Market requirements document (MRD): definition, criteria, and best practices

Great products are more than innovative ideas. They fill a gap in the marketplace to provide a solution that addresses the pain points of a specific customer base.

Successful product development depends on in-depth market research that defines the target market and identifies potential customer problems. You can use it to come up with viable solutions to the problem in the form of a product.

Many companies use a market requirements document (MRD) to consolidate high-level research into an easy-to-share summary. It enables them to communicate key features of a new product.

A market requirements document helps define the market’s requirements or demand for a specific product.

Creating an MRD involves taking the information you derived from your market research—about the product’s goal and revenue opportunity, for example—and putting it into a single document you can share with others. It provides an overview of all relevant market information that summarizes the need for the product and guides the development process.

Product features or feature categories are often included to define how the product will effectively address the target audience’s specific pain points.

Who writes a market requirements document?

Typically, a product manager takes charge of writing an MRD. It’s also not uncommon for the document to be composed by a team led by the product manager. These team members would usually have cross-functional roles, including development and marketing.

What is the difference between a market requirements document and a product requirements document?

A market requirements document identifies a specific audience and provides a high-level description of how a proposed solution will help that audience. It includes information about the product, the target audience, competitors, and product features.

A product requirements document (PRD), on the other hand, describes how a product should be built to meet the target audience’s needs. A market requirements document is what comes first to provide relevant information to guide the PRD.

The MRD is created in the early stages of new product planning to determine and explain a product’s viability. It’s the earliest document you would write in the development process.

This document compiles all the information derived from market research to inform a long-term product development plan. It informs the product requirements and documents that follow, including the product roadmap and product backlog.

You might revisit or alter it occasionally as market trends shift or when developers are planning a product upgrade or enhancement. As trends change, you may add new research to the document to reflect changing customer needs.

An MRD should define the following:

• A need in the market

• Target customers

• Customer pain points

• Your plans for delivering a solution

While you can write the document in any format, it should contain these key components informed by your market research:

• Summary: define the problem you intend to solve and create a concise report of your research regarding pain points, key findings, assumptions, and suggestions for how the product will provide a solution. This is like a condensed version of your MRD.

• Vision or goal: explain how your product is a unique solution that will fill a gap in the market. Identify what you hope to accomplish with the product.

• Target market: illustrate the market size using your research to document facts that validate the market opportunity. Include details about your target audience and their pain points with existing solutions.

• Customer personas: describe the various customer personas you’ll target with your planned solution.

• Competitors: include an analysis of alternatives that currently exist and where these products fall short. Show how your product is different from those of competitors and how you’ll make it stand out in the marketplace.

• Capabilities: define the functionalities the product requires to meet your customers’ needs. These can include potential features or an overview of feature categories that should be included during development to solve the problems identified by your target market during research.

• Strategy for measuring success: identify the KPIs and methods you’ll use to measure success. Consider how the product will generate income and how pricing will be structured to provide an adequate return on investment.

What makes a good requirement?

Requirements are the problems you need to solve with a potential product. You’ll list these as solutions or capabilities that will solve specific problems for target customers. A good requirement usually falls into one of the following five categories:

1. Functional: capabilities that will work toward meeting the product goal

2. Performance: characteristics that improve customer satisfaction, including capacity, speed, and user-friendliness

3. Constraints: conditions likely to limit the product design and how you can solve them

4. Interface: how the product interacts with hardware and software components

5. Compliance: laws and regulations and how you’ll maintain compliance with relevant standards

Asking specific questions will help you define the elements you should include in your market requirements document. These questions align with an MRD’s basic requirements to help you clearly illustrate why your product fills a space in the market.

What is our target market, and why is it worth pursuing?

New products often fill a hole in the marketplace for audiences with needs that fall outside the scope of existing products. You might find that the market for a product spans multiple industries where a simplified version of an existing product will address pain points.

For example, you might develop an application for users with minimal tech knowledge that includes templates or user-friendly features that allow new users to avoid coding.

What is the potential revenue from this market?

You can use multiple forms of data to define potential revenue. If you’re planning to launch a software solution billed monthly, you can estimate the number of users your company will be able to sell to over time and multiply the number by your monthly fee.

Another option is to identify the total market size for the product and estimate the percentage of the market share your product could earn.

Who are the buyer and user personas in the target market?

Buyers and users are not always the same, especially in a B2B market. The buyers could be investors at mid-sized or large companies investing in new software solutions for employees. The end users would then be the employees who use the application. Each of these personas will have different interests in the product.

What are the pain points of the buyer and user personas?

What pain points are these potential buyers and user personas facing, and can this product solve them?

For example, imagine you have determined that end users need a product to boost efficiency during research. Pain points may include poor integration with existing software or a complicated interface. Company buyers who haven’t previously purchased apps for this function will need to conduct time-consuming research to find an effective solution.

How will we solve their problems?

Now that you know what pain points your users and buyers experience, you need to identify and write a short description of the features and functions most likely to solve them.

An MRD should include only brief strategic descriptions of proposed features and functions to guide the product’s development. As trends change, the MRD can be considered a living document that you can alter over time to reflect your customers’ changing needs.

Applying the following practices when creating and using MRDs can help you get the most out of them:

• Use market research. Your MRD should provide hard data supporting the need for your proposed product in the marketplace. Be sure to include data-backed facts to uphold your claims and generate interest in the product.

• Embrace a collaborative process. You can use an MRD’s key components to encourage buy-in, guide development, and support your team’s marketing efforts. Creating the document with input from cross-functional team members will help you avoid errors, conflicts, and redundancies.

• Update the document as needed. An MRD may not need to be updated with each sprint, but it should be updated routinely to reflect market and product changes and new information.

• Use templates as a guide. Using templates to guide your research and detail your product development plan can help you avoid missed opportunities and errors. Various templates can assist the process, from research to development and updates to improve customer satisfaction.

• Track relevant measurements to monitor impact. Collect user feedback and sales data to support your assumptions and guide decisions regarding future enhancements and upgrades. Be sure to choose relevant key performance indicators (KPIs) that allow you to use measurable data to track ongoing results.