Got a great new business idea? Perhaps you're getting ready to launch the next big thing in your niche? Like it or not, having brilliant ideas isn't enough to ensure success. You also need to determine if customers actually want or need your product. This requires estimating its market potential.
TL;DR (Too Long; Didn't Read)
Market potential value indicates whether customers are interested in your product or service. To determine market potential value, research the market size and growth rate, determine your potential revenue and check the competition.
Why Is Market Potential Important?
Approximately 550,000 Americans become entrepreneurs every month. Unfortunately, only a few make it through and bring their vision to life. In fact, nine out of 10 startups go out of business. This is largely due to the fact that there's no market for their products or services.
Nowadays, launching a new product or starting a business isn't as difficult as it used to be. Even if you're on a tight budget, there are plenty of ways to secure funding. You can apply for a loan, reach out to angel investors or leverage the power of crowdfunding platforms to raise the money you need.
However, you need more than a great idea and money to ensure that your venture will be successful. If customers are not interested in your product, your efforts will be in vain. That's why it's essential to determine its market size and potential value.
Understanding Market Potential Value
As an entrepreneur, you want to know whether or not it's worth putting time and effort into a new product or business idea. The first step is to assess its market potential value. This requires estimating how much money could potentially be spent by customers in a market during a certain period of time.
In order to determine a product's market potential, you need to consider the market intensity and size as well as the competition, profitability, penetration rate, potential customer base and other key factors. These aspects can make or break your success.
Market intensity, for example, refers to the factors that will impact prices and market demand for your products or services. These may include tax regulations, environmental factors, political changes and so on. Companies worldwide use the market intensity index to analyze these factors and determine which markets to enter and how to plan their marketing strategies.
Research the Market
The first thing to consider before launching a new business or product is its market size. Research companies like Nielson, GFK and Comscore provide detailed insights about various markets and industries. Search for financial reports, statistics and case studies related to your particular market.
Next, determine the market growth rate. Again, check studies and forecasts to see what experts say about the potential of a particular market and how it performs.
For example, McKinsey estimates that artificial intelligence will create up to $5.8 trillion in value each year across 19 different industries. The travel, transport, retail and automotive industries will benefit the most from using this technology. If you're planning to launch a travel app that uses artificial intelligence, your chances of success are quite high.
Estimate Your Potential Revenue
Profitability is another key component of a product's market potential. Even though it's hard to come up with an exact figure, try to make a rough estimate of your return on investment. Check other similar products on the market to see how profitable they are and what you can expect in terms of revenue and sales.
Don’t Overlook Your Competitors
Consider your competition too. If you're a small business in a highly competitive market, you may find it difficult to promote yourself and drive customer loyalty. In this case, it's important to come up with a solid marketing plan and creative ideas to draw attention and reach the target audience. Study your competitors to see what they're doing well and identify areas of improvement.
In addition to the factors listed above, you must research your customer base. Who are your potential clients, and how can you reach out to them? At what prices are they likely to purchase your product? Why should they choose your products over those offered by your competitors?
With these things in mind, narrow down your audience and estimate the potential value of your product or service. Research and analyze data, collect feedback, check case studies and then decide whether or not it's worth bringing your idea to life. Consider creating a prototype of your product or offering samples to see how the market reacts.