eBusiness Weekly
Markets are a critical matter for every small business. You may have a brilliant product or service but if no one is aware of it and willing to pay for it that may as well be a hobby. Every small business owner needs to be able to identify (or create) a market, access the market and closes sales.
This, in my view, is a much more vital issue than just getting capital because anyone can get money but not every enterprise owner is proficient at securing markets and closing sales. Four aspects are key, namely identifying the market need, defining the opportunity you see, estimating the size of the entire market and finally, selecting your target market.
Identifying the market need
The success of companies hinges on supplying products and services that meet the current most-pressing needs and wants of customers. This implies a need to continually check the market and see if these needs and wants have not changed, and when they have changed quickly updating one’s offering to suit the prevailing desires.
This is the philosophy of the popular Lean Start-up methodology, whose core component is the build-measure-learn feedback loop.
The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. The fact is that many start-ups begin with an idea for a product that they think people want. They then spend long periods of time and resources perfecting that product without ever showing the product, even in a very rudimentary form, to the prospective customer.
When they fail to reach broad uptake from customers, it is often because they never spoke to prospective customers and determined whether or not the product was interesting and suitable for current needs. When customers ultimately communicate, through their indifference, that they don’t care about the idea, the business fails. Great emphasis must be placed on identifying the real needs of the market, quickly building a prototype, pushing it to the market and acting on feedback to produce a better, required product.
Defining the opportunity
The needs of the market are only an opportunity for a small business owner if he can then respond with a fitting solution. One must assess their capacity and ability to produce a high quality product and deliver it with precision to the right people. Again the Lean Start-up methodology warns the enterprise owner to appreciate the fact that entrepreneurs are everywhere and the opportunity you see, the pain points you identify are also noticed by others.
These are the ones you will meet in the same market as competitors, and you will be bidding to get the most customers through the delivery of the best solutions to customer needs. Some small businesses thus choose to not lead but follow and so commit fewer resources to initial market analysis, but aim to close out the gaps that become evident when other companies push a product.
It can be a smart strategy provided the leader does not get it right the first time and close out the possibility of any other players.
Assessing market size
Your company may have correctly identified market needs and confirmed capacity and ability to produce a quality product in response, but because the bottom line matters, it is also important to ensure the overall market size can sustain your activities. For consumer products and services, an effective way to analyse market size is to obtain information on demographic characteristics — the populations of consumers in your location broken down by categories such as gender, age and income level.
Numbers do not lie. You can thus be able to forecast uptake, volumes, revenue and also check trends. Growth projections would be on an informed basis and allow the business owner to determine if the opportunity is economically viable and worth pursuing in the short, medium or long term.
These statistics also inform the features of the product, the pricing and the advertising and sales approach to be taken to reach out to the identified possible market. In as much as a company may be keen on pushing a product, if the numbers indicate that sustainability will be an issue they are better off avoiding it altogether.
Selecting a target market
Finally, after mapping out the broad market, a business that would thrive must locate the customers that are most ready to pay for its’ product or service, and serve them appropriately. Target markets are those with the most urgent need to purchase what you have on offer and it is logical to actively seek them out with the knowledge that their motivations differ. Psychographic segmentation will be important here, categorising your customers by their personality traits, lifestyles, degree of loyalty as well as interests, opinions, attitudes, hobbies and other factors.
There are also customers that will buy certain products only on specific occasions. This can be a powerful way of marketing the same product to people from otherwise dramatically different demographics. Every customer has a different psychographic make up. Analysing that make up and grouping similar characteristics together is the start of psychographic segmentation.
A practical example
Bringing all the pieces together practically, one may have identified the need for casual clothing and specifically fashionable ladies jeans. Perhaps they are not easily found in the city and a local clothing company then seeks to wholesale produce them and sell them to retailers and individuals in their factory store. The need would have been identified through continuous enquiries as well as responses to their monthly social media surveys in which they include the question: “What new products do you want us to make available to you?”
The company would then assess internally if they have sufficient skills, space and equipment to produce ladies jeans at scale. Having satisfied themselves of their capacity and ability, they would begin a city wide assessment of the market, making use of information that local government records show of the gender, ages and perhaps average incomes in the area.
Should the figures give positive indications when stress tested, they can proceed to design the different types of jeans for ladies — jeggings and skinny jeans for the younger ladies, slim legs and straight legs for the office dress down, boot legs for the complete casual look, loose fits for the more modest types. This then ensures that the business model works and rewards the company with profits.
The best approach to markets is to analyse them first, be sure that the market exists, measure it, and specifically build for it. This will reduce market risk and ensure that every business strikes gold on any new product. In the coming article we will look into market access and linkages in greater detail and how to leverage the digital tools available in this age.
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