A pop-up store was set up in a shopping centre in Cresta, Johannesburg, some time back to find out if a range of UK-made clothing would work in South Africa. There were other pop-up stores in major centres such as Cape Town and Durban. I’ve never heard a word about the results of the pop-up store success or otherwise since. But demand must have been lower than expected because the store was never established in Johannesburg.
This was a serious retail clothing brand and they went about testing market demand in a real-world way. Rather than invest huge sums in setting up stores, training staff and bringing in huge quantities of inventory, they did the initial test to determine viability. Without the minimum level of customer interest, they would not have had a serious market.
What criteria would you use to evaluate or screen a new product or service idea?
Potential customer demand is an important measure because without customers you don’t really have a business. This is why it is important to use the best methods possible to make assessments or projections of market demand. You really have to do find out the number of potential customers in a geographic area, their propensity to buy what you are offering and price points.
Some would say that one of the most important criteria is the customer benefit or advantage that your new product or service provides. If customers can solve the problem in other ways, then your new product or service may not have an advantage. That’s why it’s important to also find out how customers are achieving they need presently.
Whatever market you are entering, it is important to have experience or expertise in the particular industry or market. For example, if you are planning to open a bakery and know next to nothing about baking bread and confectionery, then you are at a big disadvantage. It’s important to have core competence in the product line or business that you wish to start. Yes, you may be able to bridge the competence gap by hiring an experienced manager but you will always be beholden to outside expertise.
Others look to the growth potential of the market, which is an important indicator of future viability. If, for example, you enter a declining market, then you are going to battle all the way. In a declining market, a specialised niche of the market may have potential for a number of years but if you are aiming to keep your business going in the long-term future, you would have to seriously think about entering a market on the decline.
A further important criteria is how your product or service or small venture will make money. In other words, what is your business model? A business model is a story of how you will serve customers, deliver and manufacture product for them and distribute all with the intention of making a profit. Some people confuse a revenue model with a business model. It’s important to know the difference.
Ultimately it’s up to you to decide which criteria is most important to screening your new product or service idea. Yes, it’s true that perhaps one criteria is perhaps not enough but without knowing it, you might not uncover an important fatal flaw in your new business idea.