How do you know if your new business idea will be a winner or a loser?
The marketing consultants Al Reis and Jack Trout tell how product ideas don’t always test out well. The inclination is to do market research but that can be a big mistake. One example they mentioned was Univac which pioneered a big product idea called the computer only to lose its early lead to IBM. It seems Univac lost out because its own market research predicted that by the year 2000 there would be only 1,000 computers in use. So they didn’t invest in a product with such a limited potential market. IBM, on the other hand, didn’t spend money on research and didn’t know about this bad news about computers. As Reis and Trout say, “Instead they geared up for a market that proceeded to exceed every market researcher’s wildest dreams”.
But even IBM later got it wrong. When Haloid approached IBM to complete the development of the 914 and handle its introduction IBM hired a consulting firm, Arthur D Little, to study the copier market and advise on how to proceed. After extensive financial and market analysis, the consulting firm projected that no more than 5,000 of the new Xerox machines would sell. So IBM declined to help. Eight years later, Xerox – the new name for the Haloid Company – had manufactured and placed 190,000 copiers.
How then do you find out the demand for your new product or service as a start-up or small business with virtually no money to spend? The real question is: will you be able to recognise a winner even if it’s an idea you came up with yourself?
The solution to finding out whether a new product or service idea will be successful or not is to test your idea. But as you see from the behemoth corporations who get it horribly wrong even if you get back test results you still have to make a judgement call whether your product or service idea will fly. You’re also probably not going to get much help from friends and family who will probably think that your idea is crazy and maybe who do you think you are to have the audacity to try out something new.
Without any money or very little how then do you do market research? You might be tempted to show your products or service idea or even a basic prototype to family and friends. Sometimes they just want to appease or flatter you and will say your idea looks good. But what does that mean? Flattery, praise or opinions are actually worthless. Worthless, worthless, worthless. They tell you absolutely nothing. If you start to lose your self-confidence and believe their flattery, praise and opinions you might as well believe in the tooth fairy, the Easter Bunny and Father Christmas.
There is a way that you can test your idea that will give you accurate information on the sort of demand you can expect. It’s not fool proof. Nothing is. But the reality is that there are no-cost and low-cost market tests that you can perform. One such test will actually put money in your bank account from a real, live customer rather than pour it down the drain into a market research firm’s booty. As an entrepreneur, you don’t have the luxury of the big corporate who can throw money away in market researching their new product idea just so they can cover their behinds when the product flops.
If you want to know whether your new products or service idea has legs, get your hands on a copy of “Breakthrough Ideas”, a resource that will point you in the right direction when it comes to no-cost, low-cost market testing of new product ideas. It’s not all you’ll find in this valuable volume that shows you how to turn a promising new idea into a viable product or service. But when it comes to helping you judge whether there will be demand for your new business idea, you won’t find any source like it.