Ninety percent of new products and startups fail because their creators fail to account for a few key considerations before jumping into development. Namely:
- The product’s target audience or market
- Why potential customers would use this product over others available to them
To answer these questions, product owners, managers, and teams need to establish a clear understanding of what the customer wants.
Once all of that is done and the product development process is finalized, it’s time for the most important step in the process: actually selling the product.
To sell the product to its identified target audience, product owners need something to transform their offering into a market-driven product — something that people will line up to buy. That’s where the marketing requirements document (MRD) comes in.
Table of contents
- What is a market requirements document (MRD)?
- Market requirements document (MRD) vs. product requirements document (PRD)
- Why you need a market requirements document
- How to create a market requirements document
- Key takeaways
What is a market requirements document (MRD)?
A market requirements document (MRD) is a document that clearly addresses potential users’ and customers’ expectations or needs from the product or service in question.
The market requirements document is usually prepared by a product manager or a product marketing manager. It contains vital information about the product vision, potential business opportunities, competitors, and a brief description of features.
Market requirements document (MRD) vs. product requirements document (PRD)
A market requirements document is different from a product requirements document (PRD), which generally addresses the development process and helps cross-functional teams to collaborate on building the product.
An MRD, meanwhile, contains information about the market and opportunity. As such, the MRD is created before the PRD.
The table below outlines the difference between what’s included in a market requirements document vs. a product requirements document:
|Market requirement document (MRD)||Product requirement document (PRD)|
|Product features at a high level||Who are the users?|
|Product vision||What is the end goal for the product?|
|Market opportunities||What is the value add?|
|Competitors||What does the user workflow look like?|
|Reusable template across products||How to measure success after launch?|
Why you need a market requirements document
When creating a product, the product team might have multiple tasks or features to execute with limited resources. In such scenarios, it is crucial to prioritize tasks to optimize the available resources and to avoid duplication of efforts.
A MRD addresses all these issues and gives the team a clear direction to move forward — a plan that ties in the product strategy, customer demands, and market opportunities.
How to create a market requirements document
A marketing requirements document consists of seven key components:
- Executive summary
- Product vision
- Target market
- Competitive analysis
- High-level capabilities
Imagine we’re building a product (let’s call it X) to help musicians find jobs and connect with other artists in their area. We’ll refer to this example as we explore in greater detail each step in the process described above.
1. Executive summary
The executive summary describes the issue the product aims to solve.
When writing an executive summary, you should consider the customer’s most obvious short-term needs as well as any issues they might face in the immediate future. The MRD owner should be able to succinctly define the assumptions, ideas, and customer needs in the executive summary.
An executive summary for our example MRD might look as follows:
The gig economy is expected to reach close to 80 million workers by 2023. Moreover, gig workers in the music industry are growing at a rapid pace, with more and more artists and performers looking for jobs and peers to play music with.
With our product, X, we aim to provide a platform to local and lesser-known music artists to showcase their talents through videos and images and create an easily searchable portfolio for potential employers.
X will also enable musicians to find other local artists to connect with and create a strong community. The current options depend heavily on chance and are not tailored to the music industry; this provides a unique opportunity for X to capture a significant portion of the market.
2. Product vision
The second step in creating a marketing requirements document is to define the product vision. What unique factors differentiate your product from others that aim to solve the same problems?
When defining the vision, try to think of it as an elevator pitch. The primary objective is to help people understand the core idea.
For our example, the product vision might be something like:
X aims to be a one-stop shop for local and amateur music artists to showcase their talent to peers and potential employers while connecting with them to form a tight-knit community. X provides artists with a structured way to create a portfolio and helps optimize their chances of others finding them using keywords and machine learning technology.
3. Target market
This part of the marketing requirements document mainly talks about the market and industry data as it relates to your product.
Some key points to keep in mind include market category, market size, key user segments, personas, competitors, etc.
The target market section for our example market requirements document might look as follows:
X is a product in the entertainment industry, with flavors of a social networking website. It has tremendous potential, being in a market that is expanding exponentially and currently valued at over $50 million.
Potential user segments include local artists looking to meet other artists, artists looking for gigs to perform at, and potential employers such as bars and restaurants who are looking to hire musicians for a short period of time.
While X does not have a direct competitor, social networking sites represent significant competition to X. Other than the social platforms, LinkedIn and other job search portals are also potential competitors for X.
Once you’ve defined the target market, the next step is to define in detail the personas who you expect to use the product. While defining personas, we can go as deep as defining a pseudonym for the persona and ascertaining what their experiences might be — what jobs do they do? What is their education? What challenges do they face? What goals do they hope to achieve using our product?
You can have multiple personas for a single product.
One persona for our example market requirements document might look like this:
John Doe is a 22-year-old senior who likes to play keyboard and piano. He has been playing these instruments for about three years and is looking to start playing publicly.
While he does not intend to take on playing these instruments as a full-time job for now, he would like to pick up gig work if possible. He finds the platforms he is currently using to be unstructured and difficult to navigate. He likes to arrange his videos and clips in a certain way so that it’s easier to share with his peers.
5. Competitive analysis
The competitive analysis section of the marketing requirements document focuses on the other possible options that your customers have to solve their pain points.
Understanding all the current players in the market can help you differentiate your product from the competition.
A competitor for our MRD example might be described as follows:
Instagram is one of the biggest competitors for X. Instagram is an American photo and video sharing social networking service founded in 2010 by Kevin Systrom and Mike Krieger that makes it easy to capture, create, and share what you love.
Instagram’s mission is to empower people to build a community and bring the world closer together. It really benefits from its social aspect, and economies of scale and scope are its biggest advantages.
Instagram generated an estimated $47.6 billion revenue in 2021 and is only growing in terms of the number of users and revenue. What’s most compelling to users is the ability to be creative and share their day-to-day lives with their friends and family.
Check out these free competitive analysis templates to help you complete this section of your market requirements document.
6. High-level capabilities
This section of the MRD focuses on your product’s features and how they aimt to help users solve their problems.
Keep in mind that this description should be high-level; you don’t need to create a detailed explanation of the features.The goal of this section is to help teams align internally when deciding what to build.
High-level functionalities for our example might include the following:
Music artists want to take matters into their own hands when looking for jobs instead of depending on a social media site’s recommendation engine to reach their target audience. Currently, they struggle to find a platform that allows them to build their portfolio in a structured way so that they can share it to potential employers.
X provides key functionalities to help users efficiently display their talent such that they are easy to find. It also gives them a platform to find peers around their area to jam and play music with to build a stronger community.
When creating a market requirements document, it’s important to define key metrics and objectives to monitor the success of the product. This can help gauge the impact of the product and usually goes hand-in-hand with the business strategy.
For our example:
An X membership will be priced at $15 per month for new users. X will also have a peer-to-peer model when the membership fee drops down to $10 if referred by a current member.
We project the revenue associated with X to be $500,000 for the first year and $1.5 million for the second year.
The long-term goal for the product is to have higher user acquisition and leverage economies of scale to grow revenue and the number of users posting on the platform.
Defining a strategy based on the requirements of the market is an important first step in the process of product development. Having a deep understanding of who you are building for and what you are optimizing for helps the teams working on the product stay aligned to the goal.
Cross-functional teams need a common theme to work off of, and the marketing requirements document does just that.
Following the steps and examples mentioned above is a great way to build your MRD. You can use the examples as a structural framework to write your own MRD.
Featured image source: IconScout
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