Somewhere between
scribbling your idea on a cocktail napkin and actually starting a business,
there's a process you need to carry out that essentially determines either your
success or failure in business. Oftentimes, would-be entrepreneurs get so
excited about their "epiphanies"-the moments when they imagine the
possibilities of a given idea-that they forget to find out whether that idea is
viable.
Of course, sometimes
the idea works anyway, in spite of a lack of market research. Unfortunately,
other times, the idea crashes and burns, halting a business in its tracks. We'd
like to help you avoid the latter. This how to on researching your business
idea is just what you need to keep your business goals on track?
The Idea Stage
For some
entrepreneurs, getting the idea-and imagining the possibilities-is the easy
part. It's the market research that doesn't come so naturally. "It's a big
red flag when someone outlines the size of the market-multimillion dollars-but
doesn't clearly articulate a plan for how the idea will meet an unmet need in
the marketplace," says Aaron Keller, an adjunct professor of marketing at
the University of St. Thomas in neighboring St. Paul and a managing principal
of Capsule , a Minneapolis-based brand development firm.
That kind of
full-throttle approach can cost you. "Entrepreneurs are often so
passionate about their ideas, they can lose objectivity," adds Nancy A.
Shenker, president of the ONswitch LLC , a full-service marketing firm in
Westchester, New York. "Rather than taking the time to thoroughly plan and
research, they sometimes plow ahead with execution, only to spend valuable
dollars on unfocused or untargeted activities."
Market research,
then, can prove invaluable in determining your idea's potential. You can gather
information from industry associations, Web searches, periodicals, federal and
state agencies, and so forth. A trip to the library or a few hours online can
set you on your way to really understanding your market. Your aim is to gain a
general sense of the type of customer your product or service will serve-or at
least to being willing to find out through the research process. "For
example," says Shenker, "if you don't know if your product will
appeal to the youth market, make sure you include a sample of that population
in your research efforts."
Your research plan
should spell out the objectives of the research and give you the information
you need to either go ahead with your idea, fine-tune it or take it back to the
drawing board. Create a list of questions you need to answer in your research,
and create a plan for answering them. "Utilize experts in planning and
conducting research sessions," Shenker advises. "They can recommend
what type of research is most appropriate, help you develop statistically valid
samples and write questionnaires, and provide you with an objective and neutral
source of information."
The type of
information you'll be gathering depends on the type of product or service you
want to sell as well as your overall research goals. You can use your research
to determine a potential market, to size up the competition, or to test the
usefulness and positioning of your product or service. "If, for example,
the product is a tangible item, letting the target audience see and touch a
prototype could be extremely valuable," notes Shenker. "For
intangible products, exposing prospective customers to descriptive copy or a
draft Web site could aid in developing clear communications."
Analysis
When working with
firms on brand development, Keller first looks at a business idea from four
perspectives: company, customer, competitor and collaborator. This approach
allows Keller to scrutinize a business idea before even approaching the topic
of brand development. Here's what he looks at for each of the four issues:
1. Company.
Think of your idea in terms of its product/service features, the benefits to
customers, the personality of your company, what key messages you'll be
relaying and the core promises you'll be making to customers.
2. Customer.
There are three different customers you'll need to think about in relation to
your idea: purchasers (those who make the decision or write the check),
influencers (the individual, organization or group of people who influence the
purchasing decision), and the end users (the person or group of people who will
directly interact with your product or service).
3. Competitor.
Again, there are three different groups you'll need to keep in mind: primary,
secondary and tertiary. Their placement within each level is based on how often
your business would compete with them and how you would tailor your messages
when competing with each of these groups.
4. Collaborators.
Think of organizations and people who may have an interest in your success but
aren't directly paid or rewarded for any success your business might realize,
such as associations, the media and other organizations that sell to your
customers.
Another approach is
to research is SWOT analysis, meaning analysis of the strengths of your industry,
your product or service; the weaknesses of your product (such as design flaws)
or service (such as high prices); and potential threats (such as the economy).
"[SWOT] enables you to understand the strengths and flaws, [everything]
from internal information such as bureaucracy, product development and cost to
external factors such as foreign exchange rates, politics, culture, etc.,"
says Drew Stevens, a St. Louis professional speaker and consultant who works
with entrepreneurs in researching and marketing their ideas. "SWOT enables
an entrepreneur to quickly understand whether their product or service will
make it in the current environment."
Whatever your
approach to evaluating your idea, just be sure you're meeting the research
objectives you've outlined for your product or service. With those goals always
top-of-mind, your analysis will help you discover whether your idea has any
holes that need patching.
Checking Out the Competition
Assuming your
research process has helped you uncover your competition, you now need to find
out what they're up to. Shenker advises becoming a customer of the competition,
whether by shopping them yourself or by enlisting the help of a friend.
"Visit their Web site and put yourself on their list," she says. "Talk
to your competitor's customers, too-ask them what they like or don't like about
your competitor's product or service. If you conduct formal research, include a
question like 'Where do you currently go for that product or service?
Why?'"
Your aim is to
understand what your competition is doing so you can do it better. Maybe their
service is poor. Maybe their product has some flaws-something you'll only know
if you try it out yourself. Or maybe you've figured out a way to do things
better, smarter, more cost-effectively. Find your selling point. It's going to
be the core of your marketing program, if and when you're ready for that step.
It's also going to be what sets you apart and lures customers your way.
