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Understanding the Market:

To be a successful product manager, the first thing you need to have is an understanding of the external and internal factors within your industry.

Following are a few methods used to understand the industry better over several years

  • Environmental Analysis - Environmental analysis is the tool that helps you in understanding the environment in which your product belongs. Doing this not only enables you to get a complete overview of the market's current situation but also get an idea of your product's future performance. Factors to consider while performing environmental analysis are - Demographic factors, Technological factors, Sociocultural factors, Economic factors, Political and Legal factors.

  • Porter's Five Forces Analysis - It is an analysis tool that uses five industry forces to determine the intensity of competition in an industry and its profitability level. Five forces are - Threat of new entry, Buyer power, supplier power, Threat of Substitute, Competitive Rivalry.

  • Competitor Analysis - A competitive analysis is the process of identifying your competitor and evaluating their strategies to determine their strengths and weaknesses relative to your product. Steps to perform a competitor analysis - Identify your competitors, Analyse the background of your competitors, Assess competitor business model, Evaluate strengths and weaknesses, Analyse the details and performance of your competition, Predict future initiatives.

  • Market Sizing - As a product manager, you need to have a clear idea about your product's potential, and you can do this by estimating the market size in which your product operates. 

There are three kinds of market size segments, let's discuss - 

  • Total Available Market (TAM) - Your total available market refers to the overall demand for the products or services your product caters to.

  • Serviceable Available Market (SAM) - Your serviceable available market refers to the segment of your TAM which you can reach.

  • Serviceable Obtainable Market (SOM) - Your serviceable obtainable market is kind of like your actual goal. This is how much of the market in your location you can realistically reach.

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There are two approaches to determine the size of your market - 

  • Top-Down Approach - From the entire market, you determine the number of customers and the level of consumption to arrive at the target market.

  • Bottom-Up Approach - You estimate the potential sales for a single business in the market and, from it, arrive at the total sales figure.

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