The short answer is because your product or service will usually not sell itself.
No matter how novel or revolutionary your product or service is, you still need to know if there is a market for it.
The Basics
Market analysis fills in these gaps while also simultaneously providing your startup with a great deal of useful information about a variety of factors (which will likely come into play in determining its ultimate success). Remember that while you may have identified a need and have developed a product or service to meet that need with your startup, if you cannot connect with the consumers who have that need, you won’t reach your projected profits.
First, let’s discuss what exactly market analysis is. It is a formal or informal research process whereby an entrepreneur identifies, defines, and understands potential markets for his or her new product or service. The first step is to determine for whom the product or service will be made. Your new product or service may not be valuable here in the United States, but it may be needed in Asia or Europe. Narrowing down the demographics that you’ll be reaching and targeting who can use the new product or service will allow you to strategically position yourself right in that potential market.
Another angle of market analysis is to question what about your product or service-besides meeting a specific need-will differentiate you from the competition and be attractive to the market you have targeted. Will your product or service be the first of its kind in the geographic area? Is your product or service superior in quality and lower in price than the current competition? Is your service far above that of the next best competitor? Up until now, most of the information that has been gathered has been by you, the entrepreneur. You’ve likely determined what you want to make or the service you want to provide and how you want to do that.
The next step then is to look outward to the market to fully appreciate if there is a market for your product or service in the first place. For example, you will need to know who your competition is (and how many of them there are to compete against), what they are selling, the price they are selling it for, and the level of service they are providing. You will need to understand geographic patterns of shopping habits and traffic. You need to consider available avenues of advertising, including those that will break out demographics and target those you have identified as your core customers.
Research should also be conducted to determine if your particular product or service would be welcome and appreciated in the market. This can come through interviews with consumers, online surveys, and focus groups. You can gain invaluable information about what consumers are truly looking for, and if they are not finding it, why. This consumer researchcan also tell you how much consumers would be willing to pay for your product or service which you can then use to compare to your estimated costs as a way of gauging possible success.
Perhaps the most important reason to conduct market analysis is that it is the best way to find out if you are going to have problems before you start having problems. Thorough market analysis can show that what you thought was a need was in fact not a need, and vice versa. You can use the information to tweak your product or service before the launch, look into re-pricing, and overall re-working the entire startup to maximize your chances of success. In this situation, doing your homework has never been so important.
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If you are looking to start a startup, one of the best assets you can have going in is hiring knowledgeable counsel. We understand the process and can help guide you in the important decisions that you need to make everyday. Contact our firm today at 1(844) 256-5891 or click here.
