Market analysis for product software
Encyclopedia
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's 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.
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.
, 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 decision.All of these subjects are useful for determining target groups (also known as market segments).
Moreover, 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 increase the difficulty of rushing software products to market. There are some ways to relieve this tension of time-to-market.The best way for a software company to remain competitive, is by finding ways to include quality assurance activities during software development and at the same time find ways to reduce the time-to-market. This is one of the key management decisions during product development facing software companies.
Customers can be divided into two groups, consumers
(an individual) and corporate buyers. Consumers generally buy software for personal use on their home computer. While they behave as individuals, they are influenced by the environment and the other people around them. For consumers, psychological traits, such as risk-taker versus risk-avoider, play a great role in major decisions by the individual. Many other factors play a role for corporate buyers of product software. Businesses buy product software usually as an indirect material to help them increase the effectiveness of their process. There is a complex interaction of individual and group goals working during the decision-making process that are constrained by available resources. A technique for dealing with the buying process in a firm is the buying center
.
Many techniques are used to provide information on customers. Some examples are:
Competitor analysis is especially important when it comes to new product introductions. There are many advantages, especially for revenue, for a software company that can show major enhancement to software or be first to market (Messerschmitt & Szyperski, 2004). This makes competitor analysis particularly important because it can help a firm decide which new product opportunities to pursue by what the market size will be following the actions of other competitors. Research has shown that knowledge about the competitors’ strategies is very important to help distinguish failures from the successes in product software (Cornish “Product”, 1997). Knowing what is going around in the software industry is essential for software firms to be successful. Firms need to know which other software products their product must work with (eg operating systems) to provide the most usability for the customer. Therefore, developing and sustaining of architectural control can lead to competitive advantage (Messerschmitt & Szyperski, 2004).
One author has made a list of industry characteristics for product software that affect marketing strategies: emerging fragmented industry, end user competition and imitation, high level of research and development intensity, high degree of integration with hardware, high degree of specialization, complementary with hardware and computer services, high level of maintenance and marketing costs (Rao & Klein, 1994). Competitor analysis is available to explore these areas and others in greater depth to help a software firm determine their future goals and strategies.
Some techniques to conduct competitor analysis are:
Market analysis
A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and this in turn of the global environmental analysis. Through all these analyses the chances, strengths, weaknesses and risks of a company can be...
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
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
discipline. Many types of market research
Market research
Market research is any organized effort to gather information about markets or customers. It is a very important component of business strategy...
techniques are used to gather this information. Market analysis plays a large part in explaining the current situation of a marketing plan
Marketing plan
A marketing plan may be part of an overall business plan.Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use....
. 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's 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 softwareMarketing strategies for product software
Marketing strategies for product software assist software firms to determine the type of market analysis that is needed for decision-making. Two general strategies that are well known in the marketing discipline are:* marketing mix; and...
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 intelligenceMarketing IntelligenceMarketing Intelligence is the information relevant to a company’s markets, gathered and analyzed specifically for the purpose of accurate and confident decision-making in determining market opportunity, market penetration strategy, and market development metrics. Marketing intelligence is...
- marketing decision support systemsMarketing decision support systemsA marketing decision support system is a decision support system for marketing activity. It consists of information technology, marketing data and modeling capabilities that enable the system to provide predicted outcomes from different scenarios and marketing strategies, so answering "what if?"...
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. To analyze customers, aspects such as demographicsDemographics
Demographics are the most recent statistical characteristics of a population. These types of data are used widely in sociology , public policy, and marketing. Commonly examined demographics include gender, race, age, disabilities, mobility, home ownership, employment status, and even location...
, 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 decision.All of these subjects are useful for determining target groups (also known as market segments).
Moreover, 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
Risk analysis (Business)
Risk analysis is a technique to identify and assess factors that may jeopardize the success of a project or achieving a goal.This technique also helps to define preventive measures to reduce the probability of these factors from occurring and identify countermeasures to successfully deal with these...
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 increase the difficulty of rushing software products to market. There are some ways to relieve this tension of time-to-market.The best way for a software company to remain competitive, is by finding ways to include quality assurance activities during software development and at the same time find ways to reduce the time-to-market. This is one of the key management decisions during product development facing software companies.
Customers can be divided into two groups, consumers
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
(an individual) and corporate buyers. Consumers generally buy software for personal use on their home computer. While they behave as individuals, they are influenced by the environment and the other people around them. For consumers, psychological traits, such as risk-taker versus risk-avoider, play a great role in major decisions by the individual. Many other factors play a role for corporate buyers of product software. Businesses buy product software usually as an indirect material to help them increase the effectiveness of their process. There is a complex interaction of individual and group goals working during the decision-making process that are constrained by available resources. A technique for dealing with the buying process in a firm is the buying center
Buying center
A buying center , in marketing, procurement, and organizational studies, is a group of employees, family members, or members of any type of organization responsible for finalizing major decisions, usually involving a purchase...
.
Many techniques are used to provide information on customers. Some examples are:
- Customer satisfaction dimensionsCustomer satisfaction dimensionsOne of the indicators of a company’s health, customer satisfaction, can be found through market analysis. Satisfied customers usually lead to more sales and profit, making it a strong indicator of company performance...
- Consumer surplus for software productsConsumer surplus for software productsConsumer surplus can be calculated differently for software products than for other products. Customers tend to buy products with greater consumer surplus. Software companies should know what measure in their market analysis to determine their consumer surplus so that create products that are...
- Database marketing technique for software products
Competitor analysis for product software
The final major area of analysis in market analysis is the industry itself. By knowing what is happening with competitors, a software company can adjust strategies to be more successful in the marketplace. Companies should know about market share percentages, strength and weaknesses, industry structure, and strategic groupings among other things to get a good picture of what the competitive environment is like. Strategic groupings can be in the form of alliances between product software firms.Competitor analysis is especially important when it comes to new product introductions. There are many advantages, especially for revenue, for a software company that can show major enhancement to software or be first to market (Messerschmitt & Szyperski, 2004). This makes competitor analysis particularly important because it can help a firm decide which new product opportunities to pursue by what the market size will be following the actions of other competitors. Research has shown that knowledge about the competitors’ strategies is very important to help distinguish failures from the successes in product software (Cornish “Product”, 1997). Knowing what is going around in the software industry is essential for software firms to be successful. Firms need to know which other software products their product must work with (eg operating systems) to provide the most usability for the customer. Therefore, developing and sustaining of architectural control can lead to competitive advantage (Messerschmitt & Szyperski, 2004).
One author has made a list of industry characteristics for product software that affect marketing strategies: emerging fragmented industry, end user competition and imitation, high level of research and development intensity, high degree of integration with hardware, high degree of specialization, complementary with hardware and computer services, high level of maintenance and marketing costs (Rao & Klein, 1994). Competitor analysis is available to explore these areas and others in greater depth to help a software firm determine their future goals and strategies.
Some techniques to conduct competitor analysis are:
- Brand strength analysisBrand strength analysisBrand strength analysis describes efforts to determine the strength a brand has compared with its competitors.-Software companies:Software brand strength is hard to measure accurately. Techniques from competitor analysis can be used to compare companies over time. Crowley and Zajas have analyzed...
- Market Share AnalysisMarket share analysisMarket share analysis is an important part of market analysis and indicates how well a firm is doing in the marketplace compared to its competitors.Givon, Mahajan, and Muller have researched spreadsheet and word processing software firms to give a clearer image of how to determine market share in...