8-Step Market Assessment

This is a framework that we are using at a-connect in market assessment projects, particularly for pharmaceutical clients. They often look at new drugs under development, and have to make an evaluation of the market potential, various treatment options, size of the market segments, and pricing. The objective is not only to come up with a proposed product positioning, but also with a financial forecast which would then inform licensing or acquisition discussions. But the framework applies to other industries just as well. It works in parallel on financial and non-financial aspects of assessing a market, starting with broad outlines and zeroing in on specific findings.


Step 1:

The broad market assessment typically consists of a high level quantitative and qualitative overview, including key definitions, what’s in scope / out of scope, important adjacencies, a high level value chain (who are the main stakeholders), a technical understanding of the proudcts and solutions offered, as well as an initial overview of segments and competitors.

Step 2:

The next step in the analysis is a thorough understanding of the customers and their needs. In assessing a drug candidate, this would include an evaluation of various treatment options and a „patient journey.“ A similar approach works in other sectors, where a thorough understanding of customer needs (and how they fill them today) is important.

Step 3:

In a third step, the competitive landscape is being analyzed, reviewing the attributes of key products that are either already on the market or in development, and evaluating the importance of these attributes. This can take the form of a high-level qualitative assessment, or be supported by detailed quantitative market research.

Step 4:

Based on the competitive assessment performed in Step 3, a product profile and positioning is developed, that describes the optimal value proposition of the product. This profile is tested again through interviews or market research.The goal is to understand the attractiveness and drawbacks of the product in a customer’s mind, and to explore potential uptake of the product in the different market segments identified in Step 2.

Step 5:

In parallel to Steps 1 to 4 above, the starting point for the revenue forecast is a comprehensive market model. In some instances, publicly available sources (e.g. analysts covering a specific market) provide a base model with key drivers (customers, penetration / adoption, number of uses, units sold, price, etc.), and at least a starting assumption on key segments. In other instances, a new model has to be developed from scratch, informed by the findings from Steps 1 to 4.

Step 6:

An important element of a financial forecast ist o make the right assumptions on market share, and how it may evolve (and hopefully grow) over the forecasting period. This can in ist simplest take the form of a qualitative evaluation based on interviews with key market experts. More sophisticated models with take into account various factors such as price elasticity of demand, forecasted market entries and product launches, etc. Large quantitative survey and/or conjoint analyses may be necessary for this.

Step 7:

In regulated markets like pharmaceuticals, pricing assumptions play a key role, and are often hard to preduct. In other markets, assumptions on pricing (net realized prices) are more straightforward, informed by benchmarks for existing or similar proudcts. Unique product attributes may provide the ability to command a price premium, which is important to take into account here.

Step 8:

Finally, all the assumptions about market size, segments, shares and pricing obtained in Steps 5-7 are integrated into an overall revenue forecast in a user-friendly Excel forecast model that can be easily updated. All assumptions are clearly laid out, labeled and sourced. In addition to point estimates for revenues, it is important to also provide sensitivity analyses (either simple scenarios, or sophisticated Monte Carlo-type simulations).