Whether you’ve been in business for years, or you’re about to launch a start-up, you must:
- Know your market size
- Identify your ideal customer
- Study your competition
Knowing these three key factors, will help you determine where you stand today, and what strategies you’ll need to implement to keep moving forward tomorrow. Here’s what you need to know when it comes to carving out your place in the market.
Your business may be a great idea, delivering a great product or service, but it’s important to know how many people out there are ready, able and willing to purchase your product or service. If the market is too small, your business won’t have enough customers or clients to draw from, and if your market has too many products or services to choose from, yours may not stand out.
To assess the size of the market, look at the total market for your product or service, and then establish a realistic estimate for your share. Next, determine where you’ll sell your products or services, how many locations will stock them, and how many comparable products or services will sell. This amount should be 1% to 5% of the overall addressable market.
Another thing to consider is your penetration rate. You may have a high penetration rate if, for example, you’re selling a product or service that is critical to the work of your customer – such as software, computers, or even office paper. On the flip side, you may have a low penetration rate is you’re selling something that has a specialized purpose that many customers are not ready for or do not have the means to purchase.
Considering these influences together can help you determine how much of a market share you might be able to claim and your projections and strategies for growth.
Identify your customer
In evaluating your market, you also want to factor in who your customers are, how well you can service them, and how you can service more of them. This adds to your knowledge of the market and whether you’re ideally placed to reach these customers and keep their business. To do this, consider your product or service from the customer’s point of view. Think of what problem your product solves or how your service improves the customer’s life.
Consider who your customers are – where they live and shop and what their budgets are. Know their buying strategies and how often they’re apt to purchase your product or service or those of your competitors.
Speaking of competitors, it is essential to have a firm handle on who else is selling to your market. What do they do – and whether it’s a better or worse value than your product or service – can have a direct effect on the size of the market you’ll be able to secure.
Take a realistic assessment of who your competitors are and their:
- Products and services
- Market share
- Past and current sales strategies
- Marketing and advertising strategies
- Strengths and weaknesses
Asses each competitor’s price point, value proposition, method of distribution and business practices. This can help you determine where you differ, and what opportunities you can take advantage of. For example, if you have a comparable product or service, but at less cost with quicker delivery, you could anticipate seeking a greater share of the market. If another company is delivering “more” than you are, how are they doing it? And is it paying off?
Determine next steps
Knowing where you stand now – and where you could stand – boils down to a realistic understanding of your product or services, the value you provide and just who will pay for them. Many businesses fail by not understanding the market space, their customers, or their competition. Once you’ve honed in on these details, you can better determine your next steps and how you need to distinguish yourself. From there, you can revisit your analysis regularly to make sure you’re evolving and recasting as needed.
Authored By Diédre Barret – Senior Vice President of Sales and Marketing for Guaranty Bank.