Assessing the market is all about taking a look at the industry you’re hoping to move into and determining: is there a problem that needs solving and, if so, is there a way for you to stand out? You’re looking to understand the size and general trends of the wider industry as a whole, how other companies in the space are performing, and how large your potential customer base might be.
Follow this step-by-step guide to accurately assess the market.
1. Ask yourself whether your product or service is solving a problem and meeting a need.
This is a basic requirement of any new business – you need to be totally honest with yourself.
2. Determine why you're doing it.
If this is purely for your own use, you won’t need to go into the same amount of detail – and source the quantitative data – that investors and banks will want to see.
3. Look at the sector you're going to enter.
That might be recent notable activity, new players who have emerged on the scene, growth rates of the sector or major exits that other businesses have made. You can buy detailed reports online and it’s also worth reaching out to experts in the industry.
4. Get to grips with your competition.
Ask yourself – why are customers choosing them, and what will your business offer that they don’t?
5. Look at who your customers will be.
Now’s the time to narrow down your potential customers. There are two elements to working this out: demographics and psychographics. It’s useful to use both to get a real sense of who is going to be buying from you.
6. Estimate the size of your target market.
To come to this estimation, there are three tiers to consider – total addressable market, serviceable addressable market and serviceable obtainable market. These figures are only an estimate – and you might not be able to work out all three – but they’re useful nonetheless.
7. Develop your customer personals.
You now have the information you need to develop some different customer personas: three to five character profiles that you think your product or service will appeal to.
8. Use the info you've pulled together to define your brand positioning.
This is something that you’ll be thinking about throughout this process, but it’s worth actually writing down your positioning statement. This will sum up why customers will choose your brand over others and what you want your customers to feel when they think of you.
Brands who got it right
Its initial brand positioning – stay with a local while travelling – has since morphed into the global, community-focused notion of belonging anywhere.
Dollar Shave Club
In direct opposition to traditional shaving brands, it positioned itself with its no-frills approach, combining value with quality.
Instead of focusing on the technical aspects of its mattresses, Casper focused on the benefits to one’s lifestyle that better sleep can provide.
This article was first published in How to Start a Business 2021. To become a subscriber or purchase our newest guide, head to our webshop.