Testing Your Business Idea Part 2
Evaluate the Market Profitability Potential
In this first step, you will learn about two types of research methods and which is the best one to use for evaluating the market for your idea. You will also learn how to use some advanced operators in Google to determine the profitability potential of your market.
How to Gauge the Size of the Market
In order to gauge the size of your market, you will need to perform some market research. There are two types of research: primary and secondary.
Ø Primary Research - Primary research interacts directly with potential customers. It is in the form of surveys, questionnaires, contests, etc. The goal is to find interest in your product or service.
Ø Secondary Research - Secondary research comes from gathered data. This data is gathered internally or externally from industry and government sources.
A note on surveys: surveys report intention and intention does not always translate to sales. For that reason, you should cut the number of people who responded positively in half to account for this statistical variance.
Which Market Research Method is Best?
The ideal situation is to use both primary and secondary sources when performing your market research. For the purposes of evaluating products and services, you can start with secondary methods. These are easier to obtain.
Secondary research can help you determine market saturation so it’s best to use it early on. If your research tells you to continue to the next step, you can proceed with primary research techniques.
How to Start Your Market Potential Evaluation
No amount of research will give you an exact number about your market size so you need to make decisions using the research as guidance.
Start with a simple Google search and search for your product or service. If your product or service has not been developed yet, try to find products and services that offer similar features. If none are found, then use keywords from the industry itself.
As an example, suppose the product you are considering is a cat toy. If a specific product name does not exist, use the category, i.e., cat toys. Start with a search in Google with that phrase, which had close to 40 million results at the time of this writing. Obviously, this is a popular market. Refine the search to narrow the focus, for instance, “interactive cat toys”.
The results are significantly less. In this example, the first result has optimized its page for the term Interactive Toys for Cats & Kittens. You should always look for these variations on the phrase and account for them when sizing up your market potential.
The above searches are broad match searches. This means that Google may include results that contain the word “cat”, or the word “toys” or even the word “interactive” for the second example. While Google has gotten better at making searches more relevant for the entire keyword phrase, results may not show the true picture. Narrow down the search to websites that are optimizing for that term.
To do that, you can use an advanced operator within Google. Having the keyword phrase as part of the title will help Google determine what the web page is about. You can use the allintitle: operator to return only those results with that phrase in the title, as follows:
allintitle:interactive cat toys
Even these results can become skewed as you look at the results past the first few pages. However, it’s going to be close to the number of websites that are in competition for that keyword phrase.
The Small Business Association website is a tremendous help to small businesses in the U.S. It has several resources that can help businesses get started in the correct manner and can even help you find a mentor if you want some extra help. The SBA has access to useful data to help gauge your market.
It is beyond the scope of this report to go into all the resources and datasets that the SBA contains. However, you can find a great starting point www.sba.gov.
They have several resources that report business statistics.
Many other countries have their own equivalent of the SBA too, such as the Small Business Association in the UK here.
Number of Competitors
In the first section of this step, you were shown how to use the Google operator allintitle: to find pages that are specifically targeting a keyword phrase. This also gives you some indication of who is competing for that phrase.
Once you have a list of competitors from that search, you can use these to find others. Google has the related: operator. This operator works best when used with URLs, which you have from the previous section.
Sometimes, you won’t get any results for a website that you enter using the related: operator. The previous example with petsmart.com does not return any results, which is okay. Simply use another in the list. For the example, try Petco.com which does return results.
Larger companies like PetSmart sell a wide range of products. Try to use websites that are more closely related to selling cat toys or better yet, interactive cat toys. Of course, you would have to alter this to whatever product or service you are selling. Homing the search will give a more accurate indication of the number of competitors.
Part 3 coming soon.
~ The Game Changer Team