MaRS Library Assessing market maturity for technology startups
One of the most critical decisions that early-stage technology entrepreneurs must make is to determine the maturity of the marketplace they plan to enter. The reason this decision is so important is that both product and marketing strategies must change as a market matures. In this context, maturity refers to whether direct competitors are already active in the market.
Market maturity: New or existing?
A truly innovative product will solve a customer problem that has not been solved before, often because the technology to do so did not exist or was inadequate for broad market adoption.
The market is new when such an innovative product is launched, and so:
- The product category (the supply side) doesn’t exist
- Potential customers (the demand side) are not yet aware that their problem could be solved
In a new market, customers are not immediately ready to buy. A technology startup must be prepared to create the market by:
- Ensuring the acceptance of its technology
- Educating its most likely customers about its potential.
Both processes take time.
A product that enters an existing market faces a different set of challenges, namely those posed by having competitors that
- Already have customers
- Are known in the marketplace
In an existing market the product and marketing strategies differ than when the market is new. The product category exists, and this also means that the media are aware of its existence.
Challenges in an existing market
The presence of competition means that several potential customers are already aware of your competitors’ products and may already be using them.
As a new entrant in such a market, you must either
- Win customers from your competitors
- Find untapped market segments to go after
Assessing the maturity of your market is a complex task. Prominent authors Geoffrey Moore and Steven G. Blank have created analytical frameworks with the purpose of simplifying the process, as has IT advisory firm, Gartner Inc. Each framework is described below, along with links to articles that provide further details.
The technology adoption life-cycle (TALC) curve
The TALC is a tool created by Moore to help technology marketers understand the marketplace in which they operate. Moore first described the TALC in his book, Crossing the Chasm (1991), and it has become a well-known concept across most technology-driven markets. The main criticism of the TALC is that it is complex to apply in practical situations; however, in its defence, it must be acknowledged that the complexity usually reflects the reality of the marketplace, something marketers should not ignore.
Market type assessment framework
The assessment of market type is a framework described by Blank in his book, The Four Steps to the Epiphany (2005). Compared with the TALC, the determination of market type is a somewhat simpler process, and to a certain extent, Blank has incorporated some of the key points from Moore’s framework. A possible weakness of the tool is that it is a somewhat crude approach, but for early-stage entrepreneurs this often proves more helpful than something complex.
The hype cycle
Developed by IT research firm Gartner, the hype cycle is a tool for assessing the maturity of a technology or application. The hype cycle is primarily an instrument for buyers and users of technology and less so for marketers. The tool’s strength lies in that it is based on years of experience and is regularly updated by Gartner analysts on a wealth of technology categories in the IT space. Conceivably, the hype cycle could be applied to other technologies, but as it is a proprietary tool, there are limits to its application.
What early-stage tech startups need to know about market maturity
- If you have a truly innovative technology, do not expect immediate broad market adoption. In the beginning, your market will consist of only a few, often identifiable, customers.
- Your job is to work with those first customers to create a more robust product and identify a market niche to pursue as your initial market focus.
- Continue to identify new niches that can be approached through additional marketing and sales and by evolving the product’s value proposition to match the needs of those niches.
The exact implications of the market maturity for your startup depends on how disruptive your offering is and the nature of market, both of which you need to assess before making further marketing decisions.
Blank, S.G. (2005). The Four Steps to the Epiphany. Self-published: Cafepress.com.
Moore, G. (1991). Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. New York: HarperCollins.