The Missing Market
Here’s a possible way out if you are looking to crack the missing market problem…
What’s the first thing that comes to your mind when you came across the term “MISSING MARKET” supposing you happen to be hearing it for the first time & haven’t heard of it at all over your academics?
If you are thinking that the market is inexistent / there is absolutely no demand whatsoever for product(s) / service(s) / good(s) leaving one with absolutely NO real market to cater to, you may be partly right.
Think of it as a market space that’s full of GAPS. There is a problem that has been identified & validated but no org. is taking a step towards building a solution, leading to a Solution Gap intern leading to a Revenue Gap as revenues can’t trickle in sans a viable solution that fits a problem space & resonates well with the targeted user groups of a given market.
Definition:
“A missing market is one in which there’s a whole wide gap leading to a failure to envision & build product(s) providing for the market when the demand seems to be reasonably fair to good”
Surprising isn’t it?
A missing market occurs when it is feasible for the exchange of a commodity to be Pareto-efficient, but in reality, practically such market just doesn’t exist.
Pareto efficiency depicts the possibility of making the markets better in some way for one person to say in the least without compromising the condition of anyone else involved across the value chain.
That is to say, if there is a commodity whose availability is (Q) 100 units at any given point in time & the demand for the same is about Q=10 units, the price (P) would be tending lower as that could be a case of OVER SUPPLY.
If there’s ever a situation where the demand jumps to say Q=50, it is only but fair to assume that the price (P) would see a sharp rise in proportion given the demand staying constant at Q=100. Equilibrium (which could be considered an ideal situation) where demand & supply meet equate to 50 is where the price could remain satiated around the median.
Over this example, to reach Pareto efficiency one ought to match the market demand (Q) producing an optimal level of goods without compromising on quality in sense of the word so as to make the situation better for the consumer. If one is compromising on quality producing sub-optimal goods, it could spoil the market equilibrium because the demand for the product may cease to exist over time. Who would buy a product with terrible reviews? Would you?
Look towards the graph above, the market would reach a state of equilibrium when the Quantity of a certain commodity produced is at a level that is in-line with & matching the consumption or demand. Supplying in excess would lead to a dip in prices given how the demand may soften up.
So, as for the case of a missing market, it not be true that the demand is entirely absent. There could be no org. interested in catering to that market. Nobody might have taken a step towards envisioning, building & launching product(s) towards solving problem(s) in that contingent so to speak, in spite of scoping & validating the problem thoroughly.
And, that could really run into multiple reasons. Let’s explore a few of them here.
CASE 1: Well-being & Welfare
Some products could be classified under the “public goods” header & are meant for the welfare & well-being of the masses. Usually executed by some certain middle-men by procuring the components from what could be an OEM, these products are labelled & largely meant for public use.
For ex: Smart Public Wi-Fi zone + Street Light
The reason this classifies as a missing market is one can’t selectively make the product available for users who have signed-up / paid. They are laid open to everyone who is a passer-by & meant for public use by the one who built it. Given the model these devices are built & installed, it’d take the synergy of more than one business owner & could run into logjams across multiple levels, which could act as a deterrent enough for many orgs. And that’s perhaps why many public places where one can see such devices installed, one would obviously come across a banner quoting a certain wing of the government or may be a corporate who volunteered under the CSR (Corporate Social Responsibility) initiative.
If you are a PM at one such org. that’s building these products, here are a few things you ought to remember:
You would face a significantly large cycle time if you are employed at such orgs. before the product can hit the market & the targeted user groups reap the value of the product(s)
Designing these & presenting them as a potential replacement targeting the betterment of the masses could work ONLY if you happen to be talking to the government directly (or) may be a corporate who is volunteering to undertake it as a CSR initiative
Leadership could commission the project(s) & allow them to be a part of the roadmap ONLY if they already have someone who understands the dynamics & is willing to go-ahead with it in spite of it
Selectively outsource each & every task (major / minor) right from the build to the execution so that your org. could focus solely on the product design & the UX
Craft better GTMs that don’t revolve around / depend too much on a third-party involvement which may reduce the tick size of your sale, but you’d be guaranteed of some sales to say in the least
CASE 2: Pricing Challenge
Can you really even think of survival at a bare minimum level if you choose not to charge for a given product? That’s totally impractical isn’t it? Although sounding impractical to PMs in the Tech space, there could be cases where your product is being used seamlessly by everyone around but you have no way of restricting that or tracking that either. Pricing could also become a challenge here for obvious reasons. Some may use it so rarely that it may turn out to be infeasible if you bring pricing into the equation there, when some others may still be using it regularly.
For ex: Products oriented towards Fire service, Police service & the related
The orientation of the market in these cases is to fall upon them / use them on a case-to-case basis only. Nobody would call a fire station or dial the helpline (911) on a regular basis. It is tied to a basic need & is also partly governed by law. Whether or not one is a tax-payer, one is entitled to these services under the basic civic rights / citizenship benefits. Charging the caller who is in distress could in itself be a curse in some cases. What are you going to say over phone? “Yes, I can sure put out the fire alright, but it is going to cost you per sqft.?”
This is one of the main reasons why many private orgs. may have stayed away from such scenarios leading to market failures. Establishing a brand-new fire-service may still be possible in some places. But, one can’t think of establishing an alternate police service, can they? It’s all built, functions & maintained by the govt.
Here’s how you can approach this situation if you happen to be in product bordering these contingents:
Start off with analyzing the data over a regular cadence, like for instance: one important metric to track would be no. of fire accidents / crime rate
Get down to analyzing the happiness quotient of the people throwing a lot of caution to the wind given the sensitivity of information here
Envision products that could act as a feeder to the existing workforce (police / fire service) so as to help them reduce the lead-time significantly ensuring that the products fit seamlessly well into the current ecosystem
Deduce a way towards hassle-free solution integration into their respective workflows
CASE 3: Externalities
Its not at all uncommon to think that the production / continual use of a given product could lead to some problems that could also swell over the years of usage. The problems could be well-known & pretty well documented as well, but a solution may not be in sight, neither a workaround. Given this situation, it may not altogether be feasible to stop the usage of the products so concerned either. This is a classic case of products being fueled by demand but one having to deal with all those side-effects, at times positive but most times negative.
For ex:
Demand for vehicles leading to increased production intern harming the environment which is NEGATIVE
Education provided to an individual could prove to be beneficial to a whole society / community which is POSITIVE
When positive externalities prove to work for the greater good of the population / masses, OTOH negative externalities tend to be damaging in more than one sense for not just humankind but also all the other living organisms. Please note that, it is the negative case that one may need to work towards mitigating when the positive side ought to be left just like that.
The tide seems to have turned in the last decade when it comes to corporates allocating some serious thought towards environmental hazards, trying to think of innovative ways to mitigate it & putting in an effort to embed these as one of the major goals. But prior to that, the scene was totally lopsided with goods / products being produced seamlessly sans a single thought being spared towards such problems.
So, the approach for you if you happen to be a PM here in orgs. working across these domains is:
Conduct thorough research & get down to the survey route to understand the awareness & also the impact (positive / negative) the products have had over the environment
Build content / campaigns targeted at improving one’s awareness about saving the environment in cases where the awareness seems to be low / lacking
Explore legalities around the markets & how the products have been envisioned towards abiding them
Tabulate problems that could be show-stoppers validating them thoroughly against the target market & build your ICP
March ahead towards solutioning & innovation, defining alternate ways to solve the problem
CASE 4: Market Control
Oligopolies & monopolies aren’t new to anyone. As for two corporate orgs. batting for pole position or just one org. ruling the roost for a long period, there have been multiple instances of it for centuries now across domains. And since time immemorial when one of them have a stronghold over a market it is going to cause an imbalance in pricing, which could lead to a market failure.
For ex:
Pharma org. coming up with a vital breakthrough of an essential drug & holding a patent on it
Railway food catering services being contracted to a single org. for a really long period of time
In both those examples above one can notice how there is a sustained demand for products in the market space but the gates of entry have been closed down given how one org. has the key to it & intends to hold it for a really long period of time. Now, if the org. that’s holding the key decides to rise prices significantly (the prices of food packets increased by 15% overnight not attributed to a rise in input costs / changes in cost of raw materials owing to govt. policies like for instance: the budget) giving itself an unfair advantage, there if no way anyone can do anything about it.
If you happen to find yourself doing product at one such orgs/ or its rivals here’s what you ought to remember:
Start off with collecting feedback from the market regarding their value perception
Understand the gaps & try to work your way through ideating towards bettering the whole experience for them
Pin on innovation here & see how you can carve a niche in towards boosting the C-SAT scores
Work towards consistently improving the quality of the products, which would help offset the sour feeling at times when price rises are inevitable
Please note:
Having said all of that, the one thing that could perhaps beat any of the 4 cases depicted here is INNOVATION. Using technology to one’s advantage, ideating towards making things better for everyone involved (the consumer, the governance / any other third-party, the businesses) & coming up with products that can revolutionize the way things work is a sure way to break-in to these contingents, turning missing markets into an advantage zone, a zone of monopoly thereof.