Evaluating market problems helps us understand the nuances of customers’ needs, desires, and goals. By understanding market problems, we can identify market opportunities. A market opportunity is a gap in the market that we can fill with products and services.
To create products that address customers’ needs, it is essential to conduct market research, validate a market problem, and focus on a market opportunity that solves that problem.
What is a market problem?
Market problems are the challenges, frustrations, and unmet needs of your market. When considering market problems, it is important to expand the definition of “market” to include your existing customers, your target audience, and broader audiences. That could include a larger base of potential customers, including your competitors’ customers, non-customers who are searching for solutions, and non-customers who are not searching for solutions.
Market problems are observable and measurable, which means you can identify them through qualitative and quantitative research. Qualitative research methods could include NIHITO interviews with customers or focus groups. Quantitative research methods could include customer satisfaction scores over time, sales data, and other trackable metrics that evaluate product performance.
Customers buy products in the hope that they will solve market problems. If a problem frustrates customers and has a cost to the customer (such as financial losses or demands on personnel bandwidth, or other factors), customers will likely value a solution.
What is a market opportunity?
A market opportunity is a situation where a company can address a market problem before its competitors do.
Market opportunities begin as market problems. By conducting research, you can understand the needs and desires of your target market segments. Gathering quantitative and qualitative research about their experiences helps you pinpoint market problems.
Turning a market problem into a market opportunity involves 3 key steps. First, you should conduct market research to identify the qualitative and quantitative importance of a market problem. Second, you should validate a market problem to confirm that the problem is pervasive and warrants a solution. Finally, evaluate if a market problem is a true market opportunity for your company.
Conduct market research to find market problems
Evaluating market problems often involves qualitative research. We want to understand the customers’ needs, goals, and the context of their situations. When conducting market research, you should talk to audiences that are representative of your core customers. Additionally, use appropriate methodologies to gather information. That includes asking the right questions and carefully interpreting the answers.
Engage in market discovery
When starting market discovery, spend time with new and existing customers. This valuable customer interaction supports product development and builds customer relationships. This interaction is essential to gather input for enhancing current offerings, fostering loyalty, and maintaining revenue streams. Additionally, gathering feedback from new customers helps you uncover a new market opportunity or expand into adjacent markets.
Aim to solve new market problems
Don’t just chase competitors! Competitors may introduce features ahead of your company. When building products, you may need to respond to those features. Instead of solely engaging in a defensive strategy, we should gather market data to identify market problems that have not yet been solved. This approach allows us to focus on creating innovative new solutions.
Grow long-term revenue
Any market research initiative should aim to grow long-term revenue. With long-term revenue goals in mind, your efforts are more likely to align with a sustainable product development and corporate revenue strategy. This allows for careful research and validation of market problems and market opportunities. This also supports a longer lead time for product development.
Validate market problems
Market Validation is the process of verifying that a market problem found during market discovery is worth pursuing.
Our objective in this step is to confirm that we can solve a new problem that does not already have solutions in the market. If we are relying on a new opportunity to deliver significant results, we want to avoid the mistake of creating an already-known feature.
What is market validation?
Market validation helps product professionals identify market problems with high importance to the market, but low satisfaction with solutions for that problem.
When we validate market problems, we are looking for where problems sit in the matrix of satisfaction with existing solutions (on a scale from low to high) and the importance of the problem to the customer (on a scale from low to high).
Balancing importance and satisfaction
When a market problem is appropriately served, the market’s level of satisfaction with solutions rises or falls in line with the importance of the issue. For example, An issue with high importance should have a highly satisfying solution. No additional solutions are needed here, and therefore there is no new market opportunity.
A market problem is overserved if the issue is of low importance, but satisfaction levels are high. Again, there is no new market opportunity.
However, a market problem is underserved when the issue is highly important to the market but satisfaction levels are low. This indicates that existing solutions don’t solve the problem, or there are no solutions in place. New solutions are needed, and there is a market opportunity that your company could address.
Pinpoint Your Market Opportunity
Once you identify a high-importance, low-satisfaction market problem, you can evaluate the feasibility of your company providing a solution.
The Market Validation step focuses on two variables: importance and satisfaction. Now, we are looking at importance and satisfaction in relation to a third variable, feasibility. Feasibility looks at whether it is possible and realistic for your company to develop a solution. This may include technical feasibility, which is whether or not the solution can realistically be built by engineers. It may also include market feasibility. Market feasibility weighs your business structure, goals, personnel, and communication practices against the proposed solution. Essentially, can your organization feasibly bring this solution to market and sell it successfully?
The chart left helps us understand when a market problem becomes a market opportunity. This takes the variables of importance and success, which we evaluated in Market Validation. This introduces the feasibility variable. When we combine high feasibility with high importance and low satisfaction, we see an opportunity for a successful product to solve that market problem. This becomes a market opportunity.
Moving from Market Problem to Market Opportunity
Market problems may have existing solutions, or there may not be solutions available in the market. When you identify a problem that is important to the market, has a low level of satisfaction with current solutions, and is feasible for your company to solve, leaving the problem unsolved may be your biggest threat.
Market problems become market opportunities when importance and feasibility are high, but satisfaction is low. This means your company can provide a satisfying solution to an important problem.