How To Identify Your Market & Size Up Competitors

If you are an ambitious entrepreneur with a promising product, you probably can’t wait to show it to potential customers. But before you go into “sales mode,” you might want to sit down at your desk, take a look at your value proposition and do some research.
I explained how to develop a compelling value proposition. This up-front evaluation of your product is the first in a series of exercises to assess your market opportunities. It ensures you are clear about your value to potential customers before you explore the market in detail.
At NorTech, we suggest our cluster companies then move on to in-house research to help guide their market-related decisions. In-house, or secondary research, can usually be executed from your desk – before meeting face-to-face with target customers.

In-house research is a targeted, three-step process to assess the market, identify your customer base and size up the competition. It can only provide hypothetical conclusions, which field research will either confirm or change. But, at the same time, you need to do your homework before you can conduct voice-of-the-customer interviews.
“In-house research provides pieces of the market opportunity assessment puzzle,” says Nick Bush of Bush Consulting Group, “but the key is having a framework to discern which of them are edge pieces, center pieces and corners. A sound approach can do this, allowing insight into how all the pieces fit together.”
Step 1: Market Assessment
The first questions you are trying to answer will identify market size and focus areas and indicate the necessary scale and timing of your investments: How big is the overall market today? How rapidly is it growing? And what segments are most interesting?
It is important to distinguish between the addressable and available markets. The addressable market is the total revenue opportunity for your product or service. The available market is the portion of the addressable market for which you can realistically compete. This is based on many factors, including geography, resources, capacity constraints, etc.
Once you are clear about this distinction you can begin to collect data to size the addressable market. Much of this can be done online. Sources include market studies, journals and government reports. Be aware that you will collect conflicting information and finding relevant and accurate data can feel a bit like detective work. Be critical in your evaluation.

The next step is to quantify and segment the market. One method is to create spreadsheets for each market segment and list variables such as number of installments or shipments, pricing, net revenues and investments.
The next step is to use the variables you have collected to estimate the available market. Essentially, you are determining which market segments you should pursue. Your product, for example, might be able to treat drinking water across the world and you have your eyes set on the European market. But several countries in Europe have laws limiting foreign content in municipal water systems, thus shrinking the size of your available market.
Step 2: Customer Identification & Targeting
The goal of this step is to identify and prioritize the customers that will accelerate your commercialization efforts. Some customers are more likely to buy than others and their timing in adopting new products can be dramatically different. In addition, the willingness of certain market leaders to buy your product can give it a boost in the broader market.
Start by defining the customer types along the value chain in your target markets, from sub-component manufacturers to OEMs to end users. In addition, there can be “indirect” customers who have influence over the adoption of your product. These include industrial design firms and standards bodies as well as companies that offer goods or services that are compatible with yours.
Next, name the potential customers and rank them. The goal is to identify those that best fit your value proposition and can best influence broader adoption of your product. If you determined your product’s primary value is its technology and cost, for example, identify target customers that prioritize these values. Also, determine how likely these companies are to adopt new technologies and what their influence is in the market.
Finally, identify the decision makers within your priority customers. In most companies, they are the usual suspects: product managers, buyers, general managers, etc. Use websites, personal connections and other tools to find out who they are and target them for voice-of-the-customer interviews