This article looks at the key steps involved in taking an entrepreneurial start-up idea to market, from primary and secondary research to audience profiling, competitor benchmarking, branding, pricing, and value propositions…
Unlike the first little piggy in the children’s nursery rhyme, the wise entrepreneur doesn’t go straight to market. First, you need to do your homework – after all, how can you write a business plan without being able to forecast how many sales you’re likely to make or knowing how much a typical customer is willing to pay for your product or service? Do you even know what a ‘typical customer’ would look like?
Taking a product or service to market for the first time entails first gathering and analysing a wide range of information covering all aspects of setting up and running a business. For most people, starting a business is not something that happens overnight.
A little piggy-headedness
Once that ‘light-bulb’ moment occurs the urge to dump the day job becomes extremely hard to resist, but first it’s essential to research your potential market. No matter how much enthusiasm you have for your start-up idea, it will mean very little if you can’t convince customers to part with their cash post launch.
What’s in your head may be poles apart from what the market wants. Letting your enthusiasm for your business idea turn into piggy-headedness and skipping the research phase could prove very costly. Instead, try to remain open-minded and receptive, even if feedback from potential customers pours cold water on your start-up idea.
Do-it-yourself data gathering
Market research can broadly be divided into primary and secondary research. Techniques for gathering primary data range from questionnaires (now easily configurable on Facebook and Survey Monkey) to face-to-face interviews (nothing wrong with a clipboard on a high street!) and focus groups.
Secondary research – also known as ’desk’ research – involves data that has already been collected and published. This type of research is much easier to conduct now than it was in the past owing to the wealth of data available (usually for free) online. Some excellent data resources for budding entrepreneurs are:
- The Office of National Statistics
- The Federation of Small Businesses
- The trade association of your chosen field
- Competitor annual reports (more on this below)
A valuable source of information that is sometimes overlooked comes in the form of competitors’ annual reports. These documents may contain data on your target audience, plus the market and its potential for growth, prepared and paid for by your competitors for the benefit of their shareholders.
So which is better, primary or secondary? The answer is neither – as a start-up entrepreneur, you’ll need to do both.
Depending on your product or service, you may already have a pretty good idea of the type of person who makes up your target audience. However, taking the time and effort to build up customer personas will help to inform other aspects of your potential business idea, such as the messaging, branding, and sales channels you’ll use. Here are some questions that may help reveal key insights:
As well as your target audience, it’s essential to research the competition. By doing so, you’ll get to know who your competitors are and how they operate. You’ll also get a feel for the size of the market and factors such as seasonal peaks.
How individuals perceive a business is hugely subjective, so avoid the little piggy-headedness we mentioned earlier and ask friends and family what they think of competing businesses in terms of (list definitely not exhaustive!):
- Price point
- Customer service
- What they do well
- What they do badly
- Communication, tone and branding
Focus groups are another useful research method. Established companies use them, but a low-budget way to run a focus group is to gather together a group of people in a suitable venue, have three or four competitor products alongside your own, produce between five and ten questions to ask attendees and have them user-test in front of you while you take notes.
There’s also no substitute to going through the entire customer journey of a competitor yourself. Look out for their advertisements, follow their call to action messages, buy something from their website or shop, perhaps return the product and assess customer service levels, ask the staff questions and monitor how they try to retain customers and encourage repeat business.
As you gather this information on competitors, think about what you would do differently and why, and try to formulate a winning USP (unique selling proposition) from early on. Then keep this in mind as you develop your business plan.
Whether you’re a high street restaurant or an ecommerce website with 100,000 visitors per month, brand positioning matters.
How you position your brand will help to make it stand out from competitors in the minds of customers and ultimately affect your bottom line. So, for example, if you’re a boutique brewing company based in Lancashire, calling your company ‘The Lancashire Real Ale Company’ creates an immediate identity and gives a locally sourced, hand crafted, specialist feel to your products. Your website domain name, product labelling, merchandising and so forth can draw on this.
If you’re targeting an international audience, then you must make sure the brand name translates appropriately into key foreign languages. Other issues to consider when developing a brand name are copyright issues, trademarked terms and domain name availability.
In large organisations, the task of brand positioning is usually entrusted to marketing or public relations (PR) practitioners, or an outsourced specialist agency. In a start-up it’s solely the realm of the entrepreneur! One tip is to create a ‘brand bible’ from the outset that details the correct usage of your company name, logo, brand colours, your tone of voice in marketing communications, and even the little details like business cards and stationery. Getting this right early on ensures consistency; getting this wrong could be expensive to reverse at a later date.
Helping to position a business in the mind of consumers is something that PR agencies are practised at doing. These agencies are hired because they are well-connected, can write editorial, and are skilled at selling a company’s value proposition through offline and online media. For the start-up entrepreneur, unless you have a war-chest to spend, it’s do-it-yourself territory.
Reach out to your contacts (you probably have more than you think) and ask them to help spread the word. Set up your brand on the main social networks and write blog posts, tweet, post on Facebook and LinkedIn. Offline, attend networking events (your local Chamber of Commerce is a good place to start).
Image: Chris Potter
The price and value proposition
Let’s look at pricing first. Secondary research and benchmarking will reveal the ‘going rate’ for similar products on the market, but what about if your product or service is unique? In that case, primary research is the answer. Ask friends, peers, colleagues, social media followers – in fact, ask as many people as possible a range of price-based questions:
- How much would they be prepared to pay? (Does this cover your costs?)
- Is this a one-off purchase for a customer or would they repeat buy?
- When would they consider buying this product?
- What would they expect to get for a lower or higher price?
- Would they recommend this product/service at this price?
Setting the correct price is tricky for start-ups. Launch with a price that’s too high and you risk minimal take-up; enter the market too low and you may get a high sales volume but at much lower profit margins. The downside to the lower or ‘cheap’ pricing strategy is that once you’ve launched, increasing the cost of a product or service is always going to be much more difficult!
And price is only one part of the equation. The other part is the value proposition. ‘In its simplest terms, a value proposition is a positioning statement that explains what benefit you provide for who and how you do it uniquely well,’ says Michael Skok. ‘It describes your target buyer, the problem you solve, and why you’re distinctly better than the alternatives.’
Entrepreneurs excel at successfully bringing something to market that either doesn’t currently exist or is a significant improvement on an existing product or service. The ‘marketability’ of their idea in a purely commercial, money-making sense is the all-important value proposition. Therefore, aligning the price point with the brand’s value proposition is crucial.
Take designer perfume for instance. It is not simply, as some might say, overpriced scented liquid in an ornate glass bottle; it is an excellent concoction of branding, messaging, marketing and price-point decision-making delivered to a well-researched market segment. The big players execute perfume product launches so well that most people would probably think twice about buying a £3 bottle of perfume but happily pay £35 for one. For more information on developing a compelling value proposition and asking yourself the right questions read this post on Forbes.com.
Can this little piggy go to market?
You could launch a product or service without an ounce of market research or planning but you’d have to be very lucky indeed to succeed.
A far more sensible approach, especially if you want to be taken seriously by potential business angels or investors, is to do your homework before launching your business. Professional investors will expect you to have an in-depth knowledge of your market as well as your business when pitching for investment.
Even if you are not seeking outside investment, you still need to put in a lot of hard work before you can confidently take your start-up to market, but do that and you’re much less likely to be ‘crying wee wee all the way home’.
Want to learn more about investing in startups? We have a guide for that. And you can download it for free right here.