Market Analysis

When thinking about how to do a market analysis, instead of starting only with what you want to build, first think about who you are building it for. A product needs to serve an audience willing to use it and, in many cases, willing to pay for it. The second key element is the problem. For someone to spend money on your product, they need to recognize that the problem exists, that it matters, and that it is worth solving. Sometimes the problem is not even completely clear to the audience yet.

Another essential part of market research is understanding the competition. Having competitors does not necessarily mean your product should not exist. In many cases, their presence is actually evidence that demand exists. The problem begins when we enter a highly competitive market without being able to explain clearly why someone should choose our product instead of another one.

The final point is differentiation. Your product needs to be clearly different from what already exists in the market, whether through price, experience, positioning, technology, efficiency, or the specific problem it solves. To support this analysis, we can use Porter’s Five Forces, which can help us understand the level of competition and how attractive a particular market may be. It is worth taking a look at the full thesis here.

Understanding the problem

In any market analysis, you first need to understand the problem you are trying to solve and how significant it is. Simple problems are usually solved in predictable and clear ways, which means there is probably already an established process for dealing with them. One example is taking your car in for an oil change. But be careful: sometimes an apparently established process hides opportunities for improvement.

Complex problems involve many variables: people, processes, expectations, uncertainty, competition, gains, and losses. And this is often where some of the most interesting problems to solve are found. How can I create a car that pollutes less? How can I transform ocean water into something drinkable? How can I help companies understand whether their projects are consuming too much time, money, and effort before it is too late?

Complex problems, however, require a more structured process to map, understand, and solve them. I will leave another article here that can help you identify problems and their root causes and that can be used in both projects and products: “How to Find the Root Cause of Your Project’s Problems.”

When creating a new product, understanding the problem is only the beginning. We also need to understand who the users are, who the stakeholders are, and which hypotheses need to be tested. This is where market research begins to transform our initial assumptions into data that can support an investment decision.

Quantitative research

You probably already have an initial idea of who your users are, or at least who will be affected by your new product or service. At this stage, it is important to begin with research. The objective of quantitative research is to collect and quantify data about stakeholders, understand behaviors and trends, and then use that information to formulate hypotheses about the problem. Questions related to income, education, purchasing behavior, frequency of use, or other relevant characteristics can help you estimate the size and profile of the market you intend to serve.

The most important thing is that the data you collect has a direct relationship with the decision you need to make. Conducting market research simply to accumulate information does not improve your market analysis. The data should help you understand whether demand exists, who may be willing to pay for the product, how large the opportunity may be, and which hypotheses still need to be validated.

Qualitative research

Compared with quantitative research, I believe qualitative research can be even more valuable for understanding who your target audience is and what they expect from the product. Here, we collect perceptions about the problem, the reasons it exists, and, from the perspective of the people experiencing it, possible ways to solve it. We also capture feelings, motivations, fears, and expectations, which can help us build a stronger value proposition and commercial approach.

Feedback, interviews, customer satisfaction surveys, forum discussions, and social media analysis are some possible sources for this type of market research. The objective is not simply to ask users what we should build, but to understand how they experience the problem today, how important it is to them, and which alternatives they already use to solve it.

During qualitative research, always keep your objectives clear. It is easy to get lost in open-ended questions and finish an interview knowing a great deal about the person but very little about the problem you needed to validate.

What kind of questions should I ask?

The first and most important point is to keep your questions open-ended, giving interviewees the opportunity to share their own perspective. Remember who we are building the product for. I have seen many managers create products based only on what they personally considered to be a good product and ultimately generate major failures in sales and adoption.

Questions such as “When was the last time you had this problem?” usually produce more concrete information than “How do you normally solve this problem?”. In the first case, the user tends to describe something that actually happened. In the second, they may simply explain how they believe the process should work rather than how it actually works.

Always be careful to bring interviewees back to the research objectives. After all, nobody wants to start a conversation about a quality problem and finish by discussing how difficult it is to win an Olympic medal.

Personas

When we begin a market analysis, we usually have an initial idea of our users and stakeholders. After conducting quantitative and qualitative research, it is time to revisit our personas. We now have a deeper understanding of who they are, what they think, what they fear, how important the problem is to them, and what they are trying to achieve. Many times, we discover that it is not worth addressing the needs of certain groups because their impact on the product is limited. In other cases, we discover that we were focusing our efforts on the wrong people.

The idea is to use concrete data to decide which stakeholders and personas truly deserve our attention. If you need to manage them, take a look at this article: “Stakeholder Mapping: How to Identify, Analyze, and Manage Project Stakeholders”.

Once we understand the market, the problem, the competitors, and the users, we have better information to begin searching for hypotheses.

Hypothesis Search

With our problem statement, research, and personas defined, we have a clearer view of the hypotheses that may solve the problem. These hypotheses were probably being formed throughout the previous stages, even if we did not initially write them down formally. With this information in hand, we can begin prioritizing them.

The less you need to build to generate meaningful impact and learning, the better. Whether our hypothesis is right or wrong, it is preferable to discover that as early as possible and before committing a larger share of the budget. An impact-effort matrix can help you understand which hypothesis should be tested first. An opportunity solution tree can also support this decision.

However, there is an important step between identifying a promising hypothesis and deciding to invest in it. We need to determine whether what looks like a good opportunity also makes sense economically. This is where the business case and feasibility study become important.

Business Case and Feasibility Study

A market analysis helps us understand whether an opportunity exists. A business case tries to answer a different question: is that opportunity worth investing in? This distinction matters. We may find a real problem, an interested audience, and even a large market, but still discover that the cost of developing, selling, and operating the solution makes the investment unattractive.

The business case organizes the main reasons for proceeding or not proceeding with an initiative. It connects the problem and opportunity with the required investment, expected costs, benefits, risks, and potential return. In other words, it transforms a good idea into a decision that can be discussed more objectively.

A business case analysis should also connect the market opportunity directly with costs and margin. A large market does not automatically mean a good business. If customer acquisition is too expensive, development requires excessive investment, operations consume most of the revenue, or competition puts significant pressure on pricing, the opportunity may exist while still producing an insufficient margin.

How to Assess Project Feasibility

Project feasibility depends on much more than having a good idea. A feasibility study needs to compare what we expect to gain with what will be required to invest and maintain the initiative over time. This includes not only the initial development cost but also people, infrastructure, suppliers, licenses, marketing, support, operations, and future product evolution.

A feasibility analysis should also consider the revenue or benefits we expect to generate. For a commercial product, we may estimate the number of customers, average revenue per customer, growth, margin, and recurring revenue. For an internal project, the benefit may appear as cost reduction, productivity gains, risk reduction, or hours of work saved.

There is no absolute precision at this stage. We are working with assumptions. For this reason, a good feasibility study should not present only a perfect scenario. It is much more useful to consider different possibilities and understand what happens if revenue is lower than expected, the project takes longer than planned, or development costs increase.

This exercise helps us understand the economic feasibility of the initiative before a significant amount of money has been committed. The objective is not to predict the future perfectly, but to identify which assumptions need to be true for the investment to make sense.

Financial Feasibility and Return on Investment

Financial feasibility brings the business case even closer to the investment decision. It helps us understand whether the expected benefits justify the resources that need to be committed and whether the company can sustain the required investment until those benefits begin to appear.

One important element is return on investment. The principle is simple: we need to compare the expected financial benefit with the amount required to generate that benefit. The larger the initial investment and the further away the return, the greater the company’s exposure to estimation errors, market changes, and execution risks.

Return on investment should not be analyzed in isolation. Two projects may offer a similar return while requiring completely different levels of investment, time, and risk. Likewise, an initiative with a potentially high return may require an upfront investment that the company is not prepared to make.

A cost-benefit analysis can also help compare alternatives and understand which initiative provides the best relationship between the resources required and the expected results. The objective is not to reduce the entire decision to a single financial formula, but to create a clearer basis for comparing value, cost, and risk.

For this reason, the business case should be understood as a combination of market analysis, feasibility analysis, costs, benefits, risks, and potential return. At the end of this stage, the question is no longer simply “Can we build this?” but “Is it worth building this now?”.

If the answer remains positive, we can reduce our exposure to risk by validating the hypothesis with a minimum viable product before committing the entire investment.

Minimum Viable Product (MVP)

To talk about a minimum viable product, I will take a step back and explain what an MVP is not. There is one word in the acronym that is often forgotten: viable.

Viable means something users can actually use. Sometimes the assumption is that if we cut a portion from the ideal product, we can automatically call that portion an MVP. The answer is no. If users cannot use it in a meaningful way, we do not have adequate product validation.

My advice is to build the MVP with the essential features required to test the most important hypotheses. To identify those features, do not forget your personas and, most importantly, what you need to learn before authorizing a larger share of the investment.

Imagine that you are building a car. A parent may value a large trunk, an 18-year-old may care more about a sporty design, and another person may prioritize additional space in the back seats. The objective of a minimum viable product is not to satisfy every persona perfectly, but to understand whether the central value proposition generates enough value to justify continuing the investment.

After creating your MVP, make sure it is measured correctly. The more you measure user behavior, satisfaction, motivation, adoption, and interest, the more data you will have to improve the hypothesis, change direction, or simply abandon it.

This is also where a product can easily lose control of scope, schedule, and cost. The business case may have defined how much we expected to invest, how long we expected the project to take, and which benefits we expected to achieve, but execution begins to show what is actually happening.

In a project environment, a platform like Saint Jude can help leaders compare estimates with actual execution, understand how much time and money the project is consuming, verify whether the tasks created for the MVP are clearly defined, and identify risks before launch. In this way, the business case establishes the expectations for the investment, while execution data helps verify whether the initiative is still operating within those assumptions.

This does not replace product discovery, market analysis, market validation, or the feasibility study. The objective is to complement these stages with visibility into what happens after the company decides to invest.

As a final piece of advice, remember that this is a cyclical process. We start with a problem, analyze the market, research users, create hypotheses, assess project feasibility, build the business case, develop an MVP, measure the results, and return to our initial assumptions whenever new data appears.

A product can have an excellent market and still be financially unfeasible. It can have a promising business case and fail during execution. It can also begin with weak assumptions and discover a much larger opportunity along the way. This is why market opportunity, costs, return, and execution should not be treated as completely separate decisions.

I have reached the end of this article. Here, you have seen how to conduct a market analysis, perform market research, validate hypotheses, build a business case, and conduct a feasibility study before committing a larger investment. The objective is not to eliminate all uncertainty, because that would be impossible, but to reduce the risk of discovering too late that the product did not have enough market demand, margin, or return to justify the effort.

Do you want to continue this conversation? Would you like to add a process or tool that you use? Give this article a like, comment on LinkedIn, or share it on your social media.

See you soon!

Erik Scaranello