Understanding Market Need
Last week, the Fire Enterprises, Inc. (FEI) tribe kicked off product strategy discussions by reviewing the importance of creating product differentiation. This week, the topic around the FEI conference table is why understanding market need for potential products is a crucial early step in the product development process. Remember, fire = print.
The FEI tribe gathered in the conference room for a product development meeting. Zoot, Numo, Marka, Org and Lucy each took a seat around the stone table.
Lucy pulled a piece of bread out of her pocket. “We need to determine the market share commanded by FEI’s current products, and identify market niches that can be filled with new offerings,” she said.
“How long has that been in your pocket?” Zoot asked.
“Let’s take a lesson from Pompei Bakery,” Lucy suggested, holding up the slice of bread. “They used to only sell white bread, until they discovered that consumers also wanted wheat, whole grain, French, Italian—you get the picture.”
“Fire is like bread,” Lucy continued. “We just need to find the ‘wheat’ and ‘whole grain’ type niches in our market.”
“How?” Org asked with curiosity.
“Identifying new market segments in which to focus our product development efforts is a three step process,” Lucy explained. She scribbled the following on a whiteboard:
1) Create a product map of current products, their position in the marketplace and relative niche sizes.
2) List new “category creation” possibilities.
3) Narrow list to the ones that are “near” fits with FEI’s core competencies.
“New product development is easy, if that’s all there is to it,” Zoot said warily.
“I didn’t say that!” Lucy objected. “There are many more steps to the product development process, including due diligence, plan, punch holes in plan, plan again, market test, modify plan, launch.”
“And, I need assurance that these market expansion efforts will produce a return on investment,” Numo added, wagging a bony finger.
“Agreed,” Lucy said. “So let’s figure out which market opportunities represent the best new revenue potential for FEI. Before we do this, we must make a list of the market niches we’ve already filled with current product offerings.” She wrote:
Hearths – Homeowners and consumers direct.
Entertainment – Events, fireworks and celebrations.
Matches – Small self-lighting products.
Décor – High-fashion torch hardware.
Business to Business – Cooking, heating, industrial energy and more.
Org scowled. FEI simply hadn’t been capitalizing on all of its market opportunities. “How much market share do we hold in each?” he asked with concern.
“Competition from Pyro has been intense, but many people wouldn’t buy any brand other than FEI for their homes. Flintstone had the jump on the self-starting fire market, but our matches are winning in side-by-side comparisons. Entertainment is a niche market, in which no clear market leader has yet emerged. Décor will never be a big business, but profit margins can be high. Finally, I think we can all agree that the B2B market represents the best opportunity for FEI’s new products,” Lucy said.
“So what is our strategy for targeting new markets?” Org asked.
“The iFire is an emerging market if there ever was one,” Zoot said. “We can leverage the popularity of newer technologies to create products that will be wildly popular with the teenager, young adult and early adopter segments.”
“The Olympian healthcare network is expanding,” Numo offered. “Hospitals need fires to keep patients warm.”
“Another great idea,” Lucy agreed.
“There’s a grape-load of opportunity in the business-to-business sector,” Zoot said. “Developing products specifically for restaurants, banks, offices and other businesses could be a short path to new market share as well.”
“Selling through different distribution methods is another route to different markets,” Org suggested.
“Wonderful work, tribe!” Lucy exclaimed. “Yet this is only the first step of our product development strategy. Next we have to analyze our own core competencies to ensure we can create products that will be appropriately valued within these markets.”
Org stroked his hairy chin. “This core competency business sounds tough. What say we order some feta pizzas, tribe?”
“I’ll take one!” Zoot shouted.
Today’s FIRE! Point:
Start the planning process with a market needs analysis. Identify the underserved markets in your industry. Your new product/repositioning efforts should be based on a combination of positioning/relative niche sizes for current products, new category creation possibilities and your company’s internal core competencies.
FIRE! in Action:
Untapped Market Niches are EVERYWHERE
Mark Reitman runs “Hot Dog University,” a $300, two-day course in the mobile food business. Though the question, “Who would pay to learn how to sell hot dogs?” immediately springs to mind, Reitman reports the course is profitable and he plans to expand it.
Next week: Product talk continues with a discussion on the importance of developing products in line with your core competencies.