Market Analysis for Product Software

Market analysis for product software

Market analysis for product software consists of a number of techniques that allow an organization to collect and disseminate information from their external environment of software products for use in determining their market strategy and actions. For example, market analysis helps to determine critical strategies for new software products such as time-to-market length, creating product differentiation, creating and preserving supplier credibility, developing effective distribution channels, forming relationships with large customers, and managing market efforts (Igel & Islam, 2001).

This topic has its roots in marketing discipline. Many types of market research techniques are used to gather this information. Market analysis plays a large part in explaining the current situation of a marketing plan. Marketing is very important to new product development because software products have a short average lifespan of five years and incur 75% of the costs during the research and development phase (Atkinson et al, 2004). Therefore, including market analysis information early on in the product lifecycle can ensure resources are not wasted.

It is a wide field so this article is a sample of scientific work that has linked the fields of marketing and product software. This consists of research in the fields of general market, customer, and competitor analysis which can be seen as processes that are hierarchically grouped under market analysis in the meta-process model from the figure below. There are many processes that can be used for each of these three processes to acquire information from the market. This article only lists a selected few for each.

General Market Characteristics for Product Software

Analysis of general market characteristics should lead to information about the market such as definition, size, trends, and market segmentation. This analysis is needed to help develop and maintain marketing strategies for product software and overall business strategies. The covered methods and techniques to obtain this information are Porter’s five forces model, risk analysis, marketing intelligence, and marketing decision support systems.

Porter’s five forces analysis is useful for software since it highlights many important factors that will be discussed in customer and competitor analysis such as switching costs, brand equity, product differentiation, and price of total purchase.

risk analysis for product software

marketing intelligence

marketing decision support systems

Customer analysis for product software

Customer analysis is needed to predict behavior and create demand forecasts for product software. It is also necessary in the development of new products to help select the most profitable choice. One author states that a key issue for new software product development is creating links between customer needs and the product design specifications (Kekre et al, 1995). To analyze customers, aspects such as demographics, buying motivation, and expectations are studied. Besides basing behavior on software only, customers also look at the network externalities from software packages, such as manuals, add-ons, and training courses, to make purchase decisions (Shurmer, 1993). All of these subjects are useful for determining target groups (also known as market segments).

Additionally, this information helps determine the optimal solution to the tradeoff between time-to-market and quality. Market analysis results are important to help establish an optimal point between the tradeoff of time-to-market and quality. While customers would love to have a short time-to-market with lots of features and high quality, it is impossible for the vendor to find financial success in this scenario. Therefore, a managerial decision must be made on the resources and objectives for new product development. Risk analysis techniques can be used to manage this trade-off decision (Carmel, 1995). With the heavy competition in most software product markets, gaining early market acceptance is essential to achieving firm success (Trondsen, 1996). This is not easy to do. Product complexity and rapid changes in requirements (see also Requirements management processes) increase the difficulty of rushing software products to market (Ramesh et al, 2002). There are some ways to relieve this tension of time-to-market. Following market rhythms with versioning can reduce this pressure by allowing incremental innovation (Carmel, 1995). Versioning also gives flexibility to quality factors since problems can be repaired in the next release (Ramaesh et al, 2002). In the end, quality level perceived by customers is can be influence by their