You’ve got a great idea and you want to move your business forward. So how do you assess the market potential? Read on for our guide on exploring and defining your market.
Quick takeaways if you’re in a hurry:
1. Statistics are an essential source of information in proving that your market exists and has the potential to support your business
2. Competitors can give you insight into market conditions and existing product options, as well as providing you with customers who can be interviewed to sense check the appeal of your offering
3. It’s important to make sure that you can reach your target audience in the location that you choose to operate in. Look out for any social or statistical barriers to success.
Read on: How to test the market potential for your idea
The first step to starting up a business is identifying a consumer need. The second step in the start up process is to explore and understand the market potential. Defining the potential market will allow you to assess the revenue that you could generate from selling your offering.
In basic terms you’re going to need to find an audience big enough to make money for your business. Whatever market you decide to target, the most important thing is mapping its potential and understanding whether it’s going to be able to meet your needs.
Get into statistics
If you want to understand the size and value of your potential market then you’re going to need to gather some statistics. Demographic and economic data is available through national statistics and census data, as well as both national and regional government.
The industry that you’re entering into will be a great source of data for performance, number of competitors, value of revenue etc. Find out the main industry bodies at a local and national level and contact them to explore what information is available.
Most information is now available online, but a trip to your local library will probably also prove to be valuable to sense check any further data sources. You can also canvas local business networking groups or support groups that are focused on helping start up businesses and entrepreneurs. They may have access to information and be able to share good data sources.
Is your market saturated?
100 years ago, when a business set out to meet the needs of a consumer with a new product or service there’s a fair chance that they would come up with an original idea. Fast-forward to your marketplace in 2016, and you’ll probably notice that it’s challenging to come up with a unique product or service idea that hasn’t been done before.
When you set out to explore market potential, there’s every chance that you’ll find you’re not alone with the offering that you’ve decided to create. Launching a product alongside your competitors is not a problem, provided you’ve come up with a unique way of fulfilling the needs of your customers that will differentiate you from the competition.
But if the market is truly saturated, then you’ll discover that the competition has already covered all the bases and considered all the opportunities for differentiation. A saturated market is not impossible to penetrate, but your time and money would be probably be better invested elsewhere.
Is your product of interest to the market?
In the early stages of starting up your business, it’s easy to become convinced that you’ve got a great idea and everyone is going to love it. But there will be customers who will not be interested in what your business has to offer. Sometimes these customers may be grouped geographically, and sometimes they may be spread out.
Consider using focus groups and other research techniques to establish which customers would buy your product. This will allow you to identify common characteristics that will help you define your target market through statistics.
For example, a business setting up a lawn mowing franchise may identify that its core customers will be professionals who don’t have time to maintain their property but have a high income level. Statistics will then make it possible to identify specific areas where there are high numbers of customers with this income level and therefore a strong likelihood that the business would be of interest.
If you’re assessing a potential market to set up in, take some time to make sure there are no reasons why the market would not adopt your product or service. Investigate fully and canvas potential customers to explore their enthusiasm for your offering. This will help you uncover any blockers that could get in the way of success.
What’s the competition up to?
Unless you’ve come up with a unique need that no other business has recognised, you’re going to have direct or indirect competitors in your market. These competitors offer you the chance to gain a great understanding of the market potential.
The number of competitors and any information about their customer numbers will give you some good statistical insights into market size and, in combination with an understanding of their prices, potential value.
Take a close look at the products and services of your competition and understand what they’re doing well or they could be doing better. Talking to the customers of your competition through research will also give you the ability to explore how satisfied they are and whether your offering may be attractive or not.
You can also gain some smart insights by exploring parallel competitors in similar markets. If you’ve decided to set up a Computer Shop in a small town, why not find another computer shop in a similar town and ask them for some insight into what has worked well and what hasn’t worked well for them?
Explore business real estate and see if there are any similar businesses for sale. A property broker will be able to offer any insights into why businesses have been put on the market and this could provide valuable learnings around what to avoid when you establish your offering.
Can you reach your target audience?
A successful business will require you to bring the right product to the right audience. If you’ve decided to sell a product to a specific target audience, it’s incredibly important to have access to them.
This is especially important for businesses that rely on the geography of their location, for example restaurants, clubs, sports venues etc. Statistics can help a business to ensure that they will have access to the target audience in the area within which they choose to operate.
Review your potential market
Once you’ve established a consumer need that can be fulfilled, understanding the potential of a market is essential in order to assess whether there is going to be enough demand. Demand is necessary for your business to achieve its financial goals.
Statistics are essential in establishing demographic information and understanding the size and potential of existing markets. Both industry bodies and competitors offer a valuable source of information for mapping out the opportunity. And once your business has defined its product and confirmed that the market potential exists, then it’s time to understand how to move your business forward to the next stage of start up.
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