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No matter whether you have an original business idea, you have created a brand new product or whether you have decided to turn your hobby or skill into a business – it is essential to do research on your idea.
It has been our experience that too many people start a business without having spent any time at all in this step. While their idea is inspired, there is often a great rush to get it to market yet investing in this stage is one of the wisest things you can do.
Step out of the comfort zone of friends and family and check that your idea is on the money. In this chapter, we’re going to find out how you can do your own market research so that you can validate and refine your idea.
Getting too far ahead without nailing the basics can be a recipe for disaster. This means that you need to define just who is your customer and what they need to get done.
Market research is used to help you assess whether your business idea is viable. You can develop an understanding of your target customer, their needs, their preferences, and their behaviour. You will also be able to identify movements in your industry and any likely competitors.
Sound overwhelming? It’s not really. But there is structure. Lets look at what type of research can you do for your new business.
By understanding your customer you can develop better products and services. These are the people who will be spending their hard-earned money with you, so you want to identify your ideal buyer and understand where they spend their time.
This not only allows you to understand the competition more deeply, but it helps you identify the different ways that they approach doing business with your prospects. It allows a change of perspective – you can start to see your own business just as a prospective client would.
Let’s take a better look at these two points.
Understand your Prospective Clients and Customers
What comes first, the job to be done or the customer? Well, it depends on the type of business you are looking to start.
If you are looking to build innovative products, then looking at the job that you are trying to solve might be the best way. You can optimise the product or service based upon changes to the profile of the customer you are then trying to serve.
This can involve conducting surveys or questionnaires, running a focus group, checking on keywords and accessing public data.
To start this process though, you need to understand more about your prospective customer. And to do that, you build a Customer Avatar. Here’s a detailed look at what you need to create a Customer Avatar:
Your new business will not exist in a vacuum. Every business has competition. Even if you are a startup (so a zero to one), the customer has some other alternative solution that they are already using, no matter how imperfect it is for their actual requirements. Competition can also mean them choosing to do nothing at all!!
If you don’t work through this process thoroughly you may miss something which could be critical to your future success. While we’re here, it is worth pointing out that competition isn’t really part of YOUR business model – it is part of the environment in which you design your business model. They are outside of your control, and analysis is done for awareness. So that you can identify what a prospective client will be comparing when looking at your business.
In the PDF Guide we have put together a Competition Worksheet that can help you identify some of the key things that you want to look at when reviewing your competitors. You can go as deep as you want and if there are other things that you want to capture about your competition, now is the time to add it to the list. The point is to capture the same information across all competitors so that you can compare apples with apples.
To make the most of understanding your competitors, you would want to take a good look at a minimum of the top 10 competitors.
Know your Value.
To do this you need to know your Value Proposition. What’s that? A Value Proposition is the promise of value that will be delivered by your business to the customer. It is essentially a statement that answers ‘why’ someone should do business with you.
This is a way for you to develop clarity about how your products and services create value for the customer. It’s how you fix the things that matter to them.
A good value proposition can give you an advantage over your competitors and is often what your prospects use to evaluate you. And for many customers or clients, your value proposition is the first thing they encounter when exploring your brand.
There are 6 aspects to your value proposition. Combined these should describe how your product or service helps customers solve problems, what benefits customers can expect and why customers should buy from you over your competitors.
The thought that you put into this activity and building your Value Proposition will simplify a lot of the key decisions that need to be made in the future. The best part is that while you are beginning to develop your new business you can always revisit your Value Proposition to widen (or narrow) the scope of your business as you progress.
How do you turn this into action? Work through these steps:
1. Create the Customer Profile using the worksheet in the Guide
You can use this worksheet to capture information about the person or business that will likely buy from you.
2. Get on the Internet
Search for information about your likely Customer and probably Competitors. There are several useful tools and a bunch of existing studies about these groups that you’ll be able to use to build out your research. You can also check out social media, community groups, forums and blogs.
3. Ask Questions
Interview your prospective clients and customers. Don’t go the comfortable route of only talking to family and friends. Step out, jump on social media and look for your avatar and ask them for a chat. You’ll want to know what they currently do now (in context of your new business products and services), where they get the product currently, what’s good about the current solution, what could be better and what are their biggest challenges surrounding what you are looking to offer.
Ask open ended questions and listen more than you talk.
If you are comfortable in front of people then you could run group sessions, such as a workshop or focus group.
Or you can run surveys, where you get to ask a lot of people the exact same question. This can be the start of your marketing campaign as well. This is because all of the names and contact details collected here can be used to let these same people know about your prospective launch when you do kick the business off.
Value Proposition: Step by Step Process
The next step is to consider your value proposition. Ask yourself the following questions about your new business:
- What is your likely Product or Service?
- Who is your customer (or customer segment)?
- What is the Job to Be Done?
- What Outcome are they looking to achieve?
- What Outcome are they looking to avoid?
- Do you know the competing Value Propositions to your own?
Want to build your own? Use the worksheet in the Guide to frame out your own Value Proposition.
Competitor Analysis: Step by Step Approach
1. Create your Competitor Profile using the worksheet in the Guide
You can use this worksheet to capture information about likely competitors so that you can develop a better understanding about the value that they are providing.
2. Build a Comparison Chart
Often your competitors will have niched themselves. They will be operating in different parts of the market. Some competitors might be premium. Others might be competing on price. There might be geographic targeting or preference based upon demographics. Your objective is to map out these differences and build a comparison chart so that you can see where you will fit.
3. Find your Fit
You know your likely client. You know your value proposition. What is that differentiates you from the competition? What’s your “Unique Selling Point”?
Create a Competitive map (or a positioning, or perceptual, map), which is a visualisation of the competitive position of different firms, brands, products, services or locations on a basic graph.
Why take time to do this?
In short, it’s because you don’t want to waste a lot of time, energy and money on an idea that just won’t get there or end up a commercial success.
Besides, doing extra research can ultimately give you the opportunity to improve on the idea or provide you with new options to tackling the problem.
Market Research doesn’t need to be expensive
Doing research on your market offers major benefits, but it can often come a large cost. And honestly, it isn’t necessary to spend cash to get this done.
There are a lot of steps that you can do yourself, for very little cost.
Research like this will let you compare your expectations with reality. Competitor analysis will give you a lot more information surrounding your future business, including the strength and weakness of your idea. This allows you to really understand where you can fit in the market.
By matching this information with your preferred customer avatar, you can then start to work out the type of messaging that will work as you begin to communicate with your future clients.
Don’t sit at this stage too long though because you don’t want information overload. Test what you need to initially validate your idea and then move on. As you move onto the next steps you will likely come up with extra things that you want to experiment with or you will identify different key assumptions that will affect the idea.
Once you have confidence in the preliminary assessment then you can move onto Chapter 3: Prepare a One Page Plan. Here you will learn how to write a business plan that covers the important things lightning fast!
CTA: Want to join a Pre-Cede workshop about this topic? Sign up here!
Our Idea course takes you through the best way to start mapping out your idea and to begin to test it to see if it is in the ballpark.