Eight Market Analysis Traps To Avoid

Eight Market Analysis Traps To Avoid
(Marketing Memo, December, 2007)

Should you start a blog? Open an office in Beijing? Do some research first, but avoid eight common pitfalls:

Accepting the party line: "We have 99 years of collective industry experience. Who needs market research?" proclaim some companies. Other companies are reluctant to challenge zealous, but unrealistic, founders. An occasional reality check is important for all companies.

Listening to the naysayers: "There is no reason anyone would want a computer in their home," Ken Olson, president, chairman and founder of Digital Equipment Corp., famously asserted in 1977. Conviction overrode objectivity. A market study would have uncovered a significant opportunity for the company.

Jumping on the band wagon without testing if it is appropriate: What is right for your competitors may not be right for your company. Some companies tried ecommerce but lacked the infrastructure to support this new channel.

Researching the wrong problem: Testing for price sensitivity may be unnecessary if the real reason you are losing subscribers or customers is poor support services. Consider all possibilities before narrowing the scope of your research.

Confusing the whole with a part: A national product roll out is risky when you have only explored product acceptance in Texas. Even more dangerous is using US product acceptance to justify an international product launch.

Assuming causal relationship: "Don't confuse correlation with causation; just because one thing is related to another does not necessarily mean that the first caused the second," say K. Clancy and P. Krieg*. If the leaders in your market sell software subscriptions, not licenses (software as a service or SAAS**), identify the real differentiators before jumping on the SAAS band wagon.

Misusing market share data: Carefully define your market. Then, explore whether or not your market and your market share are expanding, say Clancy and Krieg. To calculate market share for a TV brand, include PCs and mobile phones used to view TV. A 45% share of the analog TV market will mean little after February 17, 2009, when TV broadcasters must switch to digital broadcasts, and viewers must buy converters or digital TVs.

Using online surveys ineffectively: Online surveys have a place, but survey questions should be meaningful, not just easy-to-manage. Many online surveys focus on demographic data or on simple usage questions. Don't ask, "How many times have you used X this month?" Ask, "What changes would make X easier to use?" Adding a comment field will also yield useful tips.

* Clancy, Kevin and Peter Krieg, Your Gut Is Still Not Smarter Than Your Head, J.Wiley, 2007, pp. 51-52.

** With a software as a service (on-demand) model, vendors use their own servers to provide software. Customers subscribe to the software services instead of licensing software for use on their own systems.

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