mer can use it to investigate all the key aspects of a new prod-uct’s market potential; the latter can use it to evaluate theirsubordinates’ work. The methodology, if used the right way,can help companies avoid the aforementioned pitfalls.The individual elements in the suggested market assess-ment framework are nothing new (see Exhibit 1). What might be new, however, are identification of all major market-relatedfactors that affect demand for a new product, categorization of these factors within a systematic framework, and a step-by-step process that is easy to follow: (1) define target segmentand needs, (2) analyze relative value, and (3) evaluate food-chain and ecosystem risks.
Defining Target and Needs
With rare exceptions, a particular new product serves onlya particular market segment or niche. This is especially true inthe consumer-technology market. If a new product to be intro-duced simply targets “everybody,” then it will most likelyhave a tough road ahead—because different segments andniches have different needs. There is a direct correlation between clarity of market-segment definition and ability tomeet target customers’ specific needs. Not surprisingly, thephenomenon of “shoot and aim” can explain why so manynew products fail.Defining the target market segment entails a detailedanalysis of key segment characteristics such as size, demo-graphics, and purchasing behavior. Without a clear under-standing of the target segment, it will be difficult to identifythe needs that a new product can meet.Associating a generic need with a product is easy, and itcan mislead companies into believing that their new productmeets target customers’ needs. To avoid that pitfall, compa-nies can ask a simple question: What, exactly, is the problemthat the new product solves?Take the failed WebTV (a set-top box that consumers connectto their television sets, which allows dial-up Internet connec-tion), for example. Consumers with a personal computer (PC)at home do not need it for Internet access. WebTV does allownon-PC households to access the Internet; unfortunately, theamount of non-PC households with such a need is very small.Moreover, WebTV cannot address that need well because of poor display of Web content on a standard-definition TV.Even if the specific need for a new product is identified ordefined, companies must assess the strength of that need, asdifferent strength levels mean different market sizes. In gener-al, two variables influence the relative strength of the need fora product: cognizance and perceived importance.
This determines to what extent target cus-tomers are aware of a particular need. There are two levels:explicit needs and implicit needs. Explicit needs are well-recog-nized and can be clearly articulated. They normally indicate ahigh level of need strength. Only new products with meaning-ful differentiation (to be discussed next) can turn these needsinto corresponding market demand. Implicit needs, on theother hand, are not well-recognized or clearly articulated. Theytypically represent a new market that takes time, resources,and market education to develop.
Depending on how strong the per-ceived importance of a particular need is, products meeting aparticular need can fit into three categories: must-have, nice-to-have, and can-live-without. Must-have products meet theneeds with the highest level of perceived importance and havethe broadest market reach. Nice-to-have products addressless-important needs and therefore have lower marketdemand. Can-live-without products generally have the lowestmarket-penetration rate.Although measuring need strength can be difficult andsubjective, it is a critical element of market analysis. Acom-mon method of need-strength assessment is conducting aquantitative survey to ask consumers their interest level ina particular new product or service. The challenge, howev-er, is that different survey designs can yield significantlydifferent results even if the same topic is addressed. Thus,as mentioned, understanding methodologies used andassumptions made is vital to appropriate interpretation of survey results.One example of different survey results on the sametopic is a study on consumers’ interest in watching videoon mobile devices. Asurvey by RBC Capital Marketsshows that only 24% are interested, whereas a study byThe Diffusion Group shows that 32% are interested. Thedelta can be attributed to differences in measurement scales(true/false versus a 7-point scale) and age groups of sur-vey respondents (ages 21-65 versus ages 15-50). (Read “TheAppeal of Mobile Video: Reading Between the Lines”under the TDG Opinions section at www.tdgresearch.com.)Regardless of which is right (or closer to being correct),consumer interest is only one variable; other factors also
MM September/October 2007
Framework for market assessment
Needs of targetmarket segment
•What is the targetmarket segment andits size?•What are the targetcustomers’ needs thatthe new product canmeet?•What is the strength ofsuch needs?•What are the alterna-tives to the newproduct?•How does the newproduct compare withits alternatives?•How much are targetcustomers willingto pay?•Are there risks in thenew product’s foodchain?•What ecosystemdependencies does thenew product have?•Will the ecosystemdependencies supportthe new product?
Relative valuefor the moneyFood-chain andecosystem factors
Note: Customers are those that make purchase decisions (in the case of business-to-business and business-to-consumer). Customers might be different from end users in the case of business-to-business-to-consumer.
PassPassStep No. 3Step No. 2Step No. 1