Evaluating Your Business Product or Idea
by Trina Newby
As you begin to develop your business idea, you need to determine its
strength and viability. Below is a checklist of criteria to help in
evaluating ideas that seem to match what you’re looking for. Ask
yourself the following questions when evaluating an idea for a business
or product:
1. Does it satisfy or create a market need? Introducing a new product
without first testing the market is like jumping off a cliff
blindfolded. In fact, many businesses fail because there is no adequate
market for their products or services. Before you risk your resources
on a new venture, it is necessary to get an objective picture of your
prospective market. Although accurately determining the customer
reaction to a new product is difficult, a new business owner must try
to get hold of as much information on the market as he or she can
either through a formal market research or through secondary research.
The rule is: find a need and fill it. To the extent possible, do not
offer a product or service so new or unusual that people cannot
understand why they should buy it - unless you want to spend most of
your time and resources educating the public. Big companies, with their
deep pockets, can afford to launch a massive educational campaign for
breakthrough products. Home businesses, given their size and nature,
often do not have the resources (capital, personnel, technology) to
mobilize such campaigns. Also, do not offer a product you love to make
but whose market potential is weak at best.
2. Will the product maintain market appeal? Beware of fads and fleeting
trends as these markets change quickly that your business cannot
achieve a sufficient volume or a sufficient share of the market. If
your product, however, is a fad, make sure that you can move fast
enough to capitalize on it before it dies. Also determine if your
product or service can be used nationally, or is it simply limited to
your geographical area. With the increasing globalization of business,
you may need to look at the international market and see if there is
significant foreign competition.
3. How unique is your product? The goal is to be able to differentiate
your product from your competitor. You need to show why your products
and services are unique, distinct, or of considerably superior than
your competitors. Every product in the world can be sold or presented
in a new way. If you seriously intend to capture a significant market
share, your potential customers must find more value from your product.
4. How useful is your product? Many new ideas and products are
successful because their creators identified an unmet need in the
market. Identify at the onset how your product or service will be used,
and determine the frequency of product use. Some business ideas fill a
real need, but in some cases the need have to be created through
promotional advertising and promotions. This information can help build
your marketing strategy.
5. How much competition exists? Remember, there is never a "no
competition" situation. You product will always have its competition.
Determine the kind of competition you will have - locally, regionally,
and nationally. Look for heavy or moderate competition - the fact that
competition exists in that market proves a demand, or at least a need
for what you offer. However, test for market saturation. Unless you are
offering a groundbreaking product, stay away from market with extremely
few competitors. Lack of competition could mean that your business idea
is not profitable to begin with, or that your idea is so new and unique
that no one has thought of it yet. Few players in the market could also
imply that the market may be controlled by a monopoly or a cartel, the
barriers to entry are too high for a small firm, or that the demand is
too limited to sustain another entrant in the market
6. Have you priced your product competitively? The right price for a
product or service is one of the essential elements in a solid business
model. Don't do yourself injustice; the wrong price tag is like a
ticket to disaster. Economic survival is the primary consideration
underlying all pricing decisions. Ideally, a price should meet three
requirements: it should match the competition; it should be attractive
to your potential customers; and it should earn a profit for you. Set
your prices, not by competition, but based on the needs of your
business. Depending on your products, consider pricing yourself on the
higher side: the higher you price yourself, the higher you position
yourself.
7. What is the level of difficulty in the creation or implementation of
the product? You need to consider the economic factors in the execution
of the product, such as time, capital investment required, and
marketing costs, personnel needed, among others. Also determine if you
have the engineering, production, sales, and distribution facilities
adequate for the product's implementation. You may have an excellent
business idea, but if you do not have the economies of scale to produce
it, then you might be better off to consider other products (or at
least a scaled down version).
8. What are the growth possibilities? Your business model stands to
succeed if the demand for your products or services can be expected to
grow with a change in the economy. Check if your product can survive a
major technological surge or obsolescence.
9. Can I get backend sales? Back-end sales are all the products or
services you sell and resell to customers or clients after they have
made their initial purchasing transaction with you. Determine if your
product or service will warrant repeat sales. There is real business
value in building a pool of repeat customers. The bulk of the sales,
cash flow and current profit comes from utilizing and then better
utilizing a back end.
10. Is the product safe? The safety of a product use is an important
consideration for many consumers, particularly for manufactured
products. If you are in the service business, you need to make sure
that your personnel are properly trained with the goal of satisfying
your customers foremost in their minds. Educate your consumers on how
best to use the product and include clear instructions to avoid costly
legal entanglements. Make sure that your business is insured against
various forms of liabilities that may arise.
11. Can my product be promoted with strong advertising copy? Emotion
sells. People are often motivated to buy a product or service because
of some emotion, whether it is greed, fear or want. Response to
advertisements often increases whenever you inject these elements into
your ad. Sit down before you write the ad and ask yourself what you
want to feel. Then translate these feelings to written words for your
advertising copy. Stress what people can gain from ordering your
product or service (financial reward, becoming the envy of others,
knowledge to get ahead in life) or tell them what they lose if they do
not order (loss of time and convenience, discounts for ordering before
a deadline).
12. Will you be left with an inventory? Avoid inventory risk; make sure
that even you will buy the product. If you have inventory, consider
getting homeowner's or renter's insurance policy to protect your
business against all possible disasters, be it fire, tornado, hurricane
or earthquake.
About the Author:
Trina Newby is President and Founder of Women About Biz, a powerful and
effective membership-based network for Businesswomen. Let us show you
how to grow your business at
Women
About Biz.
Trina Newby is President and Founder of Women About Biz, a powerful and effective membership-based network for Businesswomen. Let us show you how to grow your business at
Women About Biz.
