Product & Digital Marketing
Welcome to the “Product & Digital Marketing” guide series, your comprehensive resource for mastering the art of marketing. This series covers essential topics such as market assessment, segmentation, and crafting effective go-to-market strategies. You will learn how to conduct competitive analysis, implement growth hacking techniques, and utilize SEO for increased visibility. We will also explore digital analytics, media strategies, and the importance of integrated marketing plans. Whether you’re a seasoned professional or just starting, these guides offer valuable insights and actionable steps to drive success and growth in your business.
Understanding Market Dynamics and Assessment
As you begin your strategic planning for product and digital marketing, it’s important to assess the market you’re competing in. A useful tool for this is Porter’s Five Forces, created by Dr. Michael Porter. This tool helps you evaluate different dynamics that can affect your organization.
Key Takeaways
- Porter’s Five Forces is an important tool for assessing market dynamics.
- Understanding market size and organization helps in strategic planning.
- Defining TAM, SAM, and SOM provides clarity on market potential.
- Primary and secondary research are essential for understanding your market
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Porter's Five Forces
Competitive Rivalry
First, think about the competitive rivalry. How many competitors are there in the market? What are their strategies, and how is their market share divided? Understand their go-to-market strategies and identify their strengths.
Threat of New Entry
Next, consider the threat of new entry. Besides existing competitors, new ones may enter the market. Look at the barriers to entry. Will a new competitor need to build large facilities, or can they just launch a website to compete with you? Understanding these threats is crucial.
Threat of Substitution
Then, consider the threat of substitution. Identify potential alternatives to your products that could satisfy your customers’ needs. It’s important to know what customers are buying, not just what you’re selling.
Buyer Power
Evaluate buyer power. Are you a big player in the market, or do your customers have more influence? For example, in my firm, there’s a lot of buyer power because we sell to large companies while being a small training firm.
Supplier Power
Finally, look at supplier power. Consider those who provide raw materials and inputs to your business. Are they large or small? How much control over pricing do they have?
By looking at all five of these dynamics, you’ll be able to see where the major threats are and which opportunities you can pursue. Porter’s Five Forces is a strong tool for understanding the market dynamics that can affect your organization.
Sizing the Market
When you’re drafting your business plan, understanding the size of the market will help you see how attractive the business you’re entering is.
Understanding Your Market
Does your market consist of businesses or consumers? How many people are in your addressable market? Describe how the market is organized. Is it organized by product, by segment, by problem, or geography? Identify some of the common characteristics of the customers in that market.
Both large and niche markets can be lucrative, depending on product positioning and the addressable profit pool.
Addressable Profit Pool
Consider how big the addressable portion of the profit pool is. The profit pool represents the dollars available in that market. How much of it can the problem you solve address?
You can size your market through methods like market research, gathering analyst reports, or looking at what some of your competitors are doing and how they’ve reported the size of the market.
A complete market sizing will guide what you need to do to scale your business. It will also help you understand whether this market is attractive enough for you to make a return on your investment.
While larger markets may seem more attractive, niche markets can also be highly lucrative. For instance, Apple, with its high-end laptops, PCs, and phones, targets a very narrow market compared to the global market for those products. However, due to their products’ proper positioning within that market, it’s incredibly lucrative for them.
Understanding the size and organization of your market is crucial for strategic planning.
TAM, SAM, and SOM
- Having understood the size of your market, we now move to the next segment of our funnel – understanding the different aspects of market size. We will focus on three key definitions: Total Addressable Market (TAM), Segmented Addressable Market (SAM), and Serviceable Obtainable Market (SOM).
Understanding TAM, SAM, and SOM - Total Addressable Market (TAM)
TAM represents your potential market – the universe of people who can actually buy your products or services. However, it’s important not to confuse this with what your business can sell or the overall industry size. TAM is about the total addressable market, not what your individual company can sell. - Segmented Addressable Market (SAM)
SAM refers to those who are qualified to buy your product. This narrows down your market further to those who meet certain criteria. - Serviceable Obtainable Market (SOM)
SOM is your core market or sweet spot. This represents a more concentrated segment of potential customers. It’s crucial to understand that these definitions provide different perspectives on how you would work with your individual markets. However, finding this data can be challenging as every industry and market is defined differently. You might have to estimate by taking different data points and putting them together.
TAM, SAM, and SOM provide different perspectives on the size of your market.
Primary and Secondary Research
Market research is one of the most critical aspects of running a successful business. Without understanding your buyers, it’s challenging to make an impact in the marketplace. There are two types of market research: primary and secondary.
Primary Research
Primary research involves collecting insights directly from people through interviews, surveys, focus groups, or other methods. This type of research is designed to answer specific questions you have about your customers and your business.
Secondary Research
Secondary research involves using existing research that has already been analyzed. It’s useful for understanding basic demographics and details about your industry, like market size and major players. This can help you understand where you fit in and how to differentiate yourself.
Both these tools can help you learn about your industry, market, and your customers. However, primary market research will be the best way to answer specific questions about your customers and your company.
Primary and secondary research are two key methods for understanding your market. Both types of research serve different purposes but are crucial for a complete understanding of your customers and market.
In the next guide, we will explore market segmentation and targeting strategies. You will learn how to effectively identify and reach your target market, an essential step for successful product marketing.