The importance of market research and testing
For every successful business idea, there are hundreds that fail. One of the reasons
why most business ideas
are not successful is because they were introduced to the public without the support
of sufficient market research. Therefore, these business ideas did not meet a market
demand. Before seeking startup capital for a new business, entrepreneurs should
ensure that their business ideas are tested sufficiently before they are formally
introduced to the public. Market research and testing during the initial stages
of a productâs life will determine if a product or service is viable. It will also
aid entrepreneurs in identifying the different ways in which they can refine their
current business ideas.
Large corporations vs. small businesses
Unlike giant corporations that invest enormous amounts of money to test potential
products, small business owners need to rely on their own knowledge and skills for
testing any prospective business ideas. Often times, large corporations are later-stage,
high-market capital companies who have already established financial success and
can afford to continually test market their products. Small businesses, on the other
hand, are an extremely risky venture since most new companies have not established
a solid pattern of success. When new business owners introduce a new product into
the market without ample preparation (market research and testing), they are risking
possible company failure, especially if their product sales remain stagnant. Entrepreneurs
are encouraged to be resourceful in market testing, become familiar with the basics
of market research and targeted marketing, as well as identify any existing or potential
competitors.
Solicit opinions from family, friends, and business partners
Small business owners can enlist the assistance of their family members and friends
in evaluating their new business ideas. Families, friends, and business associates
can certainly help in detecting any potential problems in the product or service
being offered. They can even propose suggestions on improving any current business
ideas. In addition, they might be able to convey what they feel will be the most
effective marketing strategy for the products.
Ask potential customers
New business owners should also present their current
business ideas or prototype to potential buyers and request their opinions.
By developing a prototype of their existing concepts, the entrepreneur can easily
demonstrate a new product to a prospective buyer. During this prototype phase, potential
customers will be able to provide valuable feedback about the new products and can
even offer suggestions about how much they would be willing to pay. As with family
and friends, these potential buyers can assist entrepreneurs in fine-tuning their
business ideas and concepts more effectively. The entrepreneur can also develop
financial projections about their products based on the success of this informal
market testing.
Feasibility studies
Once the initial results of market testing look positive, entrepreneurs need to
employ a feasibility study of their prospective ideas/products. This type of study
can help determine how feasible their business ideas are and if there is a need
for their products in the marketplace. Most business owners prefer to undertake
a feasibility study as part of their own due diligence in researching the industry
and determining the capability of their products. It can also serve as a formal
document that will help recruit potential partners, investors, or lenders. Feasibility
studies essentially address the core of the business idea. It examines the customer’s
thoughts about the unique features of the new product and how the product should
be packaged and delivered. Feasibility studies also examine the potential target
for the business ideas, the size of the market, and the costs required to market
the products/services.
Assess the competitors
In order to improve a current business idea, entrepreneurs should not only be knowledgeable
about the market, industry trends, and potential consumer base, but should also
be aware of their competition. This includes being well-informed about the strengths
and weaknesses of any major competitors and, if possible, preventing their previous
mistakes. A product should then be introduced to the market once it has been modified
to meet consumer needs.
Conclusion
Entrepreneurs are always excited about their
new business ideas. However, they should conduct thorough market research
and testing to initially examine that their products or services are indeed viable.
Research can be completed in numerous ways, including the solicitation of opinions
from family, friends, business partners, and even potential customers. Feasibility
studies can also be conducted to have a stronger sense of the direction of products
and to investigate/be aware of any existing competitors. This collective information
is vital prior to starting a new business since there is always the risk of a new
company failing.