What is the most important thing for founders to remember when doing research about a market before they start a business or release a new product? Why is this element so important?
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1. Evaluate Long-Term Costs
In some industries, materials and service costs are relatively stable. In others, they’re either volatile or rapidly increasing. The easiest way to run yourself out of business is by relying on supplies with unsustainable pricing. To increase your chances of long-term success, make sure your costs are predictable so you’ll have room to reinvest in R&D, customer service and marketing.
2. Check Out the Competition
Don’t forget to research the competition. Sure, market size and demographics are important, but so is your existing competitors. Break that down by looking at companies similar to yours in the market, and alternative solutions. What you’re looking for with your product, service, or business, is to offer more than these competitors.
3. Go Back to the Source
It’s important to look for the source of the market and determine the forces that initially drove it. Why does this market exist? Too often I think we get away from that question and focus only on how a business exists in its current state i.e., how much revenue it’s generating. When we understand the initial demand that created a market, we can re-evaluate and discover better ways to fulfill it.
4. Learn From Others’ Mistakes
The more you know about the failed brands, the better off you will be with your product. I study the players in the space who didn’t become dominant and analyze why they didn’t: What were the mistakes they made and what could have been done differently. It gives me the right perspective and helps me set realistic expectations.
5. Focus on Intersectionality
There are a variety of aspects to a person’s identity that needs to be considered when conducting market research — geographic location, gender, race, language, culture and socioeconomic status all play a part in shaping a person’s perspective and should be taken into account when researching your market. Don’t stop at gender and race. Dig deep and consider the effects of overlapping identities.
6. Start Selling Before You Build Anything
It has never been easier to throw up a quick landing page and get a custom email address. Before spending countless hours and dollars building a product, start selling to your target market right away. Get your ideal customers (not friends/family) on the phone and let them tell you about their problems. Ask how much they would pay for those problems to be solved by your product and close the deal.
7. Find Out Market Size
You want to find out the size of your market and your competition before you release your new product. Is there room in the market for another competitor? What will you do differently? Take a look at Google Trends to help you identify the popularity of your solution. This will help you find out if the trend is increasing or decreasing in popularity.
8. Provide a Solution to a Problem
Most successful product-based companies provide solutions to a problem. Whether it’s a course, a service or a product, if it helps solve your target audience’s problem, then it will sell. And then, once that’s done, that’s when you can focus on the aesthetics, marketing, branding and providing value to the consumer.
9. Identify Your Target Audience
Before you start a business or release a product, you’ve got to know exactly who your target audience is. Knowing who your target audience is will help you create a product or service that they’ll need and want to buy, and you’ll learn how best to market and connect with them. Create buyer personas to get really detailed about the needs, wants, pain points, demographics, etc. of your ideal customer.
10. Identify Your Unique Value Proposition
One of the first steps to starting a business or launching a product is making sure that you have a key differentiator from your competition and a unique value proposition. How are you presenting a solution in a different way than what is already offered? If you can’t answer that question, you need to dig deeper. This is critical because without it, you don’t have a hook to attract customers.
11. Assess Potential to Sell the Business at a Later Time
All industries are not the same in terms of valuations. I used to own a successful internet marketing agency. It was a great business, though when it came time to move on and sell the business, I found the valuations were just two-three times net income. Conversely, some of my peers started software businesses with recurring revenue models which brought valuations from six-eight times revenue.
12. Don’t Forget Keyword Research
When doing research about a market, take a look at Google’s Keyword Planner. This will help you understand how many people are searching for certain keywords and how high the competition is to rank high in search results. Ideally, it would be best to have high traffic and low competition to keep your user acquisition cost down.
13. Consider Demand
Great ideas are a dime a dozen. The most predictive factor for business success is timing, the reason being that timing is what determines if there is a demand for your product or service. Demand is the key to success. If there is not enough demand for your product or service, then you are going to struggle and odds of success are much lower.
14. Consider Potential Regulatory Issues
The first thing I look at when doing research about starting a business is legal regulation. I look at how long the market has been around and what has happened to it with respect to legal consequences and regulation. Before starting a business and parking money somewhere you should make sure this industry won’t get shut down or incur regulatory changes to the point where it will cut into profits.