How Important is Data for the Product-Development Lifecycle?
You’ve seen it happen more than once–maybe even at your own company. A business releases a brand new feature in their software. Sometimes it’s a small change, but sometimes it’s such a huge addition that it shifts the business into a new market entirely. A few months of promotion leading up to the release, a few months of promotion after the release, and then, they’re at the one-year mark. How has the market received the new feature, have customers shown interest, has this interest converted into sales, are buyers happy with the feature, and are they even using it?
If the answers to these questions are mostly negative, it’s easy to point fingers for poor execution: The product design team drew up a poorly planned feature, or the development team didn’t engineer the product well, or the marketing department failed to communicate the value of the product correctly. While in many cases, several parties share responsibility for poor market reception, businesses often overlook a mistake that occurs even before the first line of code is written: a lack of proper research.
Market research is a fundamental aspect of product planning and development and goes a long way in increasing the chance of success and ROI of a project. It entails using data collection processes like tailored surveys, focus groups, and competitive analysis to help a company understand or identify customer and market needs across many different areas. This includes Business-to-Consumer (B2C) and Business-to-Business (B2B) interactions and helps it make strategic business decisions like adding, enhancing, or even sunsetting a product. It’s a process that requires humility because companies must accept that there are questions they can’t answer on their own, and many that they don’t even know to ask.
Successful market research also means accepting the possibility that the answers to the questions might be no. Some companies skip this part of the product development process entirely, instead leaping into a new arena based on hunch, bias, or arrogance, assuming they know what their customers want or overestimating what their company is capable of pulling off. Without the due diligence and data to back those beliefs up, product development projects can result in neutral or even negative reception and potentially millions in lost revenue. Of course, most companies don’t leap in blindly–many do some level of research before development. What truly affects the chance of success down the line is how deep this research goes and whether it includes both qualitative and quantitative data collection.
Let’s use an example in the financial software space. An invoice management provider is doing well in their target market, serving smaller enterprises with average annual revenues between $25-50 million. The provider’s success in this segment leads them to believe they will do well moving up market. In one scenario, they conduct a thorough market research study, gauging the features and functionality needs in the potential new market, scoping out the competitive landscape, and identifying weaknesses and gaps in their current solution and brand value.
They follow this research with a careful product and go-to-market strategy development while continuing to leverage the quantitative data from the initial study throughout the project.
Ultimately, they end up with a market-ready product that catches notice quickly and does well in its first three years, establishing the provider as a strong newcomer in their new market. In another scenario, the provider only runs a simple research project leveraging existing studies, in-house customer surveys, and their perception of the competitive landscape and market needs to support their decision. They make some minor updates to their products, jump into the new market segment within six months, and flounder. Not only do they fail to understand or attract customers in the new market segment fully, but they also hurt their overall brand value for years to come.
Quantitative market research means moving beyond instinct and limiting the effects of bias to support a business decision with numbers—-and numbers rarely lie. Many times, a business begins research and development with a set of known unknowns. Quantitative data research helps that business uncover their unknown unknowns as well, resulting in a much stronger case for or against a business decision.
Over the next few weeks, Levvel will explore where exactly market research fits into the product development lifecycle and how it benefits a company’s software when leveraged in synchronization with other critical product development stages, like user testing and design.