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INVENTOR'S CHECKLIST
THE MARKET APPROACH

HAVE YOU PLANNED YOUR MARKET ENTRY?

Entering a market with a new product or service needs to be carefully planned. To do this requires in-depth research, which will be used to develop your market approach and strategy.

Qualitative data methods deal with feelings and other non-quantifiable elements; such as, how customers feel about products and what influences their buying behaviour. Qualitative data is typically gathered through interviews and focus groups.

When undertaking market and customer research it is important to identify what your aim and objectives are – specifically what information you need to gather through this research.

Generally, the key topics are
  • Market size
  • Sales and economic trends
  • Customer profiles
  • Competitor activity
  • Relevant legislation

Bear in mind though that each idea and market is different. There may be issues specific to your market which are of importance and need to be addressed. For example, road safety issues would be important for new bicycle products. Weather and tourism trends may be important for snow sports products for the Scottish Highlands.

Product testing requirements and regulations would be important to new make up products. Defining the key topics will help you to keep your research focused.

As part of your research it is important to consider what you know about your market; have you identified:
  • Is the market ‘ready’ for this idea?
  • How big the commercial opportunity is?
  • How fast the market is growing (or shrinking)?
  • How legislation and regulations affect your idea both now and in the future?
  • Who the existing competitors are in the market and their market share (%)?
MARKET AND CUSTOMER RESEARCH

2 FUNDAMENTAL QUESTIONS

Market and customer research typically aims to answer two fundamental questions:

HOW MANY?

Quantitative (numerical/statistical data) research, gathered through surveys and questionnaires.

WHY?

Primarily qualitative data.

UNDERSTANDING YOUR MARKET

This research will help you to quantify the market opportunity, validate that there is a gap in the market for your idea and identify the barriers and opportunities to entering the market.

Note: Be aware that buying behaviour will differ between geographies, influenced by different cultures, tastes and behaviours – ensure your research addresses this.

EXERCISE 1 - DESCRIBE YOUR MARKET

Exercise Template (Download)

You have to show that you thoroughly understand the market place. This exercise will help you think about the key aspects when you are asked about your market.

Using the resources avaiable to you, such as the internet, library, magazines and trade journals, as well as the information you have gathered for previous exercises, complete the provided template, describing the following

  • Market Size - Provide an educated estimate of the size of the market. Don't forget to reference the source of information.
  • Trends - Explain what the trends are, such as sales trends and economic trends? Are people spending more money in general after an economic downturn? What are they spending their money on? What products are/ will be in fashion?
  • Customer Profiles - Describe who your customers are. Write up a profile for them. Imagine you writing a dating profile for them.
  • Competitor Activity - Explain who the key competitors are. Describe any new products they may be launching and the way they promote themselves.
  • Legislation - List and explain any legislation which may have an impact on your idea.
  • Each idea and market is different. Therefore, list and describe an issues specific to your market place.
Research hints and tips:
  • If you are using the internet to undertake your market research, ensure that the sources you are using are reputable and the information is reliable.
  • Ensure that you reference where your information came from.
  • Document all your research. This information will be a critical part of your business plan.
  • Be aware that buying behaviour will differ between geographies, influenced by different cultures, tastes and behaviours – ensure your research addresses this.

UNDERSTANDING YOUR CUSTOMER

It is important to gather insight into the motivations and ambitions of your customer segments. It is not enough to just list a few groups of potential customers. You have to demonstrate that you know and understand them.

What makes them tick?
  • Know and understand their behaviour. Consider: user status, user rate, loyalty, when do they use it, how often, what may influence their purchasing decision, and so on.
  • Who is the decision maker? A product may be aimed at children but it is the parents that make the decision on a purchase. A perfume may be aimed at women but it would be men that ususally buy it for them as a present.
  • What are the benefits offered to each customer segment? Different segments may experience different benefits from the same product. Someone may buy a food product for its low calories while another just likes the taste of it.
  • What is their purchasing process? Do they tend to impulse buy or do they do their research first, comparing products and prices?
Why do they need the solution?
  • Are they suffering from the problem you described earlier? To what extent are they suffering from this problem?
  • How is the problem currently solved?
  • Can they live with it or is it vital for them to find a solution to the problem?
  • Do they want a solution which just solves the problem or are there other motivations as well which specifically require your solution?
Can they afford it?
  • Can your target market actually afford your solution?
  • Are they willing to pay for it? They may really need your solution, but if they can’t afford it, then nobody is going to buy it.
  • How much are they willing to spend on alternative solutions?

All this will help you in not only providing a better understanding of your target market but also in validating that there is a true need for your solution.

Speak to your potential customers

To gain a more in-depth understanding of the specific needs and wants of your customers, the best way to gather this information is to communicate directly with these customer segments.

You may feel that you have already undertaken this activity by talking to friends and family and asking them directly what they thought about your idea, and more than likely they will have said that ‘it is great’ and they ‘would definitely buy it’… however be aware that this may not be reflective of real customers.

How do you find out the needs and wants of your customers?

This can be done in a number of ways, such as through interviews, surveys, questionnaires and focus groups. Your approach will depend on your idea and the approach that you feel most comfortable with.

Interviews and Focus Groups will typically provide the greatest opportunity to gather in-depth, qualitative information; whereas you will typically get feedback from a larger number of potential customers through questionnaires and surveys. Qualitative research is incredibly useful in identifying the needs and wants of your customers.

We would recommend that you conduct customer research as early as possible in the process of developing your idea. This is because once you have identified and validated that there is a gap in the market, your idea can be shaped to directly meet the needs identified.

Different approaches to research
Qualitative research

Typically focused on how people feel, what they think and why they make certain choices. This is typically undertaken through interviews and focus groups.

Quantitative research

A data-led approach which provides a measure of what people think from a statistical and numerical point of view. This is typically undertaken through surveys and questionnaires.

How do you access these customers?

Once you have identified your customer segments (for example, if your customer segment is women aged 20-30 years who buy skincare products) you will need to understand their buying behaviour. Where does this customer segment get information from before purchasing products? For example, in the case of skincare products, for this age group a common resource is skincare/ beauty forums or blogs.

Other ways of communicating with this potential customer segment may include social media, such as Facebook, Twitter and LinkedIn groups. For each customer segment the way you access these customers will differ- market and customer research will help you identify the most relevant approach for accessing your prospective customers.

Useful information
  • There are a number of free survey tools that may be useful when conducting this research, such as SurveyMonkey and Kwik Surveys.
  • Make sure you have a clear aim of why you are undertaking this research – is it to gather information on the needs of your customers or is it to validate the market opportunity for your solution?
  • Keep surveys short and simple in order to increase the number of respondents – focus on gathering key information.
EXERCISE 2 - DESCRIBE YOUR CUSTOMERS

Exercise Template (Download)

You have to show that you thoroughly understand your customers. This exercise will help you think about the key aspects when you are asked about your customers.

As before, using the resources avaiable to you, such as the internet, library, magazines and trade journels, as well as the information you have gathered for previous exercises, complete the provided template.

Where you can't provide the relevant information, you may want to consider engaging directly with potential customers through a survey, focus group or interview.

As each customer segment is different, try to find out the following for each of your segments.

  • Customer behaviour - Describe how they use the product/ service, when, where and how often.
  • User benefit - Describe how they benefit from your product/ service.
  • Buyer motivation - Explain why your customers would buy your product/ service. - What is the problem and to what extend are they suffering from it? Is it crucial for them to find a solution? Is it just a good to have?
  • Affordability - Show that your customers are able to afford your product/ service and that they are willing to pay for it. How much are they paying for other solutions (not just similar products but any solution to the problem)?
  • Purchasing process - Describe the steps involved in your customer making a purchase. - Are they impulse buyers or do they research their products first? Where do they research their products, peers and friends, online, magazines ? Are they easily influenced by advertising? Where do they shop; online, through catalogues, in-store? When and how often do they shop? Who is the decision maker?
  • Each idea and customer segment is different. Therefore, list and describe an issues specific to your customers.

BUSINESS STRATEGY

DEVELOPING A STRATEGY

When starting out in business, applying limited resources to best effect is one of the key skills which have to be developed and applied. Because different customer segments are likely to require a slightly different approach; approaching all of them at the same time will over-stretch the resources of any business. At the same time as gathering knowledge on your target customers, it is important to consider the competition in each of these segments, and the required approach for each of these customer segments.

As such, Module 4: The Customer and Modules 5: The Competition should be considered in parallel with this section. What you learn from each of the modules will have an impact on the others.

For example, a customer segment where there are a number of highly active, dominant competitors might not appear to be an attractive option if you are seeking to enter that segment with a product which is competitive to theirs. However, if your offering is based on a technical improvement you have devised and protected you could change the route to market and business model by licensing your technology to one of the existing competitors in this segment.

Prioritise your Customer Segments

Having identified and quantified your market and potential customer segments in Module 4, it is important that you start identifying the customer segments that hold the most potential for your business (as part of your business strategy). The exercise below will help you to identify the customer segments that hold the greatest opportunity for your business.

EXERCISE 3 - CUSTOMER SEGMENT ANALYSIS

Exercise Template (Download)

Select your top customer segments which you feel hold the greatest potential. Using the template provided, rate these segments against the assessment criteria using a traffic light system.

On completion of the exercise evaluate how each of your segments rated, and rank them in order of prioritisation.

Segment Assessment Criteria:
  • Revenue Potential - Is there sufficient money to be made? Can you reach your goals?
  • Product Fit - How easily would your product fit into the customer environment? Are they "ready" for it? Do they have to invest in another product in order to use your solution?
  • Competitiveness - Are there many competitiors in this segment and would you win business?
  • Accessible - How easy or difficult is it to access/ reach customers in this segment?
  • Follow-on Potential - What is the likelihood they will accept additional products in the future? This would include product add-ons and new versions of your product/
  • Growth Potential - How fast is this segment growing?

CHOOSING YOUR BUSINESS MODEL

Your business model is how you will make money from your business.There no such thing as one business model. There are infinite possibilities of running a business, especially thanks to new technological developments.

It is important that you know the advantages and disadvantages of each approach. Here is a list of the the most basic of business models:

BUSINESS MODEL PROS CONS
Selling the idea
  • Large lump sum of income
  • No operational costs
  • Little risk
  • One-off income
  • Loss of control over your idea
Licensing/ franchising the idea
  • Regular income
  • Little involvement required
  • Little operational costs
  • Lower income in the short run
  • Little control over the product
Design, market and sell your product (outsourcing manufacturing)
  • More control over your product
  • Higher revenue per item sold
  • Higher operational costs
  • More involvement required
  • Dependance on manufacturer
Undertaking the full process (sourcing materials, manufacturing, marketing, sales, distribution, support etc.)
  • Full control over your product
  • Potentially highest monetary reward in the long term
  • Highest operational costs
  • Highest risk
Your business model will be influenced by several factors:
  • Your Intellectual Property strategy (Module 3)
  • Your market research (Module 6)
  • The role you wish to have in your business

CHOOSING YOUR ROUTE TO MARKET

You can have the best product or service in the world, but it will fail if you don’t get it in front of the customers. To increase your chances of success you need to identify and focus on the most effective routes to your market.

As part of your market and customer research you will have identified information such as: what your customers buy, where they buy, how they prefer to buy and why they buy. Your next step is to identify the best way to access each of your customer segments (your route to market).

Be aware that different customer segments may require different routes to market:

Direct routes to market (where you directly engage with customers)
  • Your own brick-and-mortar shop
  • Your own website
  • Mail order
  • Exhibitions
  • etc...
Indirect routess to market (where you engage with customers via a 3rd party)
  • Brick-and-mortar retailers
  • Online retailers
  • Sales agents
  • Distributors
  • Franchises
  • Licenses
  • etc....

UNDERSTANDING YOUR VALUE CHAIN

Your idea fits within a value chain. Suppliers, manufacturers, retailers, every actor involved in bringing your idea to market, together make up this chain and each one adds some value to your end product before it reaches the customer.

It is important that you explore and identify how this value chain will work, understanding threats and potential opportunities. It is important to consider who plays an important role in your value chain – do you rely on one manufacturer or do you only have one main customer? Consider what would happen if tyour one manufacturer increased the cost per unit substantially (so that the product was no longer affordable) or your one key customer switched to a competitor?

You need to consider the strengths, weaknesses, opportunities and threats of your current value chain.