The second question is, “how big is the market?” If you have done the steps in determining if there is a market, you will already but a long way towards understanding how big the market is. There are three directions one can take to understand the market size and I recommend doing at least two of them if market size is a potential issue for you.
The first method is simply researching existing data on the size of a market. There are many public and private sources that estimate market size. Be careful to not over estimate YOUR market size based on the overall market size. For example, one company I spoke with made high end tile light switch plates. Their market is not the entire light switch category, which is dominated by $1 and $2 dollar plastic plates. Their portion of the market is just the high end switches. You can slice a larger market estimate into more manageable estimates by combining these larger markets with one of the following methods.
The second method is determining consumer demand. This can be done through a variety of means, although surveys and focus groups are the most common. Here you are looking for the % of your target demographic/psychographic would be interested in purchasing your product within the next year. Be sure to discount the results of either method as customers who are not expected to actually open their wallet are more interested in everything. Extend the amount of people (discounted of course) by the amount they would purchase on an annual basis.
The third method is estimating competitor size. Use all the information you gathered in determining if their is a market and extend by level of investment your competitors appear to put into your concept.
So the first question is, “Does a market exist?” There are a number of ways to understand if a market even exists and get a rough idea of how big the market potential is for you.
The easiest first step is simply to google your idea. Check the relevancy of results. Are there competitors already providing your product or service. Perhaps there are websites dedicated to enthusiasts already created. Make a list of any relevant websites and run them through a traffic estimator such as WebCompanyInfo: http://www.webcompanyinfo.com/pagestat.com. Run a number of different relevant websites through the estimator. This will not only tell you the number of people who are looking for something like your product or service, it can tell you important information such as key words and geographic concentration of searches.
Next, run a key word search estimator such as AdWords. This is another simple tool for understanding the rough volume of people searching for content related to your product or service as well as for understanding related consumer needs. Run a variety of closely and less closely related term through the search estimator. Pull the list of related key words from the traffic estimator and run each of those separately through the search estimator.
Another important step is to research your competitors. Here you are looking for several things. First, how many competitors are there. From your first two steps you will likely have discovered a number of different either direct or indirect competitors. (What’s an indirect competitor? An indirect competitor is something different than the product but still gets the job done or minimizes the need for the product. For example, at Samsonite, I used to say that cardboard boxes and garbage bags were indirect competitors for luggage. That would usually start an argument, at least an impassioned discussion until I traveled with a number of Samsonite executives. I made them wait a long time at the luggage carousel and I pointed out each box and bag a traveller used instead of luggage. That was a long time ago and I don’t think garbage bags are so acceptable to TSA anymore). Wander through each of their websites, noting where it appears they are trying to draw the consumer’s attention. How significant is your concept relative to their entire market. If they have a “sort by popularity” feature, use it. Run a number of different searches and then sort each of them by popularity to see which products their customers seem to value. Go to your competitor’s stores. Go anywhere where their product may be sold. Notice what adjacencies your competitors have selected to be around your product. Finally, run each of your competitors through a tool like www.manta.com. Manta has estimates of the business size for most registered businesses. While their estimates can be very wide, it will give you an idea of just how big your competitors are and your prior visits to their website and stores will give you an understanding of how important your concept is to each of them.
I haven’t forgotten the consumer. You can run your concept through focus groups or a survey. Even something as simple as asking your current customers related questions during their shopping experience. You may chose to not ask the customers directly if your product is sensitive or will take you a long time to develop but you will be able to ask related questions.
Of course, there is an easier way. Instead of developing a concept and then seeing of their is a market, work with your customers to understand their unmet needs and then develop a concept to service that need. Seeking unmet needs should be part of your customer service. It isn’t good enough to simply satisfy their current need. Investigate what more you can do to make your customers’ lives easier at all times.
1.) Does a market exist?
Basically, are there customers willing to pay for your product or service. Most products and services are an extension of something that already exists, so you know that a market exists. This question becomes even more important as if you are offering a disruptive product or service.
2.) How big is a market?
Basically, are there enough people who are willing to pay for your product to sustain your business. You must also consider at this point how many competitors are there and how entrenched are they. For example, if there is a million dollar business but there are already a dozen competitors, there will not be a lot of unmet demand. Then your business will have to out perform enough of the established businesses to squeeze into the market.
3.) Is the market concentrated?
Basically, how spread out is the market. It you are providing a service where you have to be present but your customers are spread across a 250 mile strip, it may not be a workable scenario. With the power of the internet, it is significantly easier to service a market that isn’t concentrated. You may have to structure your business differently depending on how and where your customers are located.
Recently the Wall Street Journal wrote about social media and a related Gallup Poll. http://online.wsj.com/public/resources/documents/sac_report_11_socialmedia_061114.pdf
Basically is the survey shows that the majority of respondents claim to not be influenced by social media postings by brands. This is even true of millenials. It appears that brands are using traditional methods in a new media space. They broadcast en mass hoping for a few listeners.
Simply put social media is not an easy path to instant new customers. It can have great potential but only if it is aligned with other channels of communication and reality. To make social media work for the company, brands should use it to enable their loyal customers to avocade on their behalf. No form of communication replaces relevant services excellently executed.
Is More Data Helpful?.
good article on some of the limits of more data. I also add that the need for more data is frequently used to delay important decisions and that while people are more likely to act when you measure them, there are frequently unintended consequences. That is what people do when you measure them is not necessarily what you wanted them to do.
- 1.) Have a specific objective
- 2.) Do your homework
- 3.) Survey your target customers
- 4.) Run a sample test
- 5.) Be open to the survey results
Have a specific objective
Clear and concise objectives lead to straight forward unambiguous surveys. Evaluate all questions against the objective. If a question does not fit the objective, it doesn’t belong in the survey.
Do your homework
Before you do a survey, understand all that is already known. Have past surveys addressed similar objectives? What does other data already available tell you?
Survey your target customers
Survey the segment of people you want to learn about. If you are offering a service to renters, home owner opinions will not help you. They may even lead you astray. In certain situations, it may be helpful to see how your target customers’ opinions vary from the population in general. If that is your situation, survey a larger population but be sure to be able to segment your target customers in the analysis.
Run a sample test
It is impossible to foresee exactly how people will respond to every question. The best way to see if their responses are helpful is to run a small test or two. First have a small group of your internal team take the survey to work out any obvious kinks. Then run your survey through a small section of your target audience. Perhaps 10% of your list or even just 100 people.
Be open to the survey results
It is easy to try to use the survey results to support your predetermined position. Don’t. Be open. Listen to your respondents. Analyze their responses without judgement.
You do not have one customer replicated hundreds or hundreds of thousands of times. Each and every one of your customers has a unique set of needs and values. Each and every one of your customers has approached your company from a different decision path. By measuring your customers to an average, so much rich information is lost.
To better serve your customers, you need to create relevant segments of customers. This can be through deep analysis of your internal data as well as combining it with data from other sources, e.g. shadow shopping, mystery shoppers, customer surveys, psychographics, focus groups excreta.
All analysis needs to have an objective. An objective of discovering how you can better and more profitably serve your best customers may lead to different segmentations than identifying under tapped customer segments. Do not approach segmentation with a canned approach. Be receptive to what your customer and your data are telling you. Good analysis is a dialog.
Evaluate what the customer desires, what your competitor does well and what you do well. Where your strengths and the customer’s needs overlap, there is potential for profit. Unfortunately, your competitor will also try to align with the customer’s needs. Where your competitor’s and your strengths competition through either lower prices or higher services tends to erode profits.
1.) Realization of need – First the consumer my realize that they “need” an item or service. The realization may happen slowly over time, e.g. the realization that the customer needs a new home, or very quickly, e.g. the realization of a need for Chapstick at the cash register at CVS. The marketer must understand how their targeted consumer segments come to this realization and plan accordingly.
2.) Research – Customers then research which products or services may satisfy their need. They get their information from everything from advertisements, company websites, family and friends, sales people and product packaging. Increasingly powerful source of information is social media and peer review sites. Research may be a large part of the purchasing decision, e.g. a customer purchasing a home will do a lot of their own research and often bring in a real estate agent to find the right match. Or the research process may be as quick as seeing the Chapstick at the cash wrap and realizing they have dry lips.
3.) Evaluation – After the customer has identified a number of options that may satisfy their need, the customer will select the best option for them based on a number of criteria, i.e. price, quality, convenience, brand, reliability, etc.
4.) Purchase – The customer then purchases the product but must still decide which channel (online, retail, catalog, etc) and which specific provider.
5.) Satisfaction – Once the customer has purchased the product or service the customer may realize the purchase was satisfactory or not. This realization will help determine if the customer becomes a positive or negative influence for potential future customers as well as determine if this customer will be a repeat consumer.