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Is there a market for your business idea?

Johannesburg - Do you have a great idea for a product? Something that’s bound to capture the hearts and minds (and wallets) of consumers everywhere? Or perhaps you’ve stumbled upon a service that isn’t being offered by anyone else. This is your opportunity! Don’t hesitate ... don’t look back ... jump right into it and…

Wait! Before you shift into high gear, you must determine whether there really is a market for your product or service. Not only that, you need to ascertain what, if any, fine-tuning is needed. Quite simply, you must conduct market research.

Many business owners neglect this crucial step in product development for the sole reason that they don’t want to hear negative feedback. They’re convinced their product or service is perfect just the way it is, and they don’t want to risk tampering with it.

Other entrepreneurs bypass market research because they fear it will be too expensive. With all the other start-up costs you’re facing, it’s not easy to justify spending money on research that will only prove what you knew all along: your product is a winner.

Regardless of the reason, failing to do market research can amount to a death sentence for your product.

Think of market research as an investment in your future. If you make the necessary adjustments to your product or service now, you’ll save money in the long run.

So what exactly is market research? Simply put, it’s a way of collecting information you can use to solve or avoid marketing problems.

Good market research gives you the data you need to develop a marketing plan that works for you. It enables you to identify the specific segments within a market that you want to target and to create an identity for your product or service that separates it from your competitors. Market research can also help you choose the best geographic location in which to launch your new business.

Before you start your market research, it’s a good idea to meet with a consultant, or talk to a business or marketing professor at a local university. This can offer guidance and help you with the first step in market research: deciding exactly what information you need to gather.

As a rule of thumb, market research should provide you with information about three critical areas:

1 Industry information

In researching the industry, look for the latest trends. Compare the statistics and growth in the industry. What areas of the industry appear to be expanding, and what areas are declining? Is the industry catering to new types of customers? What technological developments are affecting the industry? How can you use them to your advantage? A thriving, stable industry is key – you don’t want to start a new business in a field that’s declining.

2 Consumer close-up

On the consumer side, your market research should begin with a market survey. A thorough market survey will help you make a reasonable sales forecast for your new business. To do a market survey, you first need to determine the market limits or physical boundaries of the area to which your business sells. Next, study the spending characteristics of the population within this location.

Estimate the location’s purchasing power, based on its ­per capita income, its median income level, the unemployment rate, population and other demographic factors.

Determine the current sales volume in the area for the type of product or service you will sell.

Finally, estimate how much of the total sales volume you can reasonably obtain. This last step is extremely important. Opening your new business in a community won’t necessarily generate additional business volume; it may simply redistribute the business that’s already there.

3 Competition close-up

Based on a combination of industry research and consumer research, a clearer picture of your competition will emerge. Don’t underestimate the number of competitors out there.

Keep an eye out for potential future competitors as well as current ones.

Examine the number of competitors on a local and, if relevant, national scale. Study their strategies and operations.

Your analysis should supply a clear picture of potential threats, opportunities, weaknesses and strengths of the competition facing your new business.

When looking at the competition, try to see what trends have been established in the industry and whether there’s an opportunity or advantage for your business. Use the library and the internet to research competitors. Read as many articles as you can on the companies you’ll be competing with.

If you’re researching publicly owned companies, contact them and obtain copies of their annual reports.

These often show not only how successful a company is, but what products or services it plans to emphasise in the future.

You can also gather information on competing businesses by visiting them in person.

– Entrepreneur.com

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