Identifying markets and communities a new approach - value element analysis

Everybody in the world

Identifying the right markets How do we go from . . .

Potential Market/Community

1

4

3

2

5

6

Market/community Likely to Purchase product x

this this

to

1 Priority/attractiveness

Sections:

Overarching Frameworks

Section 1

How do you identify the right

markets?

Section 2

Sections:


Section 1


markets?

Section 2

Value Proposition

Market Need

+

How does a company generate cash flow?

= Potential

Cash Flow

Market + + Product

Exploring the Market Need It’s all about value

Value Element =

Value = The overall additional benefit the customer perceives they will gain from purchasing a product, both direct and non-direct.

The individual elements of a product that a customer will evaluate when making considering making a purchase.

Someone will part with cash for a product if the perceived value is greater than the cost of the product


Value Element =





Value Element =




Exploring Markets



Exploring Markets A Product will have multiple Value Elements

Product Value

Value element 1

Value element 2

Value element 3

Value element 4

Product Value


Exploring Markets which different people will respond positively to

Value element 1

Value element 2

Value element 3

Value element 4

Individual


Exploring Markets we can try out different markets for size

Community 1

Community 2

Community 3

Product Value

Value element 1

Value element 2

Value element 3

Value element 4

Potential Communities

Individual

Sections:


Section 1


markets?

Section 2

What strategy could we follow?

Build it and they will come

Option 1

Make educated guesses & target

the promising markets

Option 3

Crowd source it

Option 2

Engage with various markets

to see which show most

interest

Option 4

Option 1


Option 1



Option 3

Crowdsource it

Option 2



interest

Option 4

Risks • They may never come if they don’t know about it • Relies on people engaging and spreading the word to their peers

Benefits • Cheap • Very hard to second guess the market so why

bother?

Option 1


Option 1



Option 3

Crowdsource it

Option 2



interest

Option 4

Option 2


Option 1



Option 3

Crowdsource it

Option 2



interest

Option 4

Risks • It is difficult for a community to imagine another's world, particular

issue if community smaller and homogenous

Benefits • Individuals in a wide community will have links to

many other communities

Option 2


Option 1



Option 3

Crowdsource it

Option 2



interest

Option 4

Option 3


Option 1



Option 3

Crowdsource it

Option 2



interest

Option 4

Risks • May tend to lean to well known markets as they are easier to find data for • Relying on other peoples assumptions

Benefits • Cheaper than engaging directly (although Mintel

Reports can be very pricey)

Option 4


Option 1



Option 3

Crowdsource it

Option 2



interest

Option 4

Risks • Focus groups tend be enthusiastic about new products and this does

not always translate into actual buyer behaviour • People don’t always realise what they want

Benefits • Not reliant on assumption, prejudice and

stereotypes • Generate your own product specific data

Down Selection


Option 1



Option 3

Crowdsource it

Option 2



interest

Option 4

Value Element Analysis

Value Element Iterative Cycle

Hypothesise types of individuals who

would find the Value Elements appealing

Identify communities or markets that these type of people would

fall into

Perform Attractiveness

Analysis on these markets

Engage with these groups to test the

hypothesis

Update assumptions

Identify key elements of product aka Value Elements

1

2

3

4

5

6

Target Markets

1

3 2

4

Crowdsourced Suggstions

Gut feel

1 Identify key elements of product aka Value Elements

• Value elements are the attributes of a product that make it attractive to the customer

• This may be physical attributes size, weight, speed and cost but also includes the more emotional attributes such as how it makes you feel, connection to the brand, status symbol

Techniques for identifying new value elements • Identifying other products that share value elements with the target

concept. Look at existing value elements for this new product and see if they are in common with the original.

• Imagine that there are two similar concepts, imagine what elements the customer would look write in a list when deciding which one to buy

2

• . . .

• . . .

• . . .

Value Element 1

Hypothesise types of individuals who would find the Value Elements appealing People who have or who are or who want . . .

• . . .

• . . .

• . . .

Value Element 2

• . . .

• . . .

• . . .

Value Element 3

3 Identify communities or markets that these type of people would fall into

• . . .

• . . .

• . . .

Individual 1

• . . .

• . . .

• . . .

Individual 2

• . . .

• . . .

• . .

Individual 3

• . . .

• . . .

• . .

Individual 4

• . . .

• . . .

• . .

Individual 5

• . . .

• . . .

• . .

Individual 6

3

Individual 1 Individual 2 Individual 3

Co

mm

un

ity

1

Identify communities or markets that these type of people would fall into

Co

mm

un

ity

2

Co

mm

un

ity

3

4 Perform Attractiveness Analysis on these markets (SMART) Go with your gut • Gut Feel is an important tool but be careful • Attractive analysis tools should be used • SMART is a great such tool

Simple Multi-Attribute Rating Technique (SMART) First must define unique attributes of a market you want to analyse, these are normally: • Total Perceived Value • Size • Price sensitivity of individuals in market • Ease of access • Ability to influence their peers

4 Perform Attractiveness Analysis on these markets (SMART) Go with your gut • Gut Feel is an important tool but be careful • Attractive analysis tools should be used • SMART is a great such tool

Simple Multi-Attribute Rating Technique (SMART) First must define unique attributes of a market you want to analyse, these are normally: • Total Perceived Value • Size • Price sensitivity of individuals in market • Ease of access • Ability to influence their peers

4 Perform Attractiveness Analysis on these markets (SMART) • Once you have the individual attributes agreed take each in turn

• Draw a line and at one end mark 0 and the other mark 100

• Place the market which has the worst rating for the attribute in question at end 0 and place the one with the best at end 100

Market 0 100 Market

• Now place the rest of the markets on the line depending on how well you feel each of them rate with respect to each other and note the number that each market is assigned

• Repeat this process for all markets

4 Perform Attractiveness Analysis on these markets (SMART) • In an ideal world some markets will fall at the top for every attribute. If

this happens then these are the markets to target.

• In the real world markets will get different ratings depending. You can just add up the values but some attributes may be more important to you

• You can use the same system for prioritising the attributes. This will be subjective so it’s important to get a good mix of people in the room whilst doing this

Attrib-ute 0 100

Attrib-ute

• Each attribute will now have a number assigned to it

• If you multiply the markets values for each attribute by the attribute value and sum the numbers, the markets with highest total will be the ones you should target

5 Engage with these groups to test the hypothesis

6

Update you assumptions and repeat as needed

Confidence increases with iterations

Hypothesise types of individuals who

would find the Value Elements appealing

Identify communities or markets that these type of people would

fall into

Perform Attractiveness

Analysis on these markets

Engage with these groups to test the

hypothesis

Update assumptions

Identify key elements of product aka Value Elements

1

2

3

4

5

6

Target Markets

1

3 2

4

Crowdsourced Suggstions

Gut feel

Worked example

The see through toaster

1 Identify key elements of product aka Value Elements

See through Toaster • You can see the toast as it . . . toasts • Is a novel piece of technology • Good looking design • Etc.

2

• Tend to burn there toast

• Are interested in the science of cooking

• Want fine control over the colour of their toast

You can see the toast as it . . . toasts

Hypothesise types of individuals who would find the Value Elements appealing People who have or who are or who want . . .

• Like new technology

• . . .

Is a novel piece of technology

• Like good looking design

• . . .

Good looking design

3 Identify communities or markets that these type of people would fall into

• Students

• Elderly

• . . .

Tend to burn there toast

• Chemists

• Foodies

• . . .

Are interested in the science of cooking

• Foodies

• OCD

• Perfectionists

• . . .

Want fine control over the colour of their toast

• Gadget lovers

• Students

• . . .

Like new technology

• Modern home owners

• Single affluent men

• Japanese

Good looking design

• . . .

• . . .

• . .

etc.

3

Tend to burn there toast

Are interested in the science of cooking

Good looking design

Foo

die

s Identify communities or markets that these type of people would fall into

Stu

de

nts

Si

ngl

e

affl

ue

nt

me

n

4 Perform Attractiveness Analysis on these markets (SMART)

Student 0 100 Foodies

Market Size

0 100

Ease of access to market

0 100

Likelihood to pay a premium

Single affluent

men

75

Student Foodies

Single affluent

men

75

65

Foodies Student

Single affluent

men

4 Perform Attractiveness Analysis on the attirbutes (SMART)

0 100 Market

Size

Attributes

Ease of access

60

Likelihood to pay a

premium

Market Size Ease of access

Likelihood to pay a premium

Total

Single Affluent Males

75 x 60 = 45,000 75 x 0 = 0 100 x 100 = 100,000 145,000

Foodies 0 x 60 = 0 0 x 0 = 0 65 x 100 = 65,000 65,000

Student 100 x 60 = 60,000 100 x 0 = 0 0 x 100 = 0 60,000

Markets in order of attractiveness

5 Engage with these groups to test the hypothesis

6

Update you assumptions and repeat as needed

So Remember

1. The best space to operate is:

• Un-Identified Market Needs • Met by new applications of existing technology

2. It is all about value

3. Crowdsource the market identification question

4. Follow an iterative approach

1. Identify value elements 2. Hypothesise individuals 3. Hypothesise communities 4. Analyse 5. Engage 6. Update Assumptions and Repeat

Marketing

Identifying markets and communities a new approach - value element analysis