Here’s a question I keep getting asked from university students who want to come up with new start-up ideas: I have got an idea for a business and what do you think about it?
The problem that I found with each one of these students ideas is that they have not done homework on their market. When people think of an online business, for example, they think that the entire Internet world is the market. This is too big. You need to narrow down your market to an easy identifiable group of people that you can serve.
Just think about how important local markets are. If you’re starting a website, blog or online service for customers in your local area it makes sense because you can meet with them and they can do business with you face-to-face. The further you are from your market the more quickly distance erodes communication and trust. Yes, of course you can bridge these deficiencies – such as providing strong guarantees and refunds for your products or services – but it’s a lot easier to do business with people in your town or city.
How you define your market will be important to also reaching your potential customers using direct face-to-face contact or through mediated communication such as online advertising and advertising in local community newspapers or in local business directories. If your target market of customers can’t be easily reached – and you can’t figure out a way to reach them – then it’s going to be either impossible or very expensive to sell to them.
A target market can be defined in many ways not only geographically. It could include both demographics and psychographics. Your target group of customers may well have certain lifestyle characteristics or particular interests that makes your target market easier to define. One of the quickest ways to determine whether you have a defined group of customers is to check whether there are any specialised magazines that cater for their interests. You may also want to look on the Internet to see if there are websites or blogs that have already targeted the customer grouping that you’re aiming for.
Let’s take the example of fashion blogs. Fashion is a huge market with many facets to it. Most areas in the fashion market have already been taken up. But if you can identify a segment that has either been ignored or overlooked, then you might have a potential goldmine. While big in other countries, for example, the university student fashion target market has largely been ignored on the Internet and this target segment may be worthwhile exploring for purchasing power.
Under-the-radar market testing needs to be done because you don’t want to alert potential competitors to the market that you have identified for yourself. You would need to do careful planning because once you do make your intentions public, you may well have a slew of competitors trying to chase your market. As an example, just think of the early mover in the energy drinks sector which held the market for a few years and then suddenly energy drinks proliferated. Now when you go to an energy drink shelf there are so many energy drinks that you can’t even find the original pioneer in the category.
Some of the Internet-savvy marketers also advise that you build an “Avatar” which is essentially a detailed description of your ideal customer and their needs, wants and desires as well as a deep understanding of their habits, behaviour and motivations. Unless you have a deep understanding of your potential customer, your marketing and business strategy can be so much of a hit-and-miss affair.
Whatever business idea you come up with, just make sure that you carefully investigate your market with whatever means you have at your disposal even if all you have do do secondary, desktop type research and what you can get from the Internet. Small businesses and start-ups can’t necessarily hire market research firms to do market research for them but at least with available information and published statistics, you can get a good idea of market potentials to help you define your target market.