As you develop an idea you'll need to think about who your customers and competitors are – this is known as your 'market'.
In particular, you'll need to think about:
- the size of your market and which part you want to target
- whether your market will grow
- who your customers and competitors will be
- any legislation or regulations that could affect your market
Researching your market
To research your market, you can use:
- the internet
- trade journals
This research will help you to confirm if there is a gap for your idea and any barriers you might face.
This information will also help you when writing a business plan.
The size of your market
You should try to estimate how large you think your market is. You should also work out what part of it you would like to target. For example, if your idea was for cyclists you could be targeting people who use bikes for:
This includes sales and economic trends – how are people spending their money and what are they spending it on.
This will help you to work out if your market is likely to grow.
You should create a profile of who you think your customers will be, including:
- their behaviours – for example how often they use or do something
- if they have a problem your idea can solve
- what benefits your idea will bring them
- if they're likely to buy your idea (or if they can afford to buy it)
- how and where they spend their money, for example do they impulse buy
This will include looking at:
- who you think your main competitors are
- new products your competitors might be launching
- how your competitors promote themselves
- how your competitors sell their products or services
Legislation and regulations
You should list any legislation or regulations that you think might affect your idea.
Your 'route to market'
Your research should give you knowledge of your customers, including what they buy and how, where and why they buy it.
This research will help you work out the best way of getting your idea to your customers. This is known as 'your route to market'.
Your route to market can be 'direct' or 'indirect'. Examples of direct routes to market include:
- your own shop or website
- mail order
- selling at exhibitions or events
Examples of indirect routes to market include:
- sales agents
You can find out more about your customers through:
- focus groups
The method you use might depend on your idea or what you feel most comfortable with.
Interviews and focus groups can give you in-depth information about your customers' needs. This is called 'qualitative research'.
Questionnaires and surveys can give you feedback from a larger number of customers. This is called 'quantitative research'.
If you're creating an online survey, there are several free tools you can use.
Finding customers for research
You can find potential customers for research:
- using forums and blogs
- using social media – Facebook, Twitter, LinkedIn
- through friends and family
- at events and trade shows
You should think about your market as being made up by different 'segments' of customers.
Each segment is a small part of the wider market – with their own similar needs and interests. For example, in the sports clothing market, segments could be people who play team sports or go hill-walking.
Focusing on each segment can help you think in more detail about:
- features or benefits that appeal to particular groups
- the competitors different segments are likely to buy from
- how valuable your idea is to different groups
- how different groups make a decision to buy things
Choosing a segment to focus on
It can also help you choose which part of your market to focus on by thinking about:
- how much money you think you can make from them
- whether they're ready for your idea
- who you'd be competing with for this group
- how you can reach them (route to market)
- whether they're likely to buy new versions or add-ons
Once you know which segment you want to focus on, pick one or two customers within this segment to focus on.
Estimating the size of your market
To work out the potential size of your market, you should estimate the size of each segment.
To help you do this, you can use:
- statistics from the National Statistics Offices
- trade journals
- newspaper articles
- internet searches
You should add together the number of people in each segment.
You'll then need to estimate how many people are likely to buy your idea. This is known as 'market penetration'.
To help you estimate how many people are likely to buy your idea, it could help to think about how much you'll charge for it.
In particular, think about how much your idea will cost someone to buy in relation to your competitors.
When writing a business plan, you'll need to explain how you calculated the size of your market. You'll also need to reference any sources you've used.
Your competitors are anything that might compete for your customers' attention.
You should think about who your competitors might be. You should also think about what features, functions or benefits are important to your customers. For example:
- any unique selling points
- how they market and sell their products or services
Comparing these points with your competitors should help you to work out how strong your idea is.
The following organisations can offer you more help with market research.
Market Research Service
Business Gateway have a free Market Research Service on their website which can do your market research for you.
They can help source:
- market intelligence
- news and trade press
- company lists
- company and credit reports
- property searches
- statistics and demographics
UK National Statistics
The UK National Statistics website gives you access to the latest statistics released each day by the UK government.
Business @ The Mitchell
Business @ The Mitchell is run by Glasgow Libraries and offers free access to market research and business intelligence databases for all major industries in the UK and abroad.