Market Evaluation

Rafat Abushaban

- Business #  O 11.4K views   اقرأ بالعربية

Summary: Market evaluation is a structured operation that provides data and indicators to help understand the product-market fit, in order to identify if selling a product in a certain market is feasible.

Understanding the market and product-market fit before launching a new business or startup is essential. Evaluating a market can provide a number of key insights invaluable for the entrepreneur, including:

  • Identify who the customers are.
  • Understand customer needs and resources (buying power).
  • Understand customer preferences (quality vs. price?).
  • Address competition and identify a competitive advantage
  • Understand industry trend (growing vs. declining?)
  • Among others...

Importance of conducting an in-depth market evaluation

Coca-Cola company offers a good an example on the importance of conducting a sound market research. In the 1980s the company has changed the taste and appearance of its product in an attempt to compete with the rising popularity of Pepsi at that time. Although millions were spent on these "improvements" by Coca-Cola, the customers did not like them and the company was forced to return to its original product. After investigation, it was found that the audience preferred the original taste and appearance without change, something that could be identified with conducting a proper market research without the need to suffer from losses and backlash.

Market Evaluation Pointers

Markets can be evaluated using several ways. These include Urgency, Size, Pricing, CAC, Cost of Delivery, Competitive Advantage, Speed to Market, Initial investment, Upselling potential, and Sustainability.
Market Evaluation

  1. Urgency

    How badly do people need a product or service at the time? This open-ended question can have a number of quantitative and qualitative values, resulting in a better understanding of the customer need, and its urgency.

  2. Market Size

    It is important when entering a market to identify it is of a sufficient size and room for contribution. Finding a balance between red and blue oceans here is essential so that the market identified is found viable with plenty of room to compete and grow. See identifying a Target Market article for more insight.

  3. Pricing

    What is the highest price a buyer would pay for a product or service in the target market? How much is the competition pricing their products, and is there a chance to bid a lower price offer to the customer?

  4. Customer Acquisition Cost CAC

    CAC identifies how easy is it to acquire a new customer to a business, and how much will this operation cost. See CAC definition with examples here to learn more.

  5. Cost of Delivery

    How much would it cost to deliver the product or service to the customer, both in terms of money and effort? While this feeds into the "Pricing" pointer mentioned above, identifying the cost of delivery on its own can help the business understand its channels better and the channels preferred by customers. During the COVID-19 pandemic, this was evident as businesses with established virtual channels could easily reach customers and sell to them, while others had to invest heavily in delivery and virtual channels to reach customers.

  6. The competitive advantage.

    Coming up with a unique value proposition is no easy feat. Identifying the absolute or comparative competitive advantage to create the product-market fit is essential. More info on how to identify the competitive and unfair advantage here.

  7. Speed to Market

    How quickly can a product or service be created in order to sell? What distinguishes good from excellent business strategies is how quickly they can come up with products and services and deliver them to the market. Following the adoption curve , businesses should target early-entry innovative markets with plenty of room for growth in the future, and pull away from laggard markets that are depleting in demand. diffusion of innovation

  8. Initial Investment

    How much time and money will be needed before a product or service is ready to sell? Capital can help greatly in easing this pointer and decreasing speed to market.

  9. Upselling Potential

    Upselling is offering additional related products or features to increase the profit from the sale. This cannot be done for all offerings, but the potential for it should be estimated and tapped-into where appropriate. Learn more about Upselling techniques here.

  10. Sustainability

    Sustainability measures the volatility of the business processes as opposed to the product-market fit. How much work is needed to keep providing the services and products to customers?
    There is no direct indicator to measure sustainability itself, but addressing previous pointers and having identified a suitable product-market fit increases it.

Rafat Abushaban

Founder of Riable and consultant to several international organizations in entrepreneurship education and researcher in innovation systems and seed funding methods with 10+ years of practical experience in the MENA region, Europe, US and S.Korea
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