Market Research - The KEY To a Successful Venture
Follow these basic steps to launch a new product idea on the web…
Product With Appeal
Before you invest heavily in time, energy and other resources, learn what others think about your idea for a product/service.
Establish Who Your Customers Are
You may have a great product, but pitch it to the wrong people and you’ll never get it off the ground.
Keep On Developing
It won’t take long for others to latch on to your great idea and replicate it – you need to keep developing your product/service to stay ahead of the game.
Market Research Step 1
Assessing Your Idea Through Market research.
You are at the most preliminary yet important stage of your business. You’ve thought long and hard about your product or idea and you’ve taken the first steps to starting your own business. But so many businesses fail due to the product. It’s important to establish, beyond a reasonable doubt, that there truly is a market for what you have to offer.
Most of us turn to friends for the initial assessment of a new idea. You present them with your ideas, full of enthusiasm and emotion, and it’s difficult for your friends to give you any feedback other than praise. But you need to understand the folly in relying on the opinions of those close too us. You need to step outside and find out what other people think. You need also to poll enough people so that you have a fair representation of opinions. Doing this is called ‘Market Research’.
The problem with market research is that you may not have anything physical or tangible to show a person, you may still be at the conceptual stage. If your product requires manufacturing, there may be a high upfront cost, and you need to test the market before you commit.
Remembering the notion that we need a high sampling rate so that the data we get back isn’t skewed, you need to get out with your product, or if you don’t have the product, produce some basic brochures, artistic renditions and descriptive texts of what you are planning to develop.
1.1 Establishing Your Target Demographic.
Assess who the most likely beneficiaries of your product/service actually are. Who is most likely to be your customer? Take your product to them directly and ask their opinion. Try to determine what the perceived value would be to them – how much would they be willing to pay you for it. Try to hide the emotion that comes with being the product designer/developer. This is something that you have in your favor in a face-to-face situation but you might not be able to portray that same emotion when you sell to the masses. So keep a professional and objective attitude and try to gauge their reactions.
If you are considering a market demographic but you’re not sure if they’ll be a responsive customer, be sure to sample them – if you don’t know if your product will appeal to the over 55’s market, make sure you include a sample of that population in your market research. Oftentimes the demand for a product comes from a sector of the population that we least expected.
1.2 Understanding what it is that you are trying to accomplish.
Your market research strategy is something you should take the time to write down. In doing so it will help you organize your thoughts and subsequent efforts more effectively. Write down the objectives of the research and generate a basic questionnaire.
Ultimately you are trying to determine whether or not to –
move forward with your idea
head back to the drawing board
drop the notion altogether.
At a basic level you are trying to assess people’s reaction to your product. At a more advanced level you are trying to determine the actual size of your market and the potential value of your product to your prospective customer base. At the advanced level you are also trying to assess market competition, assuming what you have isn’t totally unique.
Once you have your plan you’ll want to get out and let as many people touch the product as you can.
Here’s a possible working plan for you to consider. I don’t know your product, your region, your prospective territory, so you’ll need to adjust my plan a little to suit your specific need.
Print the plan and fill in the appropriate information then keep it as a working reference.
1.3 Market Research Strategy – Plan.
What am I selling? Write down two or three succinct sentences that describe the product and the benefit to the end user. Include your key selling points and the language you might use to convey the points in sales literature.
What is my price point? After you’ve had the product made, and factored in for operational overhead, what will be the necessary selling price to breakeven?
Who is my demographic? Who is in the middle ground demographically. Who is on the fringe demographic. Make a list of these people and try to prioritize them as you see fit.
Who are my competitors? Where are they, how many of them are there, what are they doing differently, or more importantly, what will you be doing differently.
What is my competitive price point and does it align with my own breakeven price? Given that you have some idea of your cost structure, and a perception of a competitive selling price, can you be profitable within your perceived marketplace?
There may be other questions that you feel you need answers to, things which are specific to your product or service. Continue to build your questionnaire until you have everything covered. Now you need to get out and poll people. Here are some of the best ways I’ve found when working on a limited budget –
Market Research Step 2
1.4 Trade Show’s and Business Expo’s
The best way I’ve found to get good feedback on new ideas is via local trade shows and business Expo’s. These are often organized by your local area Chamber of Commerce and are very easy and inexpensive to attend. You’ll be amongst other business owners so it’s a great way to network and get feedback on what you’re doing. Often you can get leads that will help you move your business forward. You’ll also be exposed to the public and you’d be amazed at how useful their reaction will be.
I have to stress that attending a business Expo can be done with very little in terms of resources and very little in terms of experience. You can basically rent a 4x4 booth, often for as little as $100, and stand there for 2 days handing out flyers, showing people your product, gauging their reaction and networking with fellow business owners. After 2 days you’ll be mentally drained, but you’ll have a much better idea of how your product will be received and perceived.
Introduce some science to the process and the results of your efforts will be even more useful. Design a simpler version of your market research questionnaire to hand to people and offer a prize drawing in the form of a raffle at the end of the Expo. In other words, come up with a list of questions, have people complete the questionnaire then hand back the form to you, then have a drawing and give away one of your products in a raffle format. The raffle will be the incentive for people to take the time to fill in the questionnaire. The number of entrants will in itself provide you with some feedback on your product – if no one took the time the complete the questionnaire and enter your raffle, what does that say about the value of the prize?
On your questionnaire be sure to request information on their demographic. Age group, gender, income level etc, in line with the form you built earlier. Ask them for their idea on a price-point, would they be willing to pay between $50 and $75, $75 and $100 etc. Ask for any other information you feel would be important in providing you with specific feedback on your product or idea.
Have the Expo organizers announce the drawing over the PA and make sure they announce the details of the prize (your product). Did people show up for the drawing?
1.5 Craft Shows
There are many of these run weekly around the country, and if you think your product might be a good fit, then it’s certainly worth the minimal expense involved in attending a few of these shows. Again, if your product is built and in your hands great, if not, don’t let that stand in your way. Get out with flyers, brochures and talk to people. You are collecting feedback at this stage and nothing more. If you have something to sell, fine, but it is not essential for market research.
1.6 Retail Businesses
Assuming that your product is something that might be sold through retail outlets, get out and talk to store owners. Show them the product if you can and ask if it’s something they would be interested in carrying. Ask them their thoughts on a selling price-point, they know better than anyone what the price range of a product should be. Ask them for feedback on product packaging and their thoughts on retail displays and point-of-sale items like display stands and brochures. You could even walk away with some pre-orders. If they have time, consider asking them to complete the questionnaire you constructed for the trade show / Expo.
1.7 DIRECT ADVERTISING ONLINE AND OFFLINE
Let’s explore this option in a little more detail since it’s something that has worked incredibly well for me. Let’s assume that you don’t have your product made in sufficient quantity to sell. Perhaps you only have a prototype or perhaps you don’t have anything at all. There’s nothing to stop you from trying to sell it!
For Sale, one ‘Widget’ in as new condition. This widget is great for (description) and will provide you with many years of use. Contact me via email with your best offer. I will accept payment in cash, check, credit card or PayPal.
OK, that’s a fairly rough ad, but you can certainly embellish it to highlight the strengths of what you are selling. Craigslist offers a system whereby they assign you an email address then forward responses to your real address, so you never have to show your email online. If someone contacts you with an offer to purchase, you politely inform them that the item has been sold, but that you will retain their information should another one become available. Of course if you have the product manufactured already, there’s no reason why you shouldn’t fulfill the order!
You’ll quickly see how people are reacting to your product idea and what price they’re willing to pay. Omitting a price from the ad will tend to attract low-ball offers so don’t be too discouraged at the offers people make. You could re-run the ads and include your real price to see how that correlates to the responses where no price was shown.
Get these ads in as many places as you can online. There are various outlets for classified ads. Try a search on Google using the term “Classified ad websites” to find more beyond the two that I’ve listed.
Don’t try this technique through eBay.com unless you can fulfill the order, since you’ll be risking bad feedback and violating their terms of service. By all means try eBay if you have the product and can fulfill actual orders.
You can also place paid listings in local and national newspapers and supplements if you have the budget to do so. All of this will be useful information for when you are up and running, you’ll already have an idea of what works and what does not. But at this stage you are really just focusing on getting feedback.
Obviously the more creative you are about trying to get your product in front of people the more valuable the feedback you will receive.
What to do with the research results?
For such an objective process of collecting data, there’s a much more subjective way in evaluating it. There really isn’t a formula that says “OK, based on the feedback, let’s do it”. You’ll need to sit down, look at the results and form an opinion in the cold light of day. Here are some possible scenarios which might come into play –
There was little or no interest in my idea.
Obviously one assumes that you’ve worked hard in getting the product in front of as many people as possible. How many is enough? – there’s no real answer, but it must be upwards of 1000 to provide you with something meaningful. If you’ve used the Craigslist idea then your product will have been seen by many more people than that. And if you’ve attended at least one Expo, then you should be able to safely say that you’ve had a good representation in terms of numbers. So you have a red flag situation. Sit down and try to remove as much of the emotional connection you have to the product/idea as you can. What does it really mean to you? Are you willing to work against the odds in pushing this idea through to fruition? Can there it really bear fruit, given the response you’ve had? What would it mean to walk away now?
These are all subjective thoughts and only you can evaluate them and decide what to do. Certainly, it’s going to be an uphill task, but many of the products we see around us today required a hard-sell in the beginning.
Interest was fair, I feel encouraged but not overwhelmingly confident.
Try more market research if you have lingering doubts. Attend a couple trade shows outside of your local area, try more ads, visit local retailers, talk with more people. Are you sure you were able to hit your priority (target) demographic with your market research? Keep collecting data until you feel you are sufficiently confident in moving forward unreservedly.
Interest was very high, I’m full of confidence in my idea.
Congratulations! You should move forward quickly before someone beats you to it. Refer to upcoming Business Formation sections to consider securing domain names and Federal Trademarks as soon as you can.
Market Research Step 3
1.8 Competitor Analysis
This is another important step within your market research. You’ll have been exposed to your competitor’s at some point along the way so now it’s time to take a closer look at them.
Become a customer of several of your competitor’s if you can. Yes, I mean actually go out and purchase their products. Observe the entire process from ordering at their website to receiving the product. Be sure to test their pre-sales customer service and post-sales. Look at the product packaging when it arrives. How long did it take to arrive? How much did they charge you for shipping? You’re going to want to be better than they are so you need to know just what they’re all about at a detailed level that only a customer could know.
When I created a vitamin supplement business some years ago I purchased similar products from a half dozen other suppliers and it helped me structure my operation in many different ways.
There’s a chance that you’re going to have to attract customers away from an established supplier. How are you going to do that without knowing their strengths and weaknesses?
During my supplement days I created a simple matrix in MS Excel to record the various performance parameters of my competition. These were some of the fields that I included in the matrix to help me evaluate their strengths and weaknesses and to help me design an approach that would lure customers away from them –
Product description versus what was delivered
Customer service pre-sales telephone support (standard and ability to help answer technical questions)
Customer service post-sales telephone support (call them and request information on processing a return. Whether you send it back or not is your decision, but doing so would be a little unethical)
Packaging quality (you will get good ideas from your competition on packaging design)
Rate them overall on a scale of 1-10 then work out what you could do differently to beat their scores.
1.9 Determining Your Unique Selling Proposition (USP)
In simple terms, you need to look at ways to spin your product/service and create a unique concept from something which might already exist.
To better understand this let me provide you with a couple of real examples.
In 2007 a friend of mine wanted to start an online business retailing sunglasses. It’s a highly competitive arena and he needed to have a unique twist on his product’s to set him aside from the competition.
That unique twist came as an accidental side effect of making his glasses ultra-lightweight for comfort – they float! Capitalizing on this unique aspect of their design, he targeted sports fisherman and boaters and pitched his product to focus on their uniqueness. He’s built a very lucrative business by understanding and capitalizing on a unique selling proposition which came apparent quite by accident.
In 2000 when I was heavily involved in launching a new vitamin supplement business in Green Bay WI, it quickly became apparent that there was not only a large demand for conventional vitamin supplements online, but a large number of companies supplying that demand. The challenge became finding a niche on which to focus my marketing effort. After extensive research I developed products using ingredients from the beehive and focused successfully on that niche market. Further research on the industry showed that many people were buying not just one of the products from the beehive, but oftentimes three or even four of the main products. So I formulated the first ‘compound’ supplement combining all four bee products in one capsule (royal jelly, bee pollen, propolis and honey). Bee products became our niche and the compound product our “unique selling proposition”. We were able to offer something no other company was offering at the time.
So you need to step back a little from your product idea and look for ways in which it might be uniquely different to those similar products offered by your competitor’s. You need to identify or construct your USP.
One way in which you might do this is to research the actual search terms that people are using online, when they are looking for products similar to yours. I’m introducing this next step somewhat out of sequence but I want to show you an important tool to help with this and other stages of launching your new product/idea.
Much of what you do when you get into the marketing phase will revolve around the search engine Google. Google will be your partner in developing your business and sending people to your website. Google can also be used as a valuable research resource, which is what we’re going to do next. Go to Google.com and create an Adwords account. Google tends to move around navigation links and pages so I can’t give you a link to the signup page since it will probably have changed by the time you read this. But it’s generally easy to find.
Create a Google account and signup for Google Adwords.
Once inside your new Adwords account, look for the ‘Keywords’ tab around the middle of the page and click on that tab.
Look for the link that say’s “Keywords Tool” and click on that (please allow for changes to Google’s choice of nomenclature when using this reference).
Inside the next page you’ll be asked to enter keywords relating to your product or service. Enter a list of perhaps a dozen or so of the obvious search terms that you believe people might be using to find your product’s (for example “bee pollen”, “remote controlled cars” etc). When you click the ‘search’ button, Google will present back to you something looking like this –
This is important so lets take a minute to analyze the data.
I started in this instance by entering two search terms into the search box – “bee pollen” and “royal jelly”. Google gave me data on my two search terms but also presented back a long list of other related terms which people have been using when looking for bee pollen and royal jelly. I’m only showing two others in the image above for the sake of clarity, but there were actually 742 alternative search terms returned.
If you look under the other field headings you’ll see that Google also provides useful statistics on each of the terms. It gives you a competition index so you can see what you’re up against and also shows you how many people are using the search terms on a monthly basis.
In upcoming chapters we’ll explore this data in more detail, but for now we’re looking for ideas to give our product a unique edge.
Let me back up a little to clarify this point. You have a product idea and lets assume that there are other companies selling the same or a similar product. (think about the vitamin supplement analogy). You’re going to be pitching your product on the Internet and there are going to be many other established businesses selling a similar product with whom you are going to be trying to compete. It’s going to be tough for you to get visibility within a competitive field, so you need to look for a niche, where the competition will be weaker in numbers. You need to find a USP.
So take a look through the list that Google provides and see if anything jumps out that might give you a competitive edge or more of a niche. In my example, when I scrolled through my list of 742 alternatives I saw many ideas for targeting a niche with my bee pollen product. One example was “organic bee pollen”. Rather than target the mainstream bee pollen companies, why not source my ingredients from organic suppliers and target people looking for organic supplements. It’s a growing market so I could enter it at a stage where it is still possible to gain a foothold, and really capitalize as the market grows.
I can’t be more specific, since I don’t know what your product idea is, but hopefully you’ll gain something useful from this exercise.
Of course once you’ve identified your niche you will most likely need to readjust your marketing strategy to focus on your USP. That is why it’s important to do this in sequence. If you get too far down a specific route and find that it’s just too competitive, and you find yourself having to backup and re-evaluate your product’s USP, then you’ll have potentially wasted a lot of time and money.
Market Research Step 4
Continued from Step 3
Identifying and evaluating your USP at the start of the process will speed up your time to becoming profitable.
The uniqueness of your product should be used as a branding tool and you’ll be able to take advantage of the uniqueness in all of your marketing effort’s.
Having some unique element to your product is critical to gaining exposure. There has to be some component of your product on which you can focus your marketing effort to give you an advantage over your competitor’s. Remember in the previous section I talked about competitor analysis and looking at your competitor’s product packaging, customer service, delivery times etc. Well all of that was good information but it all came after the sale was made. If you can’t make that first sale because you can’t entice people to switch brands, then the rest is irrelevant.
It’s hard to get traffic to your website and you’re going to find that out. Make sure you have something that sets you aside from others and the task will be that much easier to accomplish.
A USP is required ahead of all else to make people switch brands. The proposition must be something that your competition either cannot, or does not offer – a uniqueness of the brand or a claim not otherwise made in that particular field of advertising.
Whatever approach you take will need to be sufficiently enticing to get people to move away from what they’re currently using. It should meet the needs of your customer’s and actually be something that they want. Using the Google research tool as I described above will lock you into “actual” needs and not hypothetical ones.
Ideally it should also be something that is difficult for your competitor’s to offer, it least in a short time. (consider a Federal Trademark if you believe this might help you protect your idea, or a Patent if it might qualify in that direction).
Generally speaking when you identify your unique selling prospect it should be something which you can describe in a clear and concise manner and not something which is overly complicated to understand.
Let’s look at a few examples to give you some ideas –
In the real estate market (before the 2008 decline), several realtors came up with the USP – “If we can’t sell your house in 90 days, we’ll buy it from you ourselves!”. Of course they protected themselves in the small print, perhaps by guaranteeing less than appraised value, but what a catchy way to attract peoples interests’.
I’ve been involved in the web design and marketing industry for many years. I started my business in 1998 focusing on Search Engine Optimization, alongside as few as 2 or 3 other companies offering the same services. After 5 years in the business it was becoming extremely competitive. I switched my service message by saying “Let us optimize your website and you pay us nothing until we achieve your desired rankings”. I was flooded with new work and new clients overnight. I showed them my commitment to helping them and I made it a no-risk situation. I was able to lift my pricing by over 10% to cover the eventuality of a non-result, but that didn’t deter people. They didn’t want to risk paying for a service that yielded poor results, as many were experiencing from the SEO industry. So they moved to using my services essentially as a no-risk, no-brainer.
There are many more examples; think about FedEx offering next day delivery ahead of all their competition. Think about video retail stores and the USP’s that they develop on a weekly basis to stay ahead of their competition, then think about NetFlix coming along and turning the industry on its head with their online rental service!
If you need more ideas, simply go to Google and search on “examples of a unique selling proposition” and you’ll gain some insights and inspiration from what many other businesses have been able to do.
If you are scratching your head right now and thinking “well, I really don’t have anything unique”, then it might be wise to reconsider your position. I don’t want to put you off, but it’s going to be an uphill struggle and you’re going to need time and money to make any headway.
I hope you were able to successfully conclude this section on Market Research and that you have new found confidence in your conceptual ideas and product. Don’t be afraid to walk away at this point, you’ve lost very little. If you decide to move forward, take a firm grasp of the nettle and get ready to give it your all.