67% product owners assess their market potential through Intuition or self-research. This practice can sometimes be the result of a lack of budget or time dedicated to market research while launching a product or service. The idea that it might be better to directly test the product on the market, can be a costly mistake for a business.
Evaluating the potential of your product or service by intuition or self-research may not be the most efficient way to fully evaluate the demand’s needs, value and volume of your market, your competitors' market share, products and pricing strategy. As an example, the value of your market is an estimated average total revenue amount your customers are expected to spend with your business throughout the entire lifetime. Defining those metrics is made possible by collecting reliable data from the industry, analyzing (through methodic calculations) and drawing the business market potential conclusions: “No data analysis = No effective decision.”
Precisely spotting your real customers’ needs in the market at a specific time and place as well as their consumption habits and beliefs will make a difference in understanding them. As an example, having traveled to the country you are willing to expand your business to (or even being familiar with their culture through movies, among others) does not speak about what potential customers factually expect in that market. Each product or service put on the market answers a different consumer’s needs. Going into more details, even the product or branding colors used are important. In the U.S., the lottery uses green tones because the color is associated with the luck of the four-leaf clover while the Chinese lottery uses red as it represents luck to them. It makes a big difference and impact in customers’ minds.
What about intuition?
Intuition can be useful to orient decisions as it is based on your experience and interactions. However, it is usually not proved by factual and numbered data. It is most likely influenced by cognitive biases. Using a proven methodology to conduct market research helps to prevent them. That's why an external and objective professional expert will bring a fresh look at your business’ growth objectives and will make sure to conduct the research without as little biases as possible.
It also helps to identify potential niches for your product or services that you might not have thought of. A niche market is a highly specialized market with limited competitors and high-profit potential, but lower potential sales volumes. It is a good strategy to adopt in a competitive market, for example. Last but not least, defining what could differentiate your business from your competitors will be a good check on your market potential of entry.
The story of a risky business
Many large companies have lost a lot of money after launching their product with no prior market research. For example in 2014, Amazon launched its smartphone "Fire Phone" without assessing their clients’ needs and expectations. Amazon developed its phone at the time seeking to differentiate itself through features such as 3D motion recognition and an innovative camera system. But, at that time, this was not what consumers needed! In a highly competitive market, the "Fire Phone" never managed to compete with Apple's “iPhones,” that were released a few weeks after, or the smartphones from Samsung, Huawei, and Lenovo’s. Results: Amazon stopped producing the smartphone and it was a failure generating a $170 million loss (Source: Wired).
The loss could be significant so why betting on luck when you can use your time and money to invest in the right offer, at the right time and in the right market?