So you've got a great idea for a new product or service. Great! What do you do next? Consider the market. Is your idea compelling only to you, or does it solve a real problem that others have as well? Is there another company doing something similar? How has the market responded to them? There are many, many questions to ask.
In order to answer these questions (both for yourself and any potential investors or partners), it is essential to conduct in-depth, exhaustive market research before launching a new business or product. However, the complexities of locating potential customers, analyzing competitors, and forecasting future trends can be daunting and, as a result, some companies choose to skip this step or only gather data that confirms what they want to hear.
Don't make this mistake! Conducting in-depth market research is vital to your company's success, and it can be easier than you think.
Would you try to drive from Orlando to Portland without a map or GPS device? No. The same goes for launching a company without understanding the “roads” and “turns” you will encounter. Business owners and budding entrepreneurs alike must allocate time in their schedule to conduct an exhaustive study of customers, competitors, and the market in general. If you don't spend the time at the front end to do your homework, you're taking a shot in the dark. In Forbes, Shawn O'Connor explains,
“Before investing significant time and money in actually starting your business you need to find your niche and determine your clients’ willingness to pay for your offering.”
Without performing a complete, unbiased market analysis, which eliminates your personal opinions and assumptions, you could be supplying a product or service that customers are not demanding (a topic that will be covered extensively in an upcoming blog post).
What's the best way to determine if your product will sell and fulfill people's needs? Ask them. While this is the most obvious step, it is often the most neglected. Go into your marketplace, identify potential customers, and talk to them about their problems. This conversation can happen in many ways:
- Interviews (phone or in-person)
- Emails (personalized or mass)
- Surveys (electronic, in-person, phone)
- Social Media interaction (Facebook, Twitter, Linked In)
- Focus Groups
All of these will reveal information about your customers' desires and problems as well as inefficiencies within the current marketplace. When conducting primary research, ask open-ended questions that encourage your potential customers to speak their minds and share their opinions. O'Connor explains,
“After conducting a survey maybe you find that customers are looking for a slightly different service… consider adjustments to accommodate your customers’ demands. Remember that you are just one consumer.”
If your primary research returns indicate that your exact product isn't needed… that's a good thing! Killing a bad idea quickly saves years of your life and thousands of dollars of your own money. It also allows you to put your resources towards a more promising idea. That good idea may be a simple tweak or pivot away from your initial inspiration.
If you make it through the first phase of market validation with potential customers, it's time to check out the competition. There's a plethora of economic and industry data available at the click of a button. Access sources such as your local chamber of commerce or data from the U.S. Small Business Association (SBA) when attempting to identify where your potential customers are currently shopping and the proper place to start your business.
Applications such as Sizeup can also assist in your market analysis. As O'Connor explains,
“You can input your business’s industry and city and it maps out your competition, highlighting areas with abundant competition in orange and areas with a lot of potential customers but few competitors in green.”
Tools such as these will help you identify areas with the largest amounts of total revenues from competition in your industry. Secondary research will allow you to identify your competitors prices and hold on the current market while likely also revealing places of weakness your business could seek to improve. A lack of proper secondary analysis could result in entering an oversaturated market or locating your business in an area where the product isn't needed or will not sell.
Through this research, you will be able to discern proper pricing for your product, initial strategies for marketing your product (depending on your potential customers and mediums available to you), as well as possible areas for expansion in the future. The Small Business Development Corporation explains that
“[Market analysis] will help you make an informed decision about starting, building, consolidating, diversifying or reducing business activity.”
Market analysis can help to identify underserved populations or niches that can help your business skyrocket. Just ask Chipotle, JetBlue, or Starbucks. By identifying customers needs and underserved populations, Chipotle changed the way Americans viewed “fast food” and Starbucks revolutionized the coffee experience forever. As O'Connor explains in Forbes,
“The modifications [Starbucks] made to the industry standard drew an enormous and loyal following, which is why today there is a Starbucks on every corner. Starbucks determined what consumers wanted and just how much they would pay for it and revolutionized an industry.”
Market research is a complex and crucial step that is often overlooked when launching a new company or product. Yet, following these simple steps could ensure that your launch is a success and your business grows and thrives. Using these strategies along with the tools mentioned above can help guarantee future, extensive success. It will also help you avoid major missteps, such as the one I'll examine in next week's blog. Stay tuned!
Have market research tips of your own to share? Tweet them @EidsonPartners!