A guide to market research for Product Managers
A Product Manager has two main jobs: Finding product-market fit and maintaining it.
There are plenty of definitions of product-market fit, but my default would always be Marc Andreesen’s:
Product Managers are well-versed in the product side. We can create a vision, plot out a roadmap, rally a team, conduct customer interviews, refine prototypes, and ship code.
But one area that we’re often not so good at is identifying and analysing the market. And why should we be? That’s the job of our exec team, market research agency, Forrester … right?!
Wrong.
And the results can range from costly to catastrophic.
From building something for a market so small that you’re never going to create a profitable business to not paying attention to trends or regulations that are going to render your solution irrelevant.
Or, as Andy Rachelf puts it:
This article aims to give you some basic tools to help understand ‘the market’ better.
But first, let’s answer a very simple question: ‘What is a market anyway?’.
A market is a group of buyers and sellers that exchange goods or services. It could be as macro as global telecommunications or as niche as gourmet sushi for cats. So long as someone is willing to buy it and someone is ready to sell it, that’s a market.
How can market research help?
Market research aims to answer three fundamental questions:
- What is the size of the opportunity?
- Who are the target customers, and what do they need?
- Who are the main competitors, and what are their strengths and weaknesses?
Answering these questions can help you make more informed decisions about product development, positioning, distribution channels, marketing, pricing, and branding.
There are no perfect answers, and markets can change very quickly, so while doing the research to understand these questions does not guarantee success, it can help to guide you away from bad ideas and give additional confidence to stakeholders and investors that you’re not barking up a wrong tree.
What is market research comprised of?
The three key questions listed above, map neatly to the three key components of market research:
- Market landscape
- Customer research
- Competitor analysis
1. Market landscape 🏞️
Understanding the market landscape involves analysing the various factors that influence the market environment. Things like:
- Supply and demand dynamics: The balance between supply and demand to identify potential gaps or oversaturated areas.
- Demographics and psychographics: Understanding the characteristics and behaviours of the market's population.
- Growth rate and market size: Assessing the market's growth potential and its overall size.
- Market segments: Identifying different segments within the market that can be targeted with tailored strategies.
- Risks and trends: Recognising potential risks and current trends that could impact the market.
Tools like Porter's Five Forces, PESTLE analysis, and TAM, SAM, SOM provide useful prompts to identify blindspots and simple, visual frameworks for communicating the market landscape to a wider group of stakeholders.
Trying to collect this raw data on your own is a mammoth task, so we wouldn’t advise it. There are plenty of organisations out there, like Statista and CB Insights, that specialise in creating market reports, some of which are publicly available, while others you can expect to pay a few thousand pounds for. Pulling from a variety of different sources and supplementing this with qualitative research and/or your own perspectives and experience can help you build up a more nuanced picture of the market landscape.
2. Customer research 🕵️♀️
Customer/user research is crucial for understanding the needs, behaviours, and attitudes of your target audience. There are plenty of tried-and-tested research methods available, each with their own strengths and weaknesses:
- Surveys and interviews: Collecting quantitative and qualitative data directly from customers.
- Focus groups: Gaining insights through group discussions (tread cautiously).
- Observational studies: Observing customers in their natural environment.
- Social listening: Monitoring social media and online forums to understand customer sentiments.
- Diary studies: Getting customers to log daily activities as and when they occur to give contextual insights about behaviours and needs.
- Data analysis: Analysing existing data to identify patterns and trends.
It can often be more effective to start with more quantitative techniques, like surveys and data analysis, to help inform your more qualitative, focused studies. Conducting Jobs to be Done interviews is a great way of identifying customers’ underlying motivations and even helping segment the market in new and revealing ways. Creating JTBD statements, personas, and user journey maps can be useful tools for synthesising your insights, but we always like consolidating our research on a plain old Miro board.
While you can outsource customer/user research, we highly recommend getting involved in as much of this as you can. Meeting customers and hearing their stories firsthand is one of the best ways to build real empathy and understanding, and it can cost as little as a cup of coffee. Get out of the building. Breathe the same air.
3. Competitor analysis ♞
Analysing your competitors' strengths and weaknesses can inform your product strategy by helping you learn about the things they are doing well, what you should copy, and where you can differentiate. The key aspects to analyse are:
- Market share and offerings: Start by mapping out who the key players are and what slice of the pie they each hold. What are their flagship products or services? How do they compare to yours?
- Pricing and distribution: Analyse their pricing strategies – how much do they charge, and through what pricing model? Do they offer tiered pricing, a freemium model, usage-based pricing, or a combination of all of these?
- Brand and marketing: Look at how competitors position themselves. What are their unique selling points? How do they communicate with customers? This can help you carve out your own distinct identity, messaging, and channel mix.
- Customer satisfaction and growth: Dive into customer reviews, ratings, and social media chatter. What do people love or hate about your competitors? Use this intel to improve your own offering.
- Geographic reach: Understanding where your competitors operate can help you identify underserved markets or regions ripe for expansion.
No competitor analysis is ever the same, and depending on whether you’re taking a broader market view to launch a new product or trying to figure out how to deliver a market-leading onboarding journey, you will likely choose to focus on very different aspects.
Like customer research, you can get a long way with competitor analysis by conducting it yourself – though, of course, there are specialist firms out there willing to take your money if you don’t have time. Pricing tends to be the aspect that’s trickier to uncover, especially at the enterprise level – so you may need to ask a friend to endure a few product demos on your behalf before their sales team finally tells you how much it’s going to cost. (A practice we’re not fond of).
Simple tools like SWOT analysis, benchmarking, and strategic group analysis can help you organise your findings and highlight areas where you can outmanoeuvre the competition.
One big risk companies regularly fall into is becoming overly obsessed with their competitors' actions. This "competitor obsession" can lead to innovation paralysis and me-too products, causing them to lose sight of their customers' real needs. While competitor analysis is important, remember that your primary focus should always be on creating unique value for your customers.
Integrating market research into product strategy
Now that you've gathered all this valuable market research, how do you actually use it? Here's a step-by-step guide:
- Synthesise your findings: Look for patterns and insights across all three areas of research. What story does the data tell?
- Identify opportunities: Based on your research, where are the gaps in the market? What unmet needs can your product address?
- Refine your value proposition: Use your insights to sharpen your product's unique selling points. How can you differentiate yourself from competitors?
- Prioritise features: Align your product roadmap with market needs and opportunities. What features will have the biggest impact?
- Inform pricing strategy: Use market data to determine the right price point for your product.
- Guide marketing efforts: Your research should inform your messaging, channel strategy, and target audience.
- Prepare for challenges: Anticipate potential obstacles based on market trends and competitor activities.
- Set realistic goals: Use market size and growth data to set achievable targets for your product.
Remember, market research isn't a one-and-done activity. Make it a habit to regularly revisit and update your research to stay ahead of market changes.
Conclusion and next steps
Good quality and regular market research can help make informed decisions, avoid costly mistakes, and identify opportunities for growth. Here's a quick recap of why it matters:
- It helps you find and maintain product-market fit
- It guides product development and strategy
- It helps you understand and outmanoeuvre competitors
- It allows you to anticipate and adapt to market changes
So, what are your next steps?
- Start small: If you're new to market research, begin with one area that's most relevant to your current challenges.
- Make it a habit: Set aside regular time for market research activities.
- Involve your team: Share insights with your team and encourage them to contribute their observations.
- Use data to tell stories: Present your findings in compelling ways that inspire action.
- Stay curious: The market is always changing, so maintain a learner's mindset.
As Marc Andreessen said, product-market fit is as much about "being in a good market” as it is about having a "good" product. With solid market research skills in your toolkit, you're well on your way to creating products that truly resonate with your target audience and stand out in the marketplace.
Now, go forth and conquer your market!
