You finally have the funds that you need to expand your business. You’ve been looking into the idea of providing complimentary services to your core product. Let’s say you own a spa treatments business. You realised that you have enough space to compliment it with a car wash service. You have looked through your finances and know that you can afford to make the necessary expansions. What is the first thing that you should do?
Nobody should launch out into a new product or service without a detailed study about the relevant market. It would be like walking into an examination you’ve not prepared for. Imagine the results of such a situation.
Do you know how big the car wash market is? Do you know what share of the market you can confidently aspire to take up?
Carrying out market research will give you the best chance of taking advantage of available opportunities. Here are some aspects of the market that you should look out for.
Who are the significant players in the industry?
The major players in an industry will have the greatest influence in the market. Decisions they make will affect your business. Do you know who they are? Are you able to study their activities and progress over time? Their strategies may give you clues into their success.
Look at their marketing strategy and customer targets. See if you can identify their strengths and also their weaknesses. What gaps have they left that you could fill?
The other participants that you should pay close attention to would be your direct competitors. Which companies are targeting the same customer demographic you are targeting? They may be businesses that are located near your own. They may also be businesses that do not provide your service but an alternative.
For example, if you run a restaurant, your competitors are not only the other restaurants in the neighbourhood but a rolex stand would take some would-be clientele from you as well. Your research should tell you what threats they would pose and what opportunities you could take advantage of.
How would I describe the consumer I’m serving?
Identify the kind of people that will use your new product or service. Undertake an in-depth study of the needs which would motivate your customers to make a purchase.
Customers will not have the same characteristics and needs. Therefore, categorise them into different market segments so that you are able to tweak services to fit their needs.
Take the example of a skin care clinic business. One customer may have the sort of profession that requires them to pay you regular visits (for example an air hostess or artist/performer) while another may only need some work done every 6 months or so. Segment these into regular, irregular and even semi-regular customers. Other segments may be according to gender, age group or even residence.
Customer segmentation helps to identify the most profitable group of customers and to create targeted strategies for each group, using information on the customer profiles.
With your new service, target both the current customer as well as new clientele. Adjustments for already existing customers will be more bearable and less costly for the business since you already have a lot of information on them. The cost of acquiring new customers is greater.
What are the external forces at play?
As a business person, you have by now understood that your business is affected by events and conditions that exist in the industry in which you operate. You are affected by the economic and political environment. Studying these situations will help you to direct your businesses’ expansion plans realistically but confidently.
Find out what circumstances would stop you from entering into your chosen business. What threats await you? Are there taxes you will have to pay or costly licenses you have to obtain? Educate yourself on all these and work out whether your idea is still viable.
Not everything is bad news though. Your study of the existing conditions may also open your eyes to technological advancements that could make your work easier or even cheaper. Look out for new trends that will offer opportunities that you may not have thought about.
This sort of information is readily available places in newspaper articles, magazines, journals and reports published in the relevant industry. You may even engage the services of a researcher if you are constrained time-wise.
Business decisions must only be made after information has been sought, studied and interpreted well. From then on, your business experience and gut feeling can also come into play, to ensure that the decisions you make are profitable for your company.