What is a market opportunity assessment?
A market opportunity assessment is the process of synthesising market research and client data to identify opportunities for growth in a specific market or business area and formulate an actionable strategy to realise this growth.
Opportunities come in many different shapes and sizes, therefore the key and first step towards success is to identify them as such. This often presents a fundamental challenge to organisations and businesses alike. Understanding and making the most out of opportunities in a constantly shifting environment and market requires an intrinsically creative, flexible and methodical approach. Not many organisations – no matter whether they are start-ups or corporations – have the time, the resources or the expertise to conduct a broad and thorough market opportunity assessment.
A nuanced market assessment will utilise a pragmatic approach that is tailored specifically to the client and the market they operate in, while leveraging tried and trusted research and analysis methodologies, underpinned by a comprehensive and up-to-date understanding of economic theory.
What kind of organisations should undertake market opportunity assessments?
Market opportunity assessments can (and should) be conducted by all organisations, whether they are businesses – large and established or young and ambitious companies – not-for-profit organisations, charities, or public and government institutions, B2B or B2C. Any organisation will benefit from identifying opportunities of where and how they can reach more people and potential clients.
A good market opportunity assessment is always tailored to the needs and goals of an organisation or business and aims to provide as much objective data as possible to verify or signpost growth strategies with the greatest potential for each organisation. Additionally, when market opportunity assessments include an audience research component and strategic analysis, they will not only identify growth opportunities, but also provide a detailed roadmap of how to achieve these.
|Goals/aims...||Identify and evaluate… to create comprehensive strategy||Who can benefit...|
Increase profit/operating margins
Diversification of revenue
|Business expansion / growth opportunities||Start-ups and growing businesses
NFP organisations and charities
Public and government institutions
|Best ROI for any business development activity (from marketing campaigns to M&A due diligence)|
|Short- and long-term risk exposure: Evaluate viability of a business going forward (support a diversification strategy and business strategy / Model TAM/SAM/SOM, market share and potential projections given specific company or economic scenarios)|
|Evaluate and improve current business performance (supports specific product/service delivery and operations improvements, and strategic support for general business improvements (e.g. as a tool to identify which parts of a business should be sold off)|
What type of market opportunities are there?
Grow the existing business
Create new business(es)
Grow the periphery/ancillary of existing business
And although expanding their business is the aim of most organisations, it can be a real challenge to identify the best strategy to achieve this while sustaining current successes.
Market opportunity assessments lay the foundation to identify growth with the highest ROI (return on investment), whether that is through a single opportunity or a mixture of the three opportunity types.
Grow existing business
Achieve growth by increasing and focusing efforts to improve the existing business. This growth may come in the form of an increase in market share, a shift in pricing or geographical expansion.
This is the most straightforward type of growth; relying on a sound understanding of an organisation’s market, customers and competition to identify the areas where an organisation has the right to win and the strategy to realise this growth. For example, a market opportunity assessment could identify the locations and M&A targets for a successful expansion, consumer pain points and competitor performance issues for a gain in market share, or customer needs and behaviours as well as the messaging for a change in pricing that increases margins.
Although most organisations will be able to (and used to) achieve growth this way, it may not always be the option with the highest return on investment, especially in mature and highly contested markets. And while there is value in regularly exploring opportunities to improve and grow a business in its existing form, other types of growth are supplementary and may also increase the resilience of a business.
Case Study: Starbucks’ growth strategy
Over the last 5 years Starbucks has leveraged a number of strategies to continue driving growth within their existing, core business. They have achieved this by creating digital initiatives, introducing a new loyalty scheme and continued physical expansion – all underpinned by market and customer research insights. In this way, Starbucks has successfully managed to grow global sales by ~3% and revenue by ~10% year on year in an incredibly saturated market.
Case Study: Lidl’s growth strategy
Lidl’s fast and successful expansion across Europe over recent years, driven by a combination of fierce discounting, effective marketing and an exceptional understanding of their market, is a perfect example of geographical growth. Lidl has managed this through optimising its entire operation to be scalable and making strategic decisions based on granular and high quality insights. At times this has meant doing things differently, employees are paid a comparably high salary for the retail industry, but have to meet specific performance indicators. In 2017 Lidl’s international operations represented over half of their total revenue with sales of €46 billion and had grown by ~11% per annum since 2012.
2. Create new Business (es)
Achieve growth by diversifying and offering new products and services (connected or unconnected to the existing business). Such growth can, for example, be realised by entering uncontested markets (Blue Ocean Strategy ) or through the merger or acquisition of other businesses.
This type of growth, manages successfully, also ensures a significant diversification of an organisation’s revenue. This has the added benefit of increasing the organisation’s longer term resilience by limiting revenue exposure to changes in demand for products and services. If one kind of offering experiences reduced demand, another might not. Key to success is a detailed market opportunity assessment that formulates a detailed business strategy for the new product or service. Typically, this is also the most investment heavy and high-risk growth, as bringing a product to market or purchasing another bsuiness usually requires a sizable outlay, which – as research shows – fails to proivde a return in more than 70% of cases .
Market opportunity assessments can provide a detail model and projections in various economic scenarios to quantify the likelyhood and rate of returns, as well as detailed roadmaps for marketing strategies, prime M&A targets and flag any major risks (e.g., due diligence).
Case Study: IBM’s growth strategy
In 2010 IBM began a three-year buying spree, driven by an aggressive M&A growth strategy. During this time IBM acquired 43 companies, with each acquisition costing an average of 350 million USD. By integrating and pushing the offering of these companies though their existing, global sales channels, IBM was able to significantly accelerate the acquired companies’ revenues – sometimes by nearly 50% within the first two years of the acquisition.
Case Study: Procter & Gamble’s growth strategy
The merger of Proctor & Gamble with Gillette in 2005, is a perfect example of growth through a multi-facetted M&A strategy. This merger not only made them the largest consumer goods business in the world, knocking Unilever off its top spot, but also added a number of new products to their portfolio, while also driving global operational and sales growth. As it so happened, Gillette’s and Procter & Gamble’s existing global sales structures complemented each other; Gillette being stronger and better set-up in some markets than Procter & Gamble and vice versa. By combining and leveraging these existing operations and sales channels, Procter & Gamble drove a 25% net sales growth in 2006.
Case study: BMW’s growth strategy
In 2011 BWM launched the car-sharing business DriveNow, since then it has grown its operation across 31 cities throughout 14 countries with more than 4 million users. Early 2019 BMW established its service as the market leader through a merger with Daimler’s Car2Go and a rebranding to ShareNow. While the car-sharing model is still in its infancy and profitability requires scale, BMW and Daimler sees this new business as an investment the urban mobility market of the future and have invested €1 billion into developing multi-modal mobility as a service (MaaS) platforms
3. Grow the periphery/ancillary of existing business
Achieve growth by identifying value on the edge of existing business (Edge Strategy ). This type of growth may come in the form of monetising the existing offering differently, offering variations of current products and services, or creating ancillary offerings.
The aim is to leverage the existing investment in a creative way to minimise risk and maximise ROI for future growth, and thereby maximising potential profits. The identification of edge-opportunities depends on a deep understanding of the market/industry as a whole, the needs and behaviour of the organisation’s customers, as well as the value of the business’s existing offering and assets.
Case study: Amazon’s growth strategy
A significant part of Amazon’s meteoric growth over the last decade is driven by the way it has monetised the periphery of its business. In fact, Amazon’s success is a great example for Edge Strategy [TM] growth: Founded in 1994 as a bookselling website, it is now an e-commerce giant with over 300 million users and worth more than $800 billion USD. While more recent growth has been acquisition-based, the early transition from an online bookstore to general marketplace, as well as their current digital assistant, Alexa, are great examples of successful peripheral growth. Alexa is expected to generate around $19 billion of sales revenue (~5% of Amazon’s total revenue) by 2021.
Case study: Apple’s growth strategy
Apple’s App Store and iTunes are further examples of a company successfully increasing its scale of offering and growing revenue with limited amounts of investment and risk. In 2018 Apple took $47 billion USD in revenue from its App Store operations.
What does a market opportunity assessment entail?
A market opportunity assessment, like all strategic support, is tailored to the specific circumstances, industries, reach, etc. of each client, and can entail all or a mixture of the following elements
|Identifying growth opportunities||Market assessment||TAM (Total Available Market)||Quantifies the total market demand for a product or a service||Markets can be assessed in volume and value
Market assessments can be conducted bottom up, top down, or, ideally, as a combination thereof (with a both validating each other)
TAM SAM SOM have different purposes: SOM indicates the short term sales potential, SOM / SAM the target market share, and TAM the potential at scale.
|SAM (Serviceable Available Market)||Quantifies the segment of TAM within an organisation’s geographical reach and targeted by its products and services|
|SOM (Serviceable Obtainable Market)||Quantifies the segment of SAM that an organisation is likely to capture with its products and services|
|Trends & drivers||Understanding how the market will perform over the next 2-5 years|
|Market and performance modelling||Model future market movement and growth||Bringing together all available data (client data, market data, competitor data, trend and driver data) to model an organisations future growth|
|Increasing resilience||Risk assessment||Evaluate short- and long-term exposure to risk (at market and operational level)||Define a strategy for business resilience and sustainability||Future-proof an organisation beyond the usual, 5-year planning horizon (e.g. by improving resilience of operations, diversification of revenue, etc.)|
|Insights to realise / generate growth||Competitive assessment / benchmarking||How an organisation performs compared to its competitors and what the drivers / differentiators of these performances|
|Audience understanding / customer satisfaction research||Understanding customer satisfaction, behaviour, create customer personas|
|Marketing messages for growth / win market share||Actionable insights that inform marketing strategy and ensure a maximised ROI for marketing expenditure
What type of marketing and messaging will be most successful with specific customer (target) groups?
Which marketing channels are most successful?
|Customer base mapping / database||During a bottom-up TAM analysis, it can often be cost effective to map potential customers and create a database that can be directly leveraged by an organisation’s business development and marketing teams (targeting potential customers)|
|Competitor mapping / database||During a market assessment or competitive benchmarking exercise, mapping / creating a database of competitors can be a cost effective exercise|
|Identifying and shortlisting of M&A targets or potential partner companies||We can also create databases of potential customers, business partners, and shortlist acquisition/merger targets, etc.|
Research Methodology Elements: How do you conduct a market opportunity assessment?
The type of research used to identify and evaluate these market opportunities and their various elements breaks into two segments: primary and secondary research. Typically, most market assessments will employ a combination of these two insight generation methodologies.
o Focus groups
§ [Sessions can be recorded/viewed by client. Possibility to create montages for presentation, internal training or other purposes]
§ Can be used to gain a very broad understanding of a subject (markets, customers, etc.)
o Surveys (online, phone)
§ Closed questions, targeted objective (validate specific hypotheses, etc.)
· Existing client data analysis
· Desk research
o Tapping into reputable sources to collect
§ Relevant research/reports conducted recently
§ Articles / industry publications to provide colour and underpin things like trends/drivers
The questions to ask yourself to see if you should tell if you should conduct market opportunity research
Are we basing our current and long-term strategic decisions on objective data?
Are we confident that we are not missing out on market opportunities?
Is my organisation currently facing a challenging market?
These are the questions any organisation should consider. A market opportunity assessment can help with all of these; it provides hard and objective data to underpin strategic decisions, identifies and quantifies new opportunities and creates growth in challenging business environments. And as market opportunity assessments are always bespoke and can be as broad or as specific as a client needs them to be, they not only fit every budget but also add direct and significant value to any organisation.
If you have any questions or wonder whether a market opportunity assessment may help you and your organisation, please get in touch. We’re always happy to hold discussions to see how we might be able to help… and don’t worry, because – for us – a market opportunity assessment has to add specific and actionable value, we will be honest and clear about how we can and can’t help you during the initial discussion.