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.
While typical New Year’s resolutions (losing weight, spending more time on the family, working out) may be great personal achievements there is one resolution that matters even more: reformulating your organization’s strategy. Continuing to work a wrong or even a bit outdated strategy in 2014 will take more out of you and out of your organization than carrying around that extra 10 pounds.
Working an incorrect strategy saps resources out of you, your personnel and your company’s financial resources. A strategy, correctly formulated and applied, guides every decision maker from customer service to the president in making decisions that are consistent, effective and future oriented. On the other hand a strategy, incorrectly formulated and/or applied, guides every decision maker to make inconsistent decisions that do not guide the organization efficiently or effectively toward a desirable future.
Generally speaking, an organization’s strategy should be validated every year and have a significant review every three years. Organizations that are faltering, experiencing significant growth or in a cutting-edge industry, e.g. 3D printers, should validate and review their strategy on a significantly quicker pace. For truly disruptive organizations, Clayton M. Christensen and Michael E. Raynor suggest processes for fostering an “emergent strategy” in The Innovator’s Solution to have a living continually updated strategy.
For your New Year’s resolution, consider asking yourself these questions:
How recently has your organization’s strategy been validated or reviewed?
Does your organization have a clear and believable strategy that has been working*?
Could every decision maker correctly describe your organization’s strategy?
Is your organization’s strategy specific to your organization (vs. a cookie cutter approach that could fit any organization in your industry)?
Do you have regular tracking of metrics that are tied to your strategy?
If your answer to question 1 is longer than a year or if you answered “no” to any question 2 through 5, it is time to review if your organization’s strategy is up to date and appropriate for the circumstances 2014 is likely to bring your industry.
* Definition of “working”: provide a lasting and positive change to sales trend