Many businesses don’t make it as they fail to study, analyze and evaluate the market. More than the product itself, the market needs to be dissected, examined and concluded whether it is apt for the business that is in the works.
There are a number of theories on how you can evaluate the market and how to take the judgment call on entering the terrain. In this piece, I present a simple methodology that will help start-ups in evaluating the market at a reasonable cost.
Step 1 : Check the Void Quotient
This is advice I got from my time learning from the pros at YEAH Local, an internet marketing authority: Consumers are going to buy your product if and only if they feel a need for it, or rather they are a facing a dearth without your product. Study the market to identify the void, and the business/product which is a byproduct must fill this empty space.
For example, if consumers feel that the taxi fares are expensive, especially when they are traveling solo, this is a potential opportunity to tap. So, you can perhaps think of filling this void by introducing a taxi service that leverages on motorcycle for transporting customers from point A to point B while sitting pillion. The gas price expended would not be as much as a car, so the differential can be passed onto the customer, who would enjoy cheaper service, and gets his/her requirement taken care of.
Step 2 : Know your Competitors
Keep your customers close and your competitors closer is the new mantra of marketing. One must study their competitors in detail before stepping in. When I say study, understand the products that are on offer, the price points, the processes that could be discerned by talking as a consumer and further probing if possible, presence among others.
Your approach to marketing and the path you wish to take for introducing your product will definitely alter once you understand what your competitors are doing. The idea is not to do something different, to stay unique but to rather understand what is being done, and what works. If something that your competitor is doing and is working, replicate it. I am not the one who goes by the logic of doing something fresh, and something that nobody else has attempted. In the cut throat competitive world that we live in, it does not work.
Step 3 : Size and Scope of the Market
You are required to evaluate the size of the market. Know what age groups fall in your scheme and what geographies that you are targeting. It is crucial as the marketing strategy will change depending on these two aspects.
Suppose you are targeting teenagers in a limited geography. Understand what this age group in this geography look for. Target them with techniques that strike a local chord with them.
Sizing and scoping your market will give you realistic figures during the estimation process. Accuracy in estimation will give you realistic figures and shows the right direction about the projected growth in sales.
Step 4 : Customer Acquisition Costing
How much does it cost to acquire customers? The ration of your advertising costs against the number of customers acquired is the matter put forth in this step.
The cost you spend to acquire customers will have to be considered during pricing of the product. The overheads arising from marketing are recovered by directly from sales before margins are drawn out.
Step 5 : Investment Costs
Before sales start to generate cash flow, what investment do you have to put in? This number is significant to apportion the investment aside before you start expecting money to flow in, and heading towards sustainability.
For example, if you need to start a blogging business, the investment that you need to ring in may be on the lower side compared to starting a restaurant business.
Step 6 : Business Expansion
I am not a big fan of businesses that wear blinders and concentrate on their core business. For example, a manufacturing industry which produces steel bolts only is not something that I believe has a great future.
Any business that starts out must have a strategy to widen the portfolio of products they offer to customers. What starts primarily as a gas station and remains a gas station is stagnant, and could go down under due to a number of factors including supply from the Middle Eastern countries, government policies etc. But, a gas station that keeps adding things to its portfolio like a retail store in the premises, car washing and car repair is more likely to grow rapidly and has a greater chance of sustaining.
Any business you get into, plan ahead in terms of what you could add to your portfolio and grow your business. Gradual business growth will show you ways to transform it too.
Step 7 : Replication Quotient
If I am in the restaurant business, I need to cook food every day, and serve to my customers. The effort that goes in procuring raw materials and hiring staff is huge. There is plenty of overhead. Suppose I start a business where I buy machines and customers use it for a period of time and pay me for it. I have lower overheads and I can concentrate my efforts on my next business. A gym or an amusement parks are good examples to achieve the replication quotient.
The best business though would remain something like authoring a book and generating money from the copies sold. Hard work once and reap the benefits for the rest of your lifetime. Likewise a blog that has information that people want and the one which can generate revenue through advertising.