Market Research for Software Products

Software product market research is one of the most important activities in any software business. Whether you have a clean-sheet startup company or a multi-billion-dollar industry giant, this is crucial. It matters not whether you produce on-premise products, SaaS, Open Source, mobile software, etc. Building products that meet marketplace needs and that the target audience will want to buy is fundamental to the business. If you don’t get this right, everything else is a detail, and success is quite unlikely.

Many things go into ultimately fulfilling these needs, but it all starts with market research. It seems to be the type of activity anyone believes they can do. Talk to a few current or potential customers, ask them what they want, and go back and build it. Rinse and repeat. Right?

Well, not really. Anyone can indeed do it–poorly. This is one of the areas that looks simple on the surface. However, in my experience, the ability to conduct this activity skillfully is one of the most scarce attributes in the technology business. So what does it take? How do you conduct market research so that your company will have a good chance to produce competitive or even market-leading products? Here are a few things to think about:

Software Product Market Research Key Factors For Success

• Start market research even before you start building production code. Especially in startups driven by technologists, the tendency is to start with an idea driven by technical capability or need. This can be great! But it’s important to conduct, at a minimum, some initial validation in your target market before you go too far. This step can help reduce the possibility of a “false start”.
• Feel free to use existing products as a benchmark in this early research, unless you’re building something revolutionary. In the cases of revolutionary technology discussed before prototypes, comparisons with existing products can be difficult for potential users to understand.
• Early on, define your target market as tightly as possible. This will help you conduct research with the RIGHT people. This approach will waste the least time, increasing your odds of early market success.
• Get to know the market size, price sensitivity, technological competence, etc., and other attributes of your target market early on. This will help frame your early research discussions with prospects.
• Within the target market you have defined, strive to speak with diverse customer types within your market. Use attributes like geographic locations, company sizes, typical market adoption stages, etc.
• Most folks tend to focus on big customers. They mean more, and their feedback should be weighted accordingly. But in most cases, understanding the full market diversity will maximize your overall return.
• This may be the most important point of all. You absolutely MUST eliminate your own biases! Good market research is a search for the truth. It’s human nature (and a big danger) to use research activities to validate the ideas you already think are great. The ability to separate personal feelings and beliefs from marketplace needs is a key skill of great product planners/managers.
• Great market research isn’t just a function of adding up the “whats”. What is usually most important is to understand the “whys”. Customers often cannot rationalize future technological possibilities with what they need today or their true long-term pain points. So they frequently ask only for incremental features/improvements relative to current products. Customers often don’t even realize, or at least can’t elaborate on, their long-term pain points. They’re too busy just trying to keep their heads above water, which leads to short-term thinking.
• I’ve found “the whys” vary greatly by their psychographic market adoption profile( early adopter, late adopter, etc.). So it’s important to know and understand who you’re talking to.  Because of this, the big payoff is in understanding customer business processes and their biggest problems. Then, using this insight in combination with technology, produce a product that brings the customer a great leap forward. If you understand the “whys,” you’ll be far ahead of most researchers who never get past the “whats”.
• The question of who should conduct the research can be controversial in some companies. Professional Product Management should take the lead in most cases (if you have them). It can also be helpful to include the software developers as well. Including the developers in early research can help get their buy-in on the results (which is a contentious activity in many software companies). They can also add real value to the research by asking questions from a different viewpoint than the marketing folks.
• In some places, there is controversy about particular research techniques used. Whether to use quantitative methods such as surveys, formal qualitative methods such as focus groups, or informal meetings with prospects and customers. This is a longer discussion; the “right” answer depends on many factors. This includes budget, market size, technological complexity, and much more. In most cases, I lean toward informal customer meetings as my primary method in a software business. The key thing to remember is that when conducting quantitative or qualitative research, formal or informal, always be OBJECTIVE.
• Lastly, if possible, don’t set a “hard” end date for the research. Especially when using informal methods, the path to “truth” is sometimes long and includes several forks in the road. It’s important to continue until you’re comfortable that you’ve gotten results you can bet on.

That’s what I think it takes to optimize software product market research activities in software-based product companies, such as SaaS. Many have done this well, and others not so well.  Please post your personal story, questions, or comments in the comment section below to continue this discussion.

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