Starting a new business can be an uphill battle. According to statistics, about 20% of startups won’t survive past their first year. One common mistake entrepreneurs make is to create and love a solution to a problem they have experienced without determining whether anyone else wants the product or service. After filing a non-provisional patent application and raising money, entrepreneurs often discover that their product has no market demand. One of the primary reasons for this is the lack of adequate vetting research on the target market before launching the product or service.
Before writing a business plan and building a company, market research is essential to validate a business model concept and build something the target market wants to buy. It is a crucial vetting process step that should be taken before writing a business plan and building a company to ensure that the business model concept is validated and that the target market wants to buy what you are offering.
Market research is essential because the success of a business model concept depends largely on the demand for the product or service. Without proper vetting research, you might be investing time and resources into a product or service that no one wants. Therefore, conducting market research is critical in determining whether there is a demand for your product or service before investing time and resources into it.
Vetting a business model concept is an iterative thought process that should lead to figuring out the product you can offer, what customer is best for this product, and how much they value it. The process is iterative because the product, target customer & value are interrelated, so it is almost impossible to figure out all three without going back to revise the first, then the second, then figure out the third again. Having a great business model means all three are well-aligned & fit your own interests & abilities.
To reach a “GO” decision with a business model concept, the product or service to be offered should fit perfectly with the customer segment identified & those people are the ones who place the highest value on the product. Value is not a dollar amount, but it is the outcome the customer gets from using a product/service. Customer value is measured by how high on Maslow’s hierarchy of needs the prospect places this product or service outcome. A business model is all about understanding that your business is your customer, so you must customize it to them.
Market research aims to understand the reasons consumers will buy your product, studying such things as consumer behavior, including how cultural, societal, and personal factors influence that behavior. Market research can be split into two varieties: primary and secondary. Primary research studies customers directly, whereas secondary research studies information that others have gathered about customers. Primary research might be telephone interviews or online polls with randomly selected members of the target group. Secondary research might come from reports found on the websites of various other organizations or blogs written about the industry.
For small business owners, market research can be easy and cost-effective. Here are some thoughts for running effective vetting market research on a budget:
- Determine what you need to know about your market.
- Prioritize the results of the first step.
- Review less-expensive research alternatives, such as Small Business Development Centers, the Small Business Administration, and trade associations.
- Be creative, put yourself out there, and keep going until you have enough information to make an educated decision about how to move forward.
Conducting market research has many benefits for small business owners, including leveraging market demand to get other parties to come to the table during the fundraising process. One cost-effective way of conducting market research is by using social media platforms such as Facebook, Twitter, LinkedIn, and Instagram. Social media has a wealth of information about customers, including their behavior, preferences, and opinions. Online tools such as Google Trends, SurveyMonkey, Google Forms, and Typeform are also helpful for market research. Analyzing competitors is an important aspect of market research because you need to know what your competitors are doing, what products or services they are offering, and how they are marketing their products.
By the way, second players into a new market have an advantage because they can learn from the mistakes of the first players. They can also innovate beyond them. You see, when you’re a first player, there are certain things that you just don’t know how to do yet. You might not know exactly what your customer wants or how to deliver it in the best way possible. That’s why second players often come in and find ways to improve on your work…they know what works and doesn’t work, and they’re willing to experiment with new ideas while also having a deeper understanding of what makes customer buy.
Conducting research is essential to validate a business model concept and build something the target market wants to buy. Vetting a business model concept is an iterative process that should lead to figuring out: the product that can be offered; what customer is best for this product or service; how much the prospect values it. Taking the time to do thorough vetting research before writing a plan and implementing the business model concept is critical to success as an entrepreneur. By understanding the target market, analyzing the competition, staying up-to-date with industry trends, and creating a solid business plan, an entrepreneur can increase the chances of success.
If you are planning to start a business or are thinking about scaling an existing one, be sure to read the ebook “Customer Centric Business Planning: A Guide to Optimizing Your Business for Maximum Success”. It is an essential book for business owners, managers, and entrepreneurs looking to leverage real-time insight to start and improve their business operations. Learn how proper customer centric business planning can assess risk and opportunity, and create an actionable roadmap for success.
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