How to Determine If a Market Exists for a Product
Determining the market or “niche” for your product depends on understanding the people or businesses that you hope to serve. Darren Dahl, a contributing editor at Inc. Magazine, writes that many new business ventures fail because they focus more on their product than on potential customers. “Listening” to your market before launch is a formidable strategy for risk management.
Stephen C. Harper, author of ''Starting Your Own Business: A Step-by-Step Blueprint for the First-Time Entrepreneur,” suggests finding gaps that exist in the current market. Small businesses cannot compete with the economies of scale enjoyed by larger firms, but they can provide more personal service to other businesses or consumers who may be under-served. A large landscaping company with crews and specialized machinery will not see value in providing limited gardening services to individual private residences, but an entrepreneur with a small start-up landscaping business may.
Developing a customer profile enables a company to focus on serving one type of customer well, rather than everyone poorly. A clear customer profile can lead to precision research on one demographic group, and provide guidance as to how best to serve them. Louis E. Boone and David L. Kurtz, authors of “Contemporary Marketing,” state that “any attempt to attract all consumers with a single marketing mix would probably fail.” Segmenting your target market can allow you to identify problems with existing competitors, and the potential for your product. It simplifies data gathering and gives more accurate results on buying habits, average earnings, and the target population in your area.
Interviewing potential customers is invaluable. It can not only help determine the need for a product or service, but it can stimulate demand, alert customers to your business plans, and encourage “word of mouth” social marketing. Talking to suppliers and other industry stakeholders may glean interesting local political and economic information. For example, perhaps there is news of a large corporation poised to move into the area that may boost consumer spending, which could open new markets for your business. Census data, in addition to demographic studies, can provide trend analyses; for example, is demand for your product increasing or decreasing?
Examine competitors and products already in existence. Look at their size, their customers, and the success of their products. Determine whether they are independent, a chain or part of a franchise. Look at their strengths and weaknesses, and identify areas where you may gain an advantage. Look at their pricing strategy, advertising, products offered, and the nature of their consumers. Determine if you can differentiate your product from theirs, and use the data to refine the perception of your company with potential customers.