The potential market for your products or services can be defined as the pool of consumers or businesses who would consider purchasing them. In other words, they have a need that your business might help them address. It is key to clearly define your market before endeavoring to conduct research. For example, if want to open an athletic store, you need to decide if you will cater to runners, swimmers, golfers, tennis players or all of the above as well as if you will focus just on one segment like footwear or broaden to include apparel, equipment and more. Once you define the scope of your potential business and the corresponding potential market for your products and services, you need to determine why a consumer or business would purchase from you rather than a competitor. Do you offer the lowest price? Unparalleled service? A unique product mix not available elsewhere? 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.
To obtain such crucial information, entrepreneurs use a variety of resources to conduct market research. Broad sources of demographic information, such as your local chamber of commerce.
Be sure to also conduct your own primary research to get information specific to your particular, unique business and the sub-set of consumers you hope to attract. A few research tools to consider include interviews, surveys, questionnaires, and focus groups, which can identify critical information about the importance of price and certain features as well as the strengths and weaknesses of competitors. For example, before I started my company, I held focus groups to determine the market size and willingness to pay for industry-leading test prep and admissions counseling services. This process also helped me identify which specific features were most important to potential customers (such as weekend availability and the unmet need for study space open to students). I then compared the consumer information I gathered to my cost structure to ensure that even after expenses like paying employees, renting space and developing materials, the business would be profitable in the short- or medium-term based on the price consumers were willing to pay. Fortunately, this research paid off as we were profitable within our first four months of operations and have never been in the red since then.
It is important to be open-minded and adaptable when conducting market analysis as some of the feedback you hear may not be exactly what you were expecting and hoping for. You may feel attached to your business idea and wish to change nothing about it, but after conducting a survey maybe you find that customers are looking for a slightly different service or additional features. Do not scrap your idea, but do consider adjustments to accommodate your customers’ demands. Remember that you are just one consumer and likely a slightly idiosyncratic one at that. You want your business to have relatively broad appeal.
A great example of a company which performed such market analysis isJetBlue, which prior to launching, determined that airline passengers cared more about comfortable leather seating and TV entertainment than a hot meal, a first class cabin, and the other “amenities” offered by legacy carriers. JetBlue invested in upgraded seating and TVs and emphasized a relaxing, calm journey at a relatively modest price. The strategy campaign was so successful that other airlines soon followed suit and numerous imitators emerged.
Another example of a business that identified and catered to unmet consumer needs is Starbucks, which turned an everyday beverage into an experience. While Starbucks SBUX -0.1% is known for its quality coffee and other tasty drinks, it is also renowned for its atmosphere, where business professionals, college students, writers and anyone who wants to kick back can set up shop for hours with free wifi and a comfortable workspace. The modifications 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.
By doing your homework before starting your business, you can be assured that your product or service is properly priced and positioned and you are offering the most sought after attributes. This will make your company a powerful force in a competitive business landscape.
You are now armed with the first three steps to starting your own business and revolutionizing not only your economic future but also that of your community and the nation. Check back next Tuesday for step 4 on finding and leveraging operational efficiencies.
please share your opinions and views and doubts if any!
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