Mind to Market

Tuesday, May 22, 2007

Market Risk

In a previous blog I pointed out three major risks a startup company faces: Management Risk, Technical Risk and Market Risk. I want to dig a little deeper into those risks and have selected Market Risk to start with. I further divided the Market Risk into three risk categories:

1. high risk market
2. lower risk market
3. transitional market

The high risk market would be a poor choice to enter unless there were changes in the market. The lower risk market mainly requires a marketing campaign to get the word out on the product. The transitional market would be a poor choice to enter unless modifications were made to the new product thereby transitioning the market from high to lower risk.

This outline was originally created with a software product in mind but other products may fit the same pattern.

1. It would be very difficult to enter a market with a new product if:
  • An existing product meets the needs of the customers.
  • Customers do not currently do what the new product does.
  • The new product does not provide sufficient value to the customers for them to buy it.
  • Customers find that building their own product to do what the new product does is more cost effective.
  • There are not sufficient numbers of paying customers to make the new product commercially viable.

2. The new product can be successfully introduced to the market if:
  • The new product will help customers but they do not understand the product.
  • The new product will help customers with a task that customers are not aware of doing.
  • Customers are not aware of the new product.
  • Customers have invested in another product that does an inadequate job of satisfying them.
  • Customers perceive that the new product won't help them.
  • The new product will help customers but they have higher priority issues.
  • The new product is not in use by a sufficiently large community.

3. The new product should be modified before it can be successfully introduced to the market if:
  • There are regulations that the new product must meet.
  • There are administration issues that the new product must overcome.
  • There are integration issues that the new product must overcome.
  • There are technology issues that prevent the new product from being used.
  • The new product has not reached a sufficient level of development.
  • The new product does not satisfy a sufficient number of the customer's requirements.

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