6-minute read
This article shares a first-hand account of conducting market analysis and selecting market analysis frameworks that suit your unique needs.
Market analysis is essential to generate insights from market research. However, choosing the right market analysis framework for your product can be difficult. In this article, we explore the characteristics, benefits, and drawbacks of SWOT analysis and the Six Forces Model and share what not to do when you take on market analysis.
Read on, or use the links below to jump to the section that most interests you:
What is Market Analysis?
Market analysis is a detailed assessment of a product’s competitive landscape and target market. It helps you understand what tools or features could help a product stand out, how that product might support your business goals, and how to position a product within a larger marketplace.
Market analysis differs from market research in that research is the process of gathering information about the market and landscape. Market analysis is the final deliverable from analyzing the research and drawing conclusions. While product managers are often responsible for conducting market research, they may share responsibilities with product marketers.
Common Market Analysis Frameworks
Although market analysis is essential to creating meaningful product strategies, you should consider the best market analysis framework for your product. I have experience using different market analysis frameworks and have found that some fit specific research questions better than others. Here are two common approaches (plus a recommendation on what not to do when you conduct market research).
Approach #1: SWOT Analysis
Organizations use SWOT analysis to assess a product’s competitive landscape. This ‘quick and dirty’ planning method is great for whiteboarding a realistic picture of your product’s market position. It can also help you anticipate where your competition may head next.
I use SWOT analysis to generate and assess the assets and liabilities of a product. So, let’s say I have a new product. I would look at our product and the top competitors and ask:
- Strengths: What are the product strengths that differentiate it from the competition? What organizational strengths do we bring to the table?
- Weaknesses: Where are features lacking or underdeveloped? Are there alliances or organizational weaknesses that erode market share?
- Opportunities: Where can we differentiate the product? What strategies can we implement to gain greater market share?
- Threats: How could this product fail? What factors in the market or the roadmap can bring it to obsolescence or lose market share?
Benefits of SWOT Analysis: SWOTs are simple and easy to understand, making them accessible to many teams and stakeholders, which can encourage discussion and collaboration during the market analysis process. They also look at the internal and external factors influencing a product’s success, which can help focus on strategic opportunities.
Drawbacks to SWOT Analysis: SWOT’s simplicity is also a drawback because it can oversimplify complex issues and lead to incomplete analyses. It also relies on the perceptions of the people conducting it, which could be biased and represent a single moment in time. Finally, SWOT provides a way of looking at all the factors that might affect a product but does not provide a framework for weighing them.
In my opinion, SWOT primarily focuses on your product and the competitors around it. This framework looks too closely at how an organization can meet objectives set for a product and narrowly focuses on your product compared to the competition. Often, product teams seek market research to determine the goals themselves, and this is where it can be limited. Organizations might look to product teams to choose or recommend the objectives. SWOT will not help you set the product objectives because it assumes you have already set them.
Approach #2: The Six Forces Model
The Six Forces Model considers six key forces shaping a business strategy. This framework goes deeper into the market dynamics of the area where you are investigating a product. Each force evaluates the competitive intensity of a market. If there is intense competition, potential buyers will be strongly interested in purchasing a product and business model(s) that ensure companies make a profit to meet this demand.
The Six Forces model assesses the following factors:
- Competition for your product.
- New Entrants who are (or who could) compete in your space. New entrants are often present with new business models.
- End Users/Buyers and their bargaining power on influencing price, integration, and concentration.
- Suppliers of raw materials, components and services for your product and their bargaining power on business strategy.
- Substitute products and those factors that influence it, such as cost of the product, perceived value, cost to switch, etc).
- Complementary products or services within a given market
Additional forces not included in the model but that you should consider include government and industry partnerships, public sentiment, and external factors such as business cycles. These have a lesser impact than the six outlined in the model but may warrant additional consideration depending on your circumstances.
Benefits of the Six Forces Model: The most significant benefit is its holistic view of the competitive landscape and the factors that might influence a product. The holistic view helps teams pinpoint competitive advantages and position the product strategically within the market.
Drawbacks of the Six Forces Model: This model is complex, and to accurately represent each of the six forces, the team conducting the analysis should gather extensive data. Some of the forces may overlap, which could cause redundancy in the analysis. Like SWOT analyses, this model represents a moment frozen in time and may not account for changing market or industry conditions.
This framework investigates what is out there in an industry for a potential product. It’s a great whiteboard exercise that lets you reference the dynamics shaping the product strategy. However, it doesn’t see the relationships in how buyers, suppliers, and competitors work together to influence the business environment. In technology and software, for example, a myriad of strategic alliances may cause a buyer to switch — not because of your product feature set, but because your product “plays well with others” with easy integrations.
What Not to Do
A common approach often backfires. I call this the “Dig around and find something good” approach. It typically begins when an executive asks for market research around a product. The product manager says, “Okay, let me see what I can come up with.” The product manager then spends 3-4 days digging up any research they can find on market trends, customer preferences, and the competitive landscape. I do not recommend this. The finished report is haphazard and lacks deep insights that market analysis needs to guide product development.
Market research and analysis should inform the product’s strategic positioning within the market and guide the product roadmap. With the correct framework for your product and your unique company goals, I’m confident that you can produce an insightful analysis that drives product strategy.
