If you’re starting your business, you will be full of energy and enthusiasm for your idea. However, it is essential to ask some important questions and do your homework before you launch. This is also known as market testing.
Questions that you should be asking include:
- how are you going to do it?
- who is your target audience?
- how much do you know about them?
- what does your customer need?
- who is your competition?
The importance of market testing
Just because there is a gap in the market for a particular product or service, it doesn’t automatically mean that there is a demand for it. Perhaps the reason that the gap has already been fulfilled is that someone has already had the foresight to investigate the market only to discover that there was no business to be had.
There is never any substitute for undertaking some comprehensive and meaningful market research to understand the proposed market place you are intending to enter. Also, the whole point is to attract customers in order to make sales and a profit. Therefore, it is important to view what you sell – product or service – from your customers’ perspective and not yours. Do they need or want what you offer?
You should look to gather any market information that you need to know in order to formulate strategy and make business decisions. Information is available in the form of statistical, economic and demographic data that can be found from online, libraries, research companies and professional associations. This is called secondary research and will require some interpretation or manipulation for your own purposes.
Additionally, you can carry out your own primary research through feedback from potential customers, surveys, questionnaires, mystery shopping and focus groups. This can be tailored to your precise needs and requires less manipulation.
Analysing your market research
Be careful when constructing your market testing and extrapolating results. If the starting point is inaccurate, the resulting analysis will not be reliable. The main elements you typically need to understand and quantify are:
- customer profile and mix
- product mix
- demographics and trends
- future regulatory and legal issues
- prices and value, and customer perceptions in these areas
- competitor activities
- competitor strengths and weaknesses
- customer service perceptions, priorities and needs
Primary research is recommended for local and niche services. Keep the subjects simple and the range narrow. A good sample size is important and remember to formulate questions that give clear yes or no indicators. You will also need to understand how you will analyse and measure the data produced.
Using focus groups will produce more detailed work. Be cautious of using market research organisations, as these can become extremely expensive. If you do, the most important thing to do is get the brief right to get the most from your investment.
With your initial market research completed, you are then in a position to consider ‘test trading’ your idea. One straightforward way to do this if you intend to sell products online, is via existing platforms such as eBay. You can sell this way for a period of time to determine the demand for your product without expending resources on your own retail website.
You might also consider offering free ‘taster’ products, for example food or drink samples. This should be done for a limited time only, so as not to lose out on too much income!