Importance of Market Research

Another consideration we must think about is whether someone out there would be interested in purchasing our product or even visiting our retail store. We have to do our market research from two perspectives: who is our consumer and who are our competitors. Who are the consumers we want to attract? Do they have the right demographic profile: age, gender, income level, education, etc. to be able to purchase our product and even enjoy it? Moreover, what do they buy, what motivates them to buy, and why would they purchase your product? Competition can be fierce or weak. We must know what we are up against in the way of product offerings and also become aware of potential changes to product development which may threaten our own product offerings.

SWOT Analysis

In earlier essays we discussed SWOT analysis as a way of investigating our own personal abilities to become an entrepreneur. We can also use SWOT analysis to investigate the competition. Knowing the competition is critical. After all "Business is War!" General Colin Powell or General Schwartzkoff wouldn't commit our military to battle if they didn't know what they were up against. We must know everything about our competition, especially their strengths and weaknesses. You wouldn't go to war and not know what you are up against!

With competitive SWOT Analysis we look at the competition's strengths from every aspect: product, price, distribution and promotion. We also look at their weaknesses. And then we compare our own strengths and weaknesses to theirs. What makes our product or idea so much better than theirs? If we cannot identify a competitive advantage over the competition, or be able to differentiate our product in a meaningful way, then we should not proceed with our idea.

Our business concept must be fully explored in order to be successful. Why would someone want to purchase your product or venture into your store? The question is "Will the customers come, and will they buy?"

The 4 Ps or Tools of Marketing

Marketers have tools at their disposal with which to control their offerings to consumers. These tools are called the "4 P's of Marketing" or the "Tools of Marketing". Specifically, these are

• Price
• Product
• Place (distribution)
• Promotion

 

With the exception of Price all of the tools are costs.

 

 

Price

 

Price is one of the components of the Sales or Revenues formula. Specifically, price per unit is multiplied by the number of units sold [Price x # of units = Sales].

 

But how do we determine the price of our product? We will become acquainted with the costs to manufacture or to acquire or to source our product. We have special design features which we build into our product and we also determine the quality of our product. We may use excellent components in order to make an excellent product. Therefore, we control the design, durability and features of the product and accordingly the costs for the product to arrive at the price the customer will pay for the item. We also have to consider our competition - what are they selling a similar product to ours for? Our formula then will include the cost of the product, a margin for quality, and our profit margin.

 

However, we must not forget that our customers know the value of things (you know that "educated consumer"), and we cannot charge more than what they will pay for it Remember, "it's what the market will bear", you cannot charge more than what the customer is willing to pay.

 

 

Product Design and Features

 

We create the product to meet the unmet needs of the target community, and its design and purpose or use. The culmination of our thoughts and vision is the product we will be selling. We control what the product is, what goes into making the product, whether we will outsource it or manufacture it ourselves, and, most importantly, we decide upon the quality of the product. After all, the higher the quality, the higher the price we can charge.

 

 

Place (Distribution)

 

The way we "get our product to market" (distribution channel) has a further implication upon the cost structure of the product. We can determine whether we will be a direct merchant, charging or not charging for the shipping to the customer, or we may want to use our own fleet of trucks to deliver the product to the retailer or the ultimate consumer.

 

Depending upon the size and durability of the product we may want to employ a wholesaler who will be responsible for the ultimate distribution of the product. Whatever method we decide upon, we must realize that the more middlemen involved in getting our product to market the more costs are involved and the more expensive our product is to the consumer.

 

 

Promotion

 

How we reach our targeted customers to make them aware of our product or location is a consideration of cost and effectiveness. We can take an ad in a regional or local paper; make a 30 sec. or 60 sec. spot for the radio to be delivered by the host live, or tape it to be played on the radio. If we have the money we can also create a commercial video and buy time on a television channel that will reach our market. This is more expensive, although glamerous to have your ad on TV, but the reality of it is, it may not be for the small business.

SWOT Analysis

To be able to determine whether you have what it takes to be an entrepreneur, you must perform a self-examination of your strengths and weaknesses or a SWOT analysis.

A SWOT analysis contains the following 4 areas of introspection:

S - Identify your strengths. Imagination, ability to sell yourself and your ideas, persistence, confidence, and expertise in a particular industry, as well as personal and business potential, etc.

W - Identify weaknesses. Is there a time limitation, a health issue, no management experience, lack of financial stability, or lack of people skills?

O - Identify opportunities. Is there an opportunity for an internship prior to opening the business to establish a network of resources, or to take courses that will prepare the prospective entrepreneur for business ownership?

T - Identify threats. Consider such issues as health concerns, lack of financial stability, and personal or family issues.

To further expand upon the above and to assist you in thinking about your SWOT analysis, I have included below some self-assessment questions for you to consider:

• What do you see yourself doing over the next two to five years?
• What are your personal goals?
• Why do you want to open a business?
• What type of business are you interested in starting and why?
• What skills do you have in this area?
• What type of work experience do you have in this area?
• In what areas do you need improvement?
• What steps can you take to gain the experience or skills you will need to operate your business successfully?

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