Way too often I run into frustrated new entrepreneurs that understand very little about the marketplace they plan to enter.
Some may have a written business plan (although this important step is neglected way too often). Some may even have experience in a niche market but have not spent time researching that market in earnest given they want to do business in it. That’s a big mistake.
Part of the problem lies in the simple fact that business owners sometimes feel they are not capable of researching a market. They have never done it before and wouldn’t know where to begin or what to look for in their study.
Others don’t feel any need to delve into the market – they may have some experience in it already and figure “I’m a professional in the market and I know what my prospects and customers want.”
I can honestly tell you that the Internet superhighway is littered with products brought to market that no one wanted! Had market research been done in the first place, most such disasters could have been avoided.
The Internet is such a wonderful tool when it comes to researching a potential market and niche (and by the way, they are not synonymous).
Here are a few questions you can ask (and the answers are there online for you) prior to creating a business, product or web site that will help you to analyze whether your business hopes are realistic.
- Who are my perfect customers? I consider a perfect customer to be one that wants exactly what I have to offer and the ability to pay for it. Remember, you don’t typically create new demand for a product or service. The demand exists in the marketplace already and your charge is to find it and then sell into that existing demand. Yes, some persuasion may be needed in a sales letter … but if the prospect isn’t looking to buy what you are offering (or something very close) … well your conversions will not be good.
- What are the demographics and characteristics of that perfect customer? What is the customer gender, age, skill level for the product, where do they live, what is their education, income level, and past experience in the market? Understanding these things helps you to better target your product to meet the profile of your customer so that you can provide something that gives great benefit, solves existing problems, and is easy to understand and use. If your offering is not a good fit for the customer’s technical or skill level you risk a “one and done” customer buying experience which is never appropriate.
- Where do these perfect customers congregate? As you get into marketing your product or web site, it’s important to laser target your ads and even branding message to be seen by those most interested in what your are offering. You always seek a high ROI (return on investment) for your marketing dollars.
- How many, and what kind of competitors will I have? Understanding the direct competition is critical. It can be a daunting task to break into a market that is filled with heavy hitters who are already established and have a track record of success. It can be done, but most likely you will need a product or service that fills a different and important need in the niche.
- Another reason for understanding the competition is that you need to see what is currently available for your perfect customers. What other choices does your prospect audience have? When you know this, you can better position your business and products to address a unique need or a “gap” in the marketplace where the competition is non-existent or at least not so heavy. A great example is the retail book business. How will you ever compete with Amazon in that space? Local bookstores by the dozens have been put out of business because Amazon has become a consumer favorite in that marketplace. So one must ask the question, “What do my prospects want that they can’t get from Amazon?” Do they want some very deeply focused niche books? Do they want a more personalized buying experience? Do they want a physical place to hang out? Do they want book reviews from experts instead of average consumers? What else can I provide that Amazon (because of its size) can’t?
- Do my customers usually buy this kind of product online? Maybe there are reasons why you shouldn’t try to sell your product on the Internet. Maybe the cost to deliver the product is exorbitant. Maybe the exact product that you would sell is already online and selling well. Maybe the product is conveniently available in local physical locations.
- Is my product timely? Or did I just miss the “hay day” of my product and now the demand is petering out. You don’t want to be chasing fads or trying to sell out-dated information or technology. You want to be on the leading edge of the product wave … not floundering in the back wash.
- Have I incorrectly estimated the size of the market? This mistake can be a business breaker. A market too broad means there is too much competition and it will be difficult to differentiate your business brand and effectively target your customers. A market too small means you might find some saturation – too many competitors for the small amount of potential buying customers. If that’s the case, you can still compete in the market but you must position your business differently. Some suggest that the biggest markets are always the best because if you see there are lots of sellers you know there are lots of customers. I personally don’t buy that logic completely. I would prefer to have a unique product in a very targeted market – it means less competition. Most viable markets are larger than you think since online markets these days reach across the globe.
- Can I get repeat sales within my niche? Most business owners don’t make a living on a single product. You’ll be ahead of the curve if you choose a niche where multiple products can be created and sold to repeat customers. Selling a happy customer on another quality product in the same niche is almost always easier and less costly than finding a brand new customer. Build your business on repeat (back-end) sales.
- When my prospects are looking to buy a product like mine, where do they go? Understanding the places typical niche participants shop is important. It helps the business owner to focus advertising and it opens the door to knowing how best to make an offer that will work. Observe the best competition. Look for the authority sites in your marketplace.
- What are typical customers in the niche willing to spend on a product like mine? Pricing decisions can be very important to a business. I think the best approach is to understand the price points in the niche that are now working and then test and track price points for your own product before you roll it out in a major way. You can always ramp up marketing, but you should only do that after you understand where the best pricing points for your niche rest.
- How much support are my perfect customers going to need? Support requests for a solo business owner can get to be overwhelming. Time is money and if you get an avalanche of support inquiries it’s going to mean a lot of your day is taken in answering phone calls and emails. Many folks are lazy (or lack confidence in their own ability to figure something out) and will pick up the phone to get help even if simple, clear and plain instructions are sent with the product.
- Are my perfect customers candidates for a community? By that I mean, are they the type of people that like to get together and interact? If so, you have a perfect niche for a forum, a subscription or membership site, or even physical or webinar events. People like to meet and interact with like-minded enthusiasts. When I think about this phenomenon, the Harley Davidson brand comes to mind. Folks that buy Harleys seem to want to get together. The product brand is recognized and esteemed. Business owners can create a lot of recurring revenue if they can enhance the brand’s user experience and provide a community platform or infrastructure for their customers.
- Will the market prospects for my product or service also be candidates for another unrelated-niche? If so, a business owner can capitalize on affiliate offers in that other niche. In addition, there are joint ventures and cross-promoting that can generate a lot of new leads and additional revenue. Just as one example, a business owner with a bridal product might decide that brides are often candidates for printers (announcements), photographers (wedding pictures), and soon, baby supplies. All of these businesses could be potential partners in sharing leads, cross-promoted product offerings, and customer back end products.
- Finally, does my market share product or web site information? Certain kinds of businesses attract customers that tend to be social. If this is the case with your product, the use of social media in your marketing can be a huge advantage. Word of mouth advertising is very effective and if your customers have a great experience with your business and share their feelings about it with their friends, you are going to reap nice benefits in your business.
There you have it: fifteen questions to ask and resolve in order to better understand and analyze the potential of your marketplace for your online business. Initial market research is ignored by many entrepreneurs. Before you decide on a product to sell , or a web site to create, or even the business model you’re going to employ, you need to research the marketplace. It makes creating a profitable and lasting business so much easier and legitimate!
To your online business success!