Bringing a Business Idea to Life
How many "million dollar" ideas have you come up with in your life? By now perhaps you may have found that the idea is the easy part - the hard part is finding ideas that will make money based on your skills, experiences and interests. Is the idea really an opportunity? Ideas do not have any value until the idea is put into a workable form and shows that it will sell at a price the consumer or end-user is willing to pay. Hopefully this information will help you to recognize the importance of market research and how this information is crucial for your idea or venture to succeed.
Lets have a look at a quick overview of issues to concidder when establishing whether your idea is an opportunity. Marketing is the most critical aspect of your business...if no one buys your product or service, there is no business.
What is Market Research?
Market research is a simple process of gathering information. It allows the individual to forecast what level of sales their new product will generate, at what profit and how best to optimize the sales. If the individual did not do any research, they would not know whether they were developing a product that was already on the market, whether there was a demand for their product or if the product could be profitable. On the other hand, if research indicated that a product met a certain need and could be produced and sold for profit, there could be a potential demand for your product idea.>Some questions to determine how much of the product you could hope to sell at a profit and the best way to sell it are provided below: What do you plan to sell - a product or service? What need does the product or service meet? How does it meet that need? Who needs this product or service? How many people will buy this product or service? What advantage does this product have over other similar products? What price will customers pay for the product or service and how often will they buy it? Can it be produced at a profit? These questions should be reasonably answered in order to assist you with attaining your goals. Answering these questions objectively will help you to determine a potential market for your product and build a marketing plan. On the other hand, if your research is not favourable, you may wish to reconsider before proceeding further, and drop the idea.
The famous four P's of marketing are... Product - what organizations offer their perspective customers (a helicopter or a haircut). Consists of the core product plus packaging, brand name, warranties, etc. Price - each product offers some utility - utility has a value - the value is stated as the product's price, normally expressed in dollars and cents. Place - (distribution) where, when, in what condition, through what intermediaries, and what route the products made available for exchange. Involves two main decisions: channels of distribution and logistics (physical aspects of distribution). Promotion - systematic communication of aspects concerning the product, price and distribution. May aim to inform, to persuade or to remind. There is no "one best way" to mix the four "Ps". Like a chef cooking a meal, the marketing manager must decide the best mix to meet the tastes of their consumers.
Marketing is selling or advertising and a management process. Understanding your consumer and their needs and habits is critical.Some interesting marketing projections for the 1990's: 75 million baby boomers will enter middle age. People over seventy-five or older will move to Florida, Nevada, or Arizona. They will be a lucrative market. There will be a growth spurt in frequent-buyer clubs, modelled after frequent-flier programs. VCRs will become so widespread that video brochures will be recognized as high-powered weapons, proving their effectiveness to all type of businesses.
Know Your Product
Ask yourself the following questions: What is "unique" about the product? Does it provide better durability, not like another in nature, quality or form? Is it unique by its appearance and/or design? Does its appearance convey desirable qualities? What features do your customers want? What are they prepared to pay? How does the product compare with the competition? Can the product be recognizable and prove useful and be price competitive? Service - will it require less servicing or less costly servicing than existing products? Most entrepreneurs feel their product is unique because "they haven't seen anything like it in the stores". Most people respond to a market that has too many choices by buying the best known brand, whether shopping for a toaster, a hair dryer, a shaver, etc. A customer may buy the brand they know best, the brand that's the cheapest, or in some cases, the brand that's most expensive. An entrepreneur faces tremendous resistance when introducing a product into a crowded market. It is also important to be aware that many markets are dominated by large companies, therefore, even more important for an entrepreneur to find a way to put a product onto the market to find a niche.
Know Your Market
Determine the total size of your target market. Demographic information such as population age, gender, income levels, race, occupations, disposable income and buying practices are essential to know when marketing the product. Geographic area is important to consider in choosing a location for your business, knowing where your potential customers are located, and other types of industries in that geographic area. Once you have defined who your target customer is, you must determine how many potential customers exist if your product idea is commercially viable. It is important to note that the market may already be well served by other acceptable products to your own.If your product is an improvement on an existing product, your market size could be determined by the total number of similar products currently being sold in the geographic market you have defined. If you have a new product which is an "add-on" to another product currently on the market, knowing the number or product sold annually in your geographic market would help determine the market size for your new product. It is also important to know whether the market of your product is growing or shrinking, if it is a new product or a mature product. Economic, political, environmental and demographic trends will have some effect on the success of your product.
Know Your Customers
Who or what do you plan to sell your product to? How do customers perceive themselves? How do you plan to acquire customers? What distribution methods will you need? What form of advertising and promotion will be effective to produce sales and sell the product? What will promotion and advertising cost? Where is your target customer most likely to buy your product? How important is price to a customer? How important are product or service quality and convenience to your customer? Focus on customers' needs. Listen to your customer. Not all products are sold to individuals although they are sold through individuals. Your customer could be schools, small businesses, restaurants, suppliers, manufacturers, etc. Psychological considerations as to whether your target customers are fashion-conscious, status-conscious, health conscious or safety conscious should be considered when defining your target customers.Knowing who your customers are is important but servicing the customers to ensure that they are happy and satisfied with your product is paramount. It has been acknowledged by many marketing gurus that customer service will be the key to survival of business over the next several years. Excellent customer service ensures an ongoing relationship between you and your customers. Entrepreneurs have to take into consideration that large retail stores, as well as distributors and manufacturers' agents may not be interested in carrying their product because the entrepreneur has not established sales records.So in order to establish this, the entrepreneur could promote the product through advertising in magazines or mail-order catalogues. They should also attend trade fairs where valuable contacts can be made as well, they can receive input about the product and learn who the major purchasers are, and whether the price is suitable to the customer. You start with the idea that there might be a need for a particular new product, but to fully understand your new business opportunity, you need to add the customers' perspective. Knowing your customers' needs, values and wants will build a strong competitive advantage into your new product.
Know Your Competition
Know who your competitors are and their company history. Know what your competitor's products are - its features, costs and prices. Know your competitor's strengths and weaknesses. >What are the advantages and disadvantages of your product? How valuable is your new product to the marketplace? Will your product make its entry difficult and costly? Will you face new competition in the marketplace from other innovations that may be expected to threaten the market share? Studying and researching the competition is a very critical market research step. It may uncover a similar product already on the market; help you evaluate the potential share of the market you can expect to obtain; and provide you with a list of companies to license or distribute your new product. If your product is similar to products already on the market, familiarity may be an advantage. If your product is completely new on the market scene, it may be a disadvantage.It is important to note that with new product introductions, customers may be slow to catch on. Failure to recognize your competition at an early stage of your marketing research, could lead to difficult problems later on.
Know Your Market Price
What price will customers pay? Does your product have a price advantage over the competitors? What does it cost you to get your product to market? Are there trends in price increases or decreases and how much in your target market area? Is your initial price low enough to find a market and yet high enough to make a profit? Price and value to your customer are the most important variables in this area. You must be able to introduce a new product at a lower cost or you will not be in business long enough to recoup your investment. If you can produce a same product like your competitors for less and sell it for less, then you can take business away from your competitors. Never assume that your product is so great and wonderful that customers will pay anything for it! Researching what your target customers will pay for your product and what your customer's needs are will have an effect on the market price.
Some factors which can contribute to business success are:
A well-thought out business plan is "worth its weight in gold"
Review your mission statement and strategic objectives
Perform market research
Formulate marketing objectives
Assess the cost Create one-year tactical plans
Establish a formal review process Set up a market infrastructure
Identify a niche
Be flexible in modifying your niche as the marketplace
changes Attend trade shows
Stay in touch and in tune with your customers
Listen to the voice of the market