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Of Urban Legends and Mythical Markets

The line between fact and fiction isn't always clear. Case in point: urban legends — stories that circulate, mutate, and are passed around as "true" — the proverbial "it happened to the friend of a friend." But it's not only urban legends that circulate and get related as fact. There are any number of statistics out there that proliferate like wildfire and become the accepted number — often quoted and rarely verified, even though it's wrong.

The Market That Wasn't There

Recently, Trendlines was asked to conduct limited market research and investigate a potential market for a client. There was very little hard data on the market size except for one figure repeatedly quoted by numerous sources. It was the "accepted" market size. At the same time, we conducted numerous interviews with various stakeholders in different parts of the value chain and attended a major industry trade show. Much to our concern, the responses didn't match up. What we were hearing about the market potential didn't correlate at all with the stated number. Responses indicated that there was a major discrepancy between the "accepted" figure and what was really happening on the ground. Interviewees were downright skeptical when we presented the concept. Were we dealing with an urban legend?

We dug deeper until we finally found the origin of the number. It turned out that the calculation for the annual market size was extrapolated from one calendar quarter in one U.S. state. Clearly, the number was grossly inflated. Our analysis of the estimated market size was one-tenth of the accepted market estimate. Having heard the results of all our interviews and our final assessment of the market potential, our client decided against pursuing this market.

Says Who?

We should know better, but many of us still fall into the trap of thinking that because it's in print, it must be reliable. Even reporters at leading newspapers don't always get their facts straight. It's not uncommon for organizations to exaggerate projected sales or market sizes. Information can be incorrectly reported, biased, or deliberately misleading. That's why the source of the information is so important: Is it reliable and up to date? Does the author list the sources used? Can the information be verified from other sources? Do key industry commentators agree?

How do you go about rating online information? Start by reading "Evaluating Information Found on the Internet" for some valuable guidelines on rating the information according to a number of factors including authorship, publishing body, point of view or bias, verifiability, currency, and more.

What's the Question?

Do you want to identify industry trends, product leaders, or new technologies? Are you trying to identify potential distributors or strategic partners in a specific market niche? Are you trying to establish the market need and interest for a specific product or service?

Depending on the questions you want to ask, the sources you decide to use may be very different. The Internet is convenient, but don't rely on it as your sole source of information. Check out industry associations, specialized libraries, and trade journals; talk to people in the know. While we've grown used to having access to free information online, it sometimes pays to purchase the right information. Information services such as Lexis-Nexis now offer "pay as you go" options that enable you to get information on a specific topic without having to sign up for an annual membership.

Asking the right questions can be a crucial part of getting relevant answers. "Watch for hidden assumptions," says researcher Mary Ellen Bates, citing a case of a searcher who was asked to find out specific features consumers in Latin America looked for when shopping for washing machines. It turned out that consumers had enough problems with sporadic electricity and the high cost of new appliances. Apparently, most people were happy to find a 10-year old machine in working order and a reliable electricity supply. "Who cares whether it's front-loading or top-loading? Sometimes the questions themselves can't be answered because they presuppose a strong economy or robust infrastructure, which may not be the case," notes Bates.

Stay in Touch

Keeping up-to-date with market trends, new technologies, and the continuously changing business landscape is hard work. Using paid-for news retrieval services and signing up for relevant industry newsletters can help you stay in touch. But useful as the Web and print publications are, if you really want to stay in touch with the market, there is no substitute for listening. Question everything. How many times have you heard: "But our research shows..."? What you hear often puts a different spin on what you've read. Keep talking to the people in your organization, to your suppliers, and to your customers. Researching and understanding your market isn't an on-off thing. It's an ongoing educational process. Start learning!