On Inc.com, Darren Dahl discusses how entrepreneurs can assess the market potential of a new product or service.
As Dahl points out, too many entrepreneurs see their businesses flounder on a loose "build it and they will come" philosophy. He cites a recent Blackbox study which found that many tech start-ups fail because they focus more on the product than on potential customers.
However, Dahl insists there are a number of inexpensive ways entrepreneurs can conduct market research to assess potential demand for products or services.
1) Ask the right questions. Victor Kwegyir, author of The Business You Can Start: Spotting the Greatest Opportunities in the Economic Downturn, tells Dahl that entrepreneurs should ask themselves the following before putting their new idea into practice:
- Will this product or service satisfy a market need?
- Who and where are my potential customers?
- What is the competition, and is it direct or indirect, local, national or international?
- How distinct is my product from the competition's?
- Can the product survive changing trends or take advantage of current ones before they die out?
- How much are consumers prepared to pay for my product, and can I make any profit at any stage?
- Are there any legal restrictions?
2) Google it. Dahl says this can be an effective way to assess the potential market and competition.
3) Collect feedback. "Crowdsourcing" via online tools such as UserTesting.com, UsabilityHub.com and Ask Your Target Market will allow you to "tap into the wisdom of the virtual crowd for modest prices".
4) Sell something. This will give you the ultimate answer as to whether someone will buy your product. Dahl recommends creating a prototype of your product or service, maybe in a basic form, that you can exhibit at industry trade shows or to retailers and distribution partners.