MARKET RESEARCH
i) Key Principles of Market Research
One of the surest tests of the strength of the demand for a new product is your ability to express all the reasons why the consumer would buy. Articulating these reasons is a important exercise in entrepreneurial endeavour. There is a direct correlation between number of reasons to buy and the likelihood of success.
ii) Essential Steps to Market Research
The Role of Market Research
At the Earliest Stage
More Detailed Research
Use the Directory of Associations in Canada to learn which trade association covers the product or industry. See what information they have. Statistics Canada has such materials as:
Market Research Handbook
Family Expenditure in Canada
Retail Trade
Retail Chain and Department Stores
Department Store Sales and Stocks
Statistics Canada Catalogue
And there are many other library sources on business and industry, some in digital form. Warning, warning! Danger, danger! The Web can be used effectively to extract very useful market information. And, of course, it allows you to access other useful databases. But the Web is not necessarily representative of either an industry or a marketplace. Interest or activity on the Web does not necessarily reflect what is going on in the marketplace. The Web can be only one of your sources of information.
Many public libraries and almost all university libraries can provide the above services and their reference staffs will be glad to assist you.
Before Product Launch
iii) Market Competition
Market research must document competitors, actual and anticipated.
The Competition: The Direct Alternatives (the products that solve a similar problem).
Identify the companies that provide these products and answer the following questions:
The Competition - The Financial Alternative
Identifying the sources of financial alternatives can be difficult.
A financial alternative is a product that while dissimilar in function or use to another product, it occurs to the consumer to think of them as alternatives. There must be some reason why it occurs to the consumer to make this comparison - the connecting circumstance.
For example, stereo equipment and a home workshop could be financial alternatives if they are sold close to each other in a department store. Or a set of luggage and the transportation cost of a trip could be alternatives because the consumer thinks of them in sequence.
In this situation, you are first looking for the competing situation, rather than the competing company. Then the competing company or companies must be considered.
Sources of Strength of the Entrenched Competitors:
It is on the last point that your best chance to compete exists.
But because of the power of the entrenched competitors, a slightly better product than theirs will likely fail (never mind a purely imitative one).
Therefore, your new product has to be much better than the existing alternatives, that is, the utility/price inequality must be strongly in your favour.
Is this making it seem that a successful new product introduction is almost impossible? Then let's look at the disadvantage of the existing (big) competitors.
The Vulnerabilities of the Existing Competition:
Remember that by creating a new and better product you may have given yourself a measure of monopoly power. And monopoly power is real power.
But a new product has no power until the consumer knows about it and can purchase it readily.
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This page was last updated 02 July 1997.