When it comes to starting a business, growth hacking your business or even just trying to launch something new in your business there is one piece of the equation that (in my opinion) does not get enough attention. Entrepreneurs and business owners are so fixated on getting the first iterations of their products, ideas, or services out of the door that they fail to assess the depth of the market they are serving.
An awesome idea with no market or a market that is on the verge of some kind of pivot makes for a bad business.
There are two things that are as good as fact when it comes to building a business:
1. Your customer’s tastes and expectations will constantly change.
2. There is no such thing as long term or sustainable competitive advantage.
It’s because of those two things that you really need to be able to identify your market/industry and to try your darndest to get a handle on what’s happening around you so that you can best position your business for success.
I know. You’re thinking that you don’t need a deep dive into understanding your market or industry because you know your customers and are solving a problem they have.
- Do you have any idea what your competitors are doing?
- Do you know what your market is expected to do over the next few weeks, months or years?
- Do you know what the demand determinants are for your customers?
- Have you positioned your business such that it you’ve added to the barriers to entry that already exist?
- Are you adding value or different from similar industries, products or services that might already exist?
- Do you know what the most important external drivers are that motivate your customers to take action or engage with you?
- Are you measuring success in a way that will keep challenging your business growth?
One more and then I’m done.
- Do you know how your cost structure measures up to that of your market?
I could keep going but, I think you get my point. Understanding your customers and the world around you is imperative to keep your business moving in the right direction. It might feel like just a busy work exercise but it’s not! The better you know your business’ environment the more quickly you’ll be able to spot trends, you’ll be able to react quicker a your customer’s tastes and expectations change, and you’ll be able to ask good questions to get good feedback from your customers.
There’s no worse feeling than pouring your heart and soul into something only to have no one buy. I know because it’s happened to me once or twice in my early days. It happened because I skipped trying to understand my market and assumed that I knew what was best for my customers.
Besides answering the questions I listed above here are 3 things you can do right now to get a better idea of what’s happening in your market.
1. Go to the Bureau of Labor Statistics and look at trends in people’s discretionary spending.
Here’s a link that goes straight to the Consumer Expenditure page http://www.bls.gov/cex/ It might sound dry but after you figure out your demographic you can learn a lot about what is important to people by taking a look at their spending. Probably the most important thing is to see if people are already spending money on your solution - great way to look for validation. You can also tap http://www.census.gov to get more on drilling dow into the specifics of who your demographics are and how they behave. Yay “.gov”’s!
2. Break your target market into segments.
Think of segments as buckets that are full of different “people who...”. If your product/service is for small businesses then you should break them out into “small businesses who....have a physical location, have under 10 employees, need a business plan, etc.” That will help you as you are trying to quantify your market and your market’s behavior over time. Get specific and deliberate about who you are serving and it will help you make the most out of your time, money and emotional resilience in your business. Remember, tastes and expectations are always changing and they might change in different sizes, rates, or scopes.
3. Figure out what the experts are saying about the future of economic activity.
Yes, this step is about making your way through some economic data but I have a link that will make it manageable for you. This article from Kiplinger is a good place to start because it hits all the major economic indicators and offers links back to their sources so you can continue to dig around. Market and economic outlooks are important because they will give you some insight into the future of your customers needs, confidence, and spending. All very important information when you are trying to compete to get their discretionary dollar’s attention as economic conditions ebb and flow. Here’s the link back to the article: http://www.kiplinger.com/tool/business/T019-S000-kiplinger-s-economic-outlooks/
Most of the businesses I run into don’t give this type of thinking and planning enough attention because they believe they are too small to be affected by their “market”. Please don’t make the same mistakes. You are making decisions in your business everyday and the quality of those decisions are a direct impact of the information you use.
Stop winging it, stop wasting time, and start spending more time getting to know your customers/industry.