One of the hard parts of ideation and product development is being objective about your idea. Great ideas are not necessarily profitable ones. What really makes an idea or product profitable is that enough people agree that it’s great.
Market research is how you determine that there are enough people who like your idea to make it profitable. But there’s more to it than that. You also need to know if:
1. You can reach these people
2. These people have the need for your product (there’s a difference between liking an idea and purchasing a product)
3. These people can afford your product
4. These people can be easily educated about the value of your product
Doing market research throughout the product development process will help you to overcome your own biases and assumptions about your idea. The fact is, it’s hard to assess the value of your product accurately, because you want to believe that it’s a great idea. But other people simply might not see it the same way you do.
Sure, some will. The real question is, will enough of them? And of those, how many are actually in a position to buy? Pursuing the answers to these questions will give you some much needed perspective— the kind that will either save you from wasting time and money on a dead end idea, or guide you along the hazardous path to profitability.
The cost of reaching the consumer
Your product won’t sell itself for free. You’ll have to invest time and money into informing the public that your product exists. You’ll have to compete for attention with a million other advertisers selling a million other products in other industries. You’ll have to compete directly with your competitors for not just the attention of the customer, but their trust.
How much is this going to cost you? Hopefully, it will cost less than you can make off your product. To determine whether it will or nor, you can ask yourself a few questions:
Who needs my product?
Do alternatives to my product exist?
What value does my product offer over alternatives?
How will I communicate the superior value to those who can benefit from it?
How much will it cost me to reach and win over those customers?
Who are my ideal customers?
How can I get their attention?
What are the most cost-effective marketing strategies for my product?
First off, if a competitor already exists, it’s going to cost you more to win sales. Even if your product is superior in every way, your competitor is already established. It will take time to win the market over.
Also, don’t just assume that your product is superior. Instead, assume your competitors might know something you don’t. After all, they’ve already successfully taken a product to market. What do you have yet to learn? Maybe you can beat them in every way. Maybe not. But the fact they exist is going to present a challenge for you.
The next major thing to figure out is who your ideal customer is. Marketing to qualified leads will greatly simplify your marketing and increase your close rates. People who are in great need of your product will be easy to educate.
And speaking of educating, there’s a few key things you need to make them aware of: that your product exists, the value it can provide them, and what it offers that the competition doesn’t. You’ll need effective messaging, and you’ll need to know the most cost-effective ways to distribute your messaging.
How to talk to your ideal customer depends on the demographics they fit into. Consider age, profession, sex, marital status, level of education, and anything else that might matter. Geographic location also matters, for two different reasons. For one, it may be more profitable to access consumers close by. For two, people’s values and attitude are influenced by their environment.
The last important thing to understand about the market is that your competition shapes the landscape. Say your chosen service area has 10,000 qualified leads. How many of those are already loyal to competitors? Are they going to be more expensive to win over? Is it going to be more profitable to target the 5,000 that are available, rather than try to appeal to them all?
How to get answers to the above questions
The further along you get in product development, the more you’ll want to invest in market research. However, there are some easy and affordable ways to conduct market research in the early stages. You can do these first. Then, as you validate your idea over time, you can invest more into more extensive research.
1. Ask friends and family to analyze your idea and point out any flaws
2. Ask any people you know who could use your product to point out any flaws
3. Read product reviews on existing products similar to yours
4. Ask potential retailers if they think there’s a market for it
More extensive measures
Surveys are one way to get hard data. Keep in mind this will cost you money and/or time. There are various ways to survey people, such as email, phone, social media, and in-person. If you already have a website, you could use it to get feedback. This could be as simple as a one-click multiple choice question in a popup or a sidebar, which costs the user only a few seconds.
Naturally, responses from your target demographics are more valuable. Still, depending on the questions you’re asking, expanding your scope to get a larger sample size also can be useful.
Identify your service area
Figure out the costs of distributing both your product and your messaging, and delineate your service area. How many leads are within that service area? Your product will determine how you answer this question.
If you’re selling B2B, you can look at business databases to see how many could use your product. If you’re selling B2C, you’ll have to narrow it down with demographics. Say you’re selling lawnmowers. You can only sell to people that either a) mow their own lawn, or b) mow somebody else’s lawn. Is there a way to count the number of lawns in the area? What about the number of businesses that mow lawns?
If, on the other hand, your idea is to mow lawns for other people, you can narrow it down to people who own lawns. To narrow it down further, you could focus on areas that you know are populated by busy professionals who don’t have time to mow, but do have the money to pay somebody else.
Challenge yourself to be resourceful in finding ways to quantify the number of customers in your service area. Then, categorize them based on how easy it will be to sell to them.
Assessing the competition
There are many ways to assess the competition. Primarily, you want to know how many of the available qualified leads they’ve already taken, as well as how many more they are in a position to fight for. Additionally, you can weigh your value proposition against theirs to estimate how hard it will be tow in the leads you’re fighting over.
You can gather intelligence on competitor’s products through product reviews, or even by putting yourself in the customer’s shoes and trying out your competitor’s product.
Beyond that, you can ask potential customers what they like and don’t like about their current provider. Even when you’ve launched your product and are actively selling, you’ll want to continue to do market research.
Market research will inform you about the marketability of your product. Don’t assume that other people will see your idea the same way you do. This is easy to do, and it’s an expensive trap to fall into.
Further reading on product development:
Read How marketable is my product? here
Read The product development process here