Business Plan Lesson 3: Market Research in Business Plans
This is week three of our Ten Week Business Plan course. If you would like to get reminders about all ten weeks, simply sign up for our eCourse and get a free business plan outline at the same time!
When you prepare to vacation in a new city, state, or country, do you set out uninformed about your destination — or do you read a few guidebooks, surf the Internet for advice, or perhaps visit a travel agent? You likely do at least a little bit of homework first so that you know what to expect.
Customers
Everyone is NOT your customer. The more well-defined your customer, the more confidence the reader has that you actually know your market. What is the geographic scope of your market? Is this a hard or soft boundary? Describe demographics of target customers. Why will a customer buy your product? Who are the innovators – the ones who will be first to buy – among target customers?
Product Features and Sensitivities
From the customer’s perspective, describe the three most important features of your product.
Which of the following elements will be most influential in your customer’s buying decision? Which are irrelevant?
Customer Sensitivities
- Price, Quality
- Your Reputation and Customer Service
- Product Appearance and Size
- Packaging, Ease of Handling, and Transportability
- Variety
- Operating Characteristics
- Location, Facilities, and Hours of Operation
- Credit Terms
- Advertising and Promotion
- Seasonal Cycles
Competitors
Even new, completely innovative products have competition. Long before your product comes into the market, customers have found ways to solve their problems. Understanding who your real competitors are is critical to your business success. As you analyze your competitors, it can be helpful to think about the three levels of competition.
Level 1 – These companies solve the customer’s problem with products or services that are very similar to yours.
Level 2 – These companies offer an alternative solution to your customer’s problem.
Level 3 – These companies do not solve the same problem, but compete for your customer’s limited resources.
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Your Assignment
Make a list of three competitors and study them. Look at their website, call their customer service department, look for their ads. Find 1 – 2 things they do well.
As I look at my business, here are my three levels of customers
Level One — As a marketing company specializing in helping small businesses grow, I compete directly with other marketing consultants, including Fat Atom, Buckaroo, Both Lobes, and Tony Fanin.
Level Two — Many of my potential customers may choose to address their growth issues by focusing on other areas of their business. They may turn to coaches such as CJ McClanhan, sales trainers such as Tim Roberts or free resources such as SCORE and the SBDC for help.
Level Three — Finally, startup companies have limited resources. As a result, I am competing for business with companies providing basic office and business supplies, such as Dell Computer, Office Depot, and their local printer.