challenges, and pain points and
their relationship to your solution.
- Write down the top three reasons you believe customers should buy your
solution instead of how they do it today or competing solutions.
- Define your sales model.
39. 2
Bottoms Up
A * B * C = Market Size
Where
A = # of customers
B = average transaction size
C = # of transactions/customer/year
41. 2
Terminology
• Total Available Market (TAM) = entire universe
that could ever buy your product – for your
niche, anywhere
• Addressable Market = revenue represented by
the market segments that you intend to sell
and service in the time covered by your
business plan, or initial investment
42. Estimate EasyERP TAM – Bottoms Up
Segment 1 – Enterprise
Segment 2 – Medium Business
CAGR = Compound Annual Growth Rate
46. “EasyERP is the first
system specifically
designed to be easy to
install, easy to change
and easy to use…”
47. Find a Proven Sales Model
Unprofitable:
Enterprise
You lose
Selling
Investment in each
transaction by Your
Company
Consultative
Selling
Poor service:
Transactional
You lose
Selling
Investment in each transaction
by Customer
Recommended reading: Neil Rackham, Rethinking the Sales Force
48. “With an average
transaction size of
$80,000, EasyERP will
use an inside telesales
and online sales
model…”
49. Before we build a better mousetrap,
we need to find out if there are any
mice out there.”
- Yogi Berra
51. Detailed Market Validation
3
Conduct 20-30 interviews with representative customers.
What are their needs? Will they buy?
Our new
What’s frustrating
employees run
about your ERP
screaming they
system?
hate it so much.
52. Sample Interview Questions
• What are your top 3 goals? Challenges?
• Typical day in your life?
• How do you solve this problem today?
• Who would you trust for advice?
• How would you want to buy it?
• What would you expect to pay?
• What services would come with it?
• If you had three choices in front of you, what criteria
would you use to evaluate them?
• What did you expect to talk about that we haven’t?
53. Case Study – SaaS B2B Software
Target Account List Contacted Interviewed Results
500 75 26
• Prioritized features
• Feedback on
prototypes of next
five products
• Development
partners & contacts
• Company
exposure/visibility
• Management team
alignment
• Customer-centric,
problem-driven
messaging
• White papers
summarizing key
business issues &
how to address
• & more
63. Tennant Consulting Services
Strategy Capital Products Marketing Alliances
Executive Team Financing Product Mgmt Marketing Alliance
Facilitation Assessment Assessment Assessment Assessment
Market Needs Positioning &
Vision & Mission Business Plan Alliance Strategy
Interviews Messaging
Market Trends & Investor Win/Loss Website Strategy
Alliance Programs
Analysis Presentation Analysis & Content
Competitive Product Business Marketing Plan &
Investor Meetings Alliance Marketing
Analysis Plan Budget
Opportunity Due Diligence Product PR & Thought Alliance Partner
Assessment Support Messaging Leadership Recruiting
Strategy Term Sheet Trade Shows & Relationship
Beta Customers
Development Support Events Rescue/Facilitation
Strategy Execution Board Sales & Customer Alliance Scorecard
Launch
& Metrics Communications Conferences & Metrics
Project Management
Leadership Feedback & Coaching
Organization Design, Staff Recruiting & Development
Collaborative Operating System
64. Tennant Consulting Services
Strategy Capital Products Marketing Alliances
Executive Team Financing Product Mgmt Marketing Alliance
Facilitation Assessment Assessment Assessment Assessment
Market Needs Positioning &
Vision & Mission Business Plan Alliance Strategy
Interviews Messaging
Market Trends & Investor Win/Loss Website Strategy
Alliance Programs
Analysis Presentation Analysis & Content
Competitive Product Business Marketing Plan &
Investor Meetings Alliance Marketing
Analysis Plan Budget
Opportunity Due Diligence Product PR & Thought Alliance Partner
Assessment Support Messaging Leadership Recruiting
Strategy Term Sheet Trade Shows & Relationship
Beta Customers
Development Support Events Rescue/Facilitation
Strategy Execution Board Sales & Customer Alliance Scorecard
Launch
& Metrics Communications Conferences & Metrics
Project Management
Leadership Feedback & Coaching
Organization Design, Staff Recruiting & Development
Collaborative Operating System
65. Drop me a business card for
freebies and to
learn more
Copy of slides
Business Concept Questionnaire
22-Page Article – How to Conduct “Quick & Dirty”
Market Analysis
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Email me at steve@tennantconsulting.com
Call me at (925) 258-9100