What we’re talking about
Assessing the market is all about taking a look at the industry you’re hoping to move into and determining whether there is a problem that needs solving and, if so, is there a way for you to stand out? It’s essential to gauge whether an opportunity exists, how big it might be and then carefully consider how you’ll position your business to take that opportunity. You’ll want 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.
The idea is to be left with a clear idea on how you’ll carve out a position of your own: why customers will choose your business over others offering a similar thing. That’s where brand positioning comes in – the notion that your brand will occupy a distinctive position in the minds of your customers.
Why it’s important
Ultimately, you need to have a firm understanding of the market you’re trying to enter, and how you’ll stand out, before you begin trying to sell your product or service. A study by CB Insights suggests that 42% of businesses fail due to a lack of market need – arming yourself with the information you need right from the start is really non-optional. Among the benefits of putting this kind of research in is the fact it’ll show you what your market potential is at an early stage and help you clarify your unique selling point. Pretty important stuff.
Things to note
- The level of detail you get into for this depends on the type of business you have and the resources at your disposal. Plenty of secondary research is available for you to get a good sense of your market.
- A competitive sector with lots of businesses in the space does not necessarily mean it’s not a market worth entering. There might be a reason why businesses are rushing to it – and if you can solve a problem in a way nobody else has, you can still get a share of the market.
- How your brand is positioned should be considered throughout and not just added at the end of your assessment. Bake it into your process.
- There are a few generic types of brand positioning that most businesses fall under: value-based (the value the customer gets); feature-based (focusing on the price, quality or another micro feature); experience-based (the unique experience it provides); or lifestyle-based (selling an image or identity).
How to confirm there’s a market for your product or service
Ask yourself whether your product or service is solving a problem and meeting a need. It’s a basic requirement of any new business – you need to be totally honest with yourself.
Look for high-level, wide-angle information about the sector you’re hoping 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. Put the legwork in: you can buy detailed reports online and it’s also worth reaching out to experts in the industry. This is why it’s often helpful to start a business in a sector you know, as you’ll already have an awareness of trends and contacts to reach out to.
Get to grips with your competition. Start by determining five to 10 competitors and note the big details such as the size of their team, their location and their years in operation. Then act the customer: go to their store; visit their website or social channels; sign up to their newsletter; abandon the checkout process and note what happens; read their reviews. Ask yourself – why are customers choosing them, and what will your business offer that they don’t?
Consider – and narrow down – the customers that your business will be serving. There are two elements to working this out. As a starting point, demographic data is still worth noting: age, gender, income level, education and marital status. Census information is normally easily found online for free, depending on your location. Demographic data certainly has its limitations, though, which is where psychographic data comes in. This focuses on customer’s opinions, interests and values. Although this isn’t necessarily as quantitative as demographic data, there are numerous ways to search this out. You might survey customers who use similar products, track hashtags on social media or search trends on Google Trends as a starting point.
Estimate the size of your target market. There are three tiers to this: total addressable market (TAM), serviceable addressable market (SAM) and serviceable obtainable market (SOM). TAM is the total number of potential customers for what you’re offering, SAM is the percentage of those who’d realistically purchase your product or service; and SOM is the percentage of those you’d be able to reach. These figures are only an estimate, but it’s useful to know – and something external investors will want to see.
Use the information that you’ve pulled together to define your brand positioning. This is something that you should be working on throughout, but it’s helpful at this point to write down your positioning statement. Write a short paragraph that sums up why customers will choose your brand and what you want your customers to feel when they think of you.
- When you’re starting a business or launching into a new category, you need to make sure you’re solving a real problem or addressing an unmet need.
- Take a look at wider market trends to see if there is an opportunity – and remember not to be put off by lots of activity in the category.
- If you are entering a crowded category, your brand positioning is what will help you stand out and attract customers.
- Think in terms of psychographics, not just demographics, when you’re thinking about the people who’ll be interested in your product.
- Learn how to calculate your TAM, SAM and SOM with this detailed guide.
- Calculate a high-level addressable market using this interactive online calculator from andfacts.com (UK only).
- Learn more about psychographic data – and the different ways you can obtain it – from this informative Medium post.
- Draft a strong brand positioning statement using this guide from Cult Branding.
- Find out how some of the world’s leading brands have positioned themselves through this 30-minute YouTube video from The Futur.
- Read more guides to help you grow your business.