Product managers come in different shapes and sizes (i.e., specializations). Some PMs work on features execution while others focus on optimizing a particular business metric. However, if there’s one skill that is common to all product managers, it’s continuous market monitoring and research. That’s where a market requirements document comes into play.
The market requirement document is a strategic artefact that product managers usually write. It communicates the market gap and opportunity, the size of the market, competitors, customer expectations and needs, and the customer’s journey to the problem.
The MRD assists the product team in outlining and planning the market strategy. Having a comprehensive understanding of the market is essential when it comes to building problem-solving and innovative products.
What is included in a market requirements document (MRD)?
A market requirements document should outline several strategic areas that help the product team and upper management identify a potential market gap and customer needs.
A typical market requirements document answers the following questions:
- What market is the product targeting? Why do we believe it’s worth pursuing, and what metric(s) can we optimize by targeting this market?
- What is the potential revenue available from this market? What type of revenue?
- Who are the user personas in this market? How is the product suited to target these personas?
- What problems can we solve for these personas?
- How will we solve those problems? This explanation should not be as detailed as what would go in a product requirements document (PRD)
Market Requirements Document (MRD) Example
Let’s say you’re the product manager for a SaaS startup that produces marketing automation tools. Your company is considering building a new product vertical that helps your customers use marketing templates and activate them to save time when conducting marketing activities.
The complex marketing tools qualifier is the key because most marketing platforms require some deep knowledge of how to use them. You have identified market — marketing coordinators who have no technical background — that would benefit from a user-friendly, templates-based platform that lets them choose and activate the best template for their marketing campaign.
Let’s break down the five key elements we should include in our market requirements document.
1. Target market
What is the market you’re targeting and why is it worth pursuing?
You might determine, for example, that the market for this product spans multiple industries where complex marketing tools are commonly used. Then, you might identify a need among marketing coordinators in those industries for easy tools that work only around campaign automation templates.
2. Expected revenue
What is the potential revenue available from this market?
The revenue number you arrive at might take several forms. For example, you can estimate the number of users or licenses your company will be able to sell over time and then multiply that number by the monthly fee you plan to charge. This will give you an estimate of monthly recurring revenue (MRR).
3. User persona
Who are the buyer and user personas in this market?
In our example, the users would be entry-level marketing coordinators at large and mid-sized organizations that pay for marketing tools.
4. Problems to solve
What problems do these personas face that the product can solve?
Let’s say you determine that these user personas have difficulty using complex marketing tools and choose the best marketing automation campaign for their services/products. Their companies have not purchased apps specifically for this function before, so these marketing coordinators have spent so much time learning those tools and applying them practically. This is difficult and resource-consuming for the organization.
5. Proposed solutions
How will you solve these problems?
To answer this question, compile a short description of the features or summaries of the types of functionality your product will need.
For a new marketing automation tool that is based on templates, that list might include:
- Campaign templates selection — Each template might contain metrics, goals, triggers, communication channels, and duration
- Basic analytics — Results from each activated campaign
- User permissions — Managers select the functionalities allowed for their teams
The market requirements document is an early-stage, living strategy document. It should remain high-level.
For example, the solutions section should include only brief strategic descriptions of the features you are proposing. Detailed discussions of each feature (and the user stories that go with them) should come later, only after your team has decided to move forward with the initiative and agreed to bridge the gap and tackle this problem.
How to structure a market requirements document?
There is no universal standard for creating a market requirement document. When it comes to structuring an MRD, it should leave no question unanswered about market gaps and user needs.
As a general template, the following structure is a good starting point when creating a market requirements document:
- Executive summary — Summarize and outline the important points that are covered in the MRD. Describe, at a high level, the overall gap in the market, the problem users face, and why you should endeavour to solve it.
- Vision statement — The vision statement is a unique version of the product’s essence that establishes the product direction and the value it delivers to users. The problem outlined in the MRD should align with the company and product vision.
- Target market — Describe the market size, define the opportunity, and demonstrate why it’s worth pursuing.
- Personas — Introduce the person or team related to the market opportunity and the planned solution. Explain the circumstance and cover any research-related results (e.g., results from user interviews you and your team have conducted to validate the problem).
- Competitor analysis — Define your competitor and illustrate how they deal with the current market gap and user problems.
- High-level capabilities — Outline the customer’s solution in the form of a product or service via short specifications.
- Metrics strategy — Setting target metrics and KPIs connects the solution with the business. It helps to create an overview of potential revenues, pricing decisions, and other key success factors such as retention, acquisition, referral, and conversion.
Who creates the market requirements document?
Typically, the product manager is responsible for creating the market requirements document. Product managers tend to be best positioned to comprehend the market, identify gaps, and understand the users and their problems.
In some organizations, the MRD is created collaboratively within the product team. The product designer and product marketing manager may also be invited to contribute due to their expertise in some of the areas covered in the MRD.
For example, the product marketing manager knows the gaps in the market and the strategy required to demonstrate that the company’s offerings are the best choice for customers. The product designer, on the other hand, knows the problems of the users and their connection with the overall product vision.
Do agile product teams use MRDs?
The short answer is yes, many agile teams write MRDs. But don’t the agile values and principles espouse “working product over comprehensive documentation?” Well, yes, but the MRD is a critical part of shaping the overall product.
For an agile company, a market requirement document is also a useful tool for the long-term product delivery strategy because it helps the product team identify a market opportunity and articulate it to the rest of the organization.
In contrast to a typical waterfall company, an agile organization would keep the MRD very short and high-level. Agile teams typically use the MRD as merely an initial strategic guide. This enables them to alter course if necessary based on how the market responds to the product.