Step 3/5 of Product Development — Market Research & Feasibility
We’ve identified the need, target audience, and solution within step 1 and step 2. Now, it is time to investigate the effect of each idea on our budget, which consists of time, money, and skills.
Defining The Costs
I often see entrepreneurs make a financial estimate, it is not only insufficient but also so hard to estimate. Because at this stage, we haven’t yet decided on our core business features, MVP, and features that make a difference.
I believe it’s more efficient in terms of the process to move to the next stage with simpler data rather than calculating the total cost of all our features and decisions.
We can start by writing down the estimated costs for the product. These may be as follows:
- Human resources (Roles, skills, experience)
- Cost of human resources (Salary, and other expenses)
- Hardware needs (Computer, Printer, Accessories)
- Office Expenses (Rent, Operating Expenses)
- Software Needs (Licensing costs of the software to be used)
- Other expenses (For example, if you are making a software product, server and domain expenses)
Sometimes, establishing a product without any revenue can take around 1 year or more.
You need to estimate how much investment you need to achieve success. It is so hard to estimate that but we can make it easier by little research about similar products and their history.
Competitor Analysis
In step 2, we researched similar products but it was about their features, I will add the results here.
At this stage, we can include data such as
- the number of total users, active users, paid users
- the number of employees
- the time it took for relevant products to come to life (company age can be)
- the company valuation
- the investment information if available
- the yearly revenue of the company
When extracting the results of this research, it helps us to estimate the cost of the product.
Competitor Analysis Result:
Defining The Revenue Model
To ensure the long-term life of our product, we move on to the step I most recommend thinking about.
How will the product make money?
What is the revenue model?
I know not everyone develops a product that aims for profitability. It’s a way to clarify how the product will sustain itself. For example, it could progress through donations, government support, or the participation of members.
In this step, we can research the revenue models of competitors and compare these data with our product. We don’t have to choose the same revenue model as similar products, but at the end of the day, we should discuss how the chosen revenue model will impact the future of the product.
Especially in the startup world, I saw a lot of companies struggling with various difficulties due to not establishing the right revenue model.
The correct revenue model, although not directly impacting the success of your product, is one of the most important steps. Skipping this step and assuming that the product meets the needs, and the customer will buy this product can increase the possibility of failure.
Example 5 Revenue Models for Our Sample Product:
- Subscription Fees: Pet owners pay regular subscription fees to access reliable caregiver services and monitor their pets’ daily activities.
- Premium Services: A paid membership option could offer access to additional features, such as emergency intervention, specialized reports, or veterinary consultations.
- Sale of Technology Products: Generating revenue by selling technology products, such as specially designed tracking devices or health monitors, allows pet owners to monitor their pets more effectively.
- Partnership Programs: Revenue can be increased through agreements and partnership programs with industry partners, such as veterinary clinics, pet care product suppliers, or training courses.
- Advertising Revenue: The platform can generate revenue through advertisements directing users to pet-friendly products or services.
Market Research
Another important step is investigating the trend of the market. Developing a product for a growing market will be especially beneficial in investment-seeking processes.
The number of existing companies in the market, and the behaviors of market leader companies in recent years, will provide valuable data for the starting process of this product.
There is a market report telling estimated market growth.
According to the report, it is said that the global pet-sitting market size was estimated at USD 1.94 billion in 2021 and is anticipated to expand at a compound annual growth rate (CAGR) of 11.52% from 2022 to 2030.
Growth Potential
After researching the market and the situations of similar products, we can predict how much share we can take in the market if we take the right steps.
This will show us how much money we can make with the estimated costs.
Accessing financial information such as the investments and revenues of competitors in recent years at this stage will benefit your decision to continue developing your product.
Opportunities and Risks
Now, we have identified the market and competitors. Let’s clarify what we need to focus on to establish a place in this market.
After benchmarking, we have identified the missing features or highly appreciated features in similar products. Areas that our competitors cannot cover will be our opportunities. For example:
- The rapid growth of the market and the limited number of products can be an opportunity for our product to enter the market.
- Focusing on issues that many customers need and complain about but need to be addressed by products in the market can be an opportunity.
- Producing at a lower cost due to pricing policies or entering the market with a more aggressive strategy than competitors, or vice versa, having a larger budget than competitors and implementing an aggressive policy in the market can be an opportunity for us.
- We can create a better product than competitors with our existing skills. Fixing a product can sometimes be more challenging than creating it from scratch.
On the other hand, we can also make a risk analysis following the opportunity study. Identifying risk factors is valuable for the decisions we will make in our roadmap. For example:
- In a growing market with few competitors, the time to market for the product is very important. If our current budget and skills are not sufficient, this should be defined as a risk.
- The market growth may have stopped, and the market leader may have dominated the market. It can be challenging to gain a share in this situation.
- After launching the product, our costs may be higher than those of competitors. In this case, we should discuss how to price it. The wrong pricing strategy will be a risk.
The SWOT analysis can answer all our inquiries in this process. Those unfamiliar with the SWOT analysis can find a detailed explanation here. By this analysis, we identify our strengths and weaknesses and define opportunities and threats.
Now, we’ve identifyed the needs, our product, and research the market. After all benchmark and market research, we know the product, the opportunities, and the risks. Now, based on this information, we should draw up our roadmap as step 4. I’ll share another article about next step soon. If you don’t want to miss that post, I recommend following me on Medium.
