Background on Industry

This is the real beginning of your marketing analysis or feasibility study.  You need to start with basic research on your industry.  What are the demographics?  This is statistical information on your industry and customers.  What are the number of firms doing what you want to?  What are the typical number of employees?  Revenues?  What are the specialized businesses within the industry?  To start, it might help you to order a research report from your local Small Business Development Center.  We have a national research office in New York that will do a custom study to assist new clients.  Once ordered, this will take approximately two to three weeks to get back.  It provides information such as general articles about your industry, financial ratio studies, association lists, abstracts of periodical articles and other helpful information.  I also recommend that every business order a Marketplace report from Dun & Bradstreet.  This can be done through the SBDC or directly using the Internet.  The web address is shown in the Resource section at the end of the book.

The field of demographics has expanded greatly in recent years.  This secondary research can be important to your business plan and success.  They call this the secondary research because its generated by others.  This is much more available and inexpensive than the firsthand research which will follow.  The more thorough you are at this stage, the better job you will be able to do once you begin your primary research.

Census data can be helpful in looking at your potential customer base.  Major census’ are conducted every ten years, but can be updated by local request.  The Small Business Development Center has recent census data on CD-ROM, which can generate custom reports by city or census tract.  These reports look at age, household, ethnicity, and other factors for a particular population.  Also, each major city in the region has a demographic study done by Arizona Department of Commerce, which is based on Census and other government sources.  It is also available from the SBDC or NPC library.

A visit to your nearest NPC campus can be very helpful in your secondary research.  NPC has a myriad of indexes, many which are on line and allow printout of abstracts of articles which may be of interest.  NPC has references such as lists of associations, trade shows, and other items which may be of interest.

Today there is a tremendous amount of information that you can obtain directly from the World Wide Web.  We have included a list of Internet addresses for various topic areas in the Resource section at the end of the book.

Trends

Once you have researched and have information on the background of your industry, you should look at where your industry is going.  Is it a mature industry that has a limited life?  Or an emerging industry with tremendous growth opportunities?  This can make a big difference in how you plan your new business, how much capital you may need to keep up with change, etc.

Another consideration is the economic cycle.  Is the industry one that historically does well during economic recessions?  Or can you expect things to slow down?  Your forethought to these issues can have an impact on your ability to respond to changes once they occur.

Primary research

Once you have gotten all the information you can from outside research sources, its time to do the most important research for your start-up.  The direct, or primary research involves your doing visitations of competitors and testing and talking to customers.  In the previous Module we discussed how to go about testing a new product.  The time spent testing your product can be invaluable in learning up front what can make your concept and products/services better.

The visiting of other businesses, or the walk and talk, can be a real eye-opener.  The businesses you visit shouldn’t only be your direct competition, either.  Try to visit the best companies in your industry and determine what makes them the best.  They will often be very helpful in determining what is most important to the customers.  It is recommended that for your direct competitors you put together a list of strengths and weaknesses for each.  The idea is to address their weaknesses in your product offering and minimize or meet their strengths head on.  If your focus is on what is important through the eyes of the customer you can’t help but put together a winning concept.

Target marketing

The key to target marketing is knowing your customer.  You want to allocate marketing funds to attract this target group.  In very few situations is a target market for any company the world.  Even large corporations select target audiences.  For example, Pepsi long ago found it difficult to compete with the loyalty of the established, mature Coke customers.  Their focus or target market has and continues to be the younger generation.  They have chosen not to try to convert all the Coke customers, but instead convert the younger generation.  As Cokes customers have continued to age, Pepsi has made greater strides in acquiring market share.  With a small business in a rural area, you will still probably need to focus your marketing efforts to a specific target market.  Not all small businesses can afford to promote their businesses using the mass media, that hit large portions of the total population.  It helps to focus in on the best customer for you.

A target market is not the same as an average customer.  You may serve a broad cross section of the population, but find that one group is your best choice.  Auto dealers are finding today that women are more and more making decisions on automotive purchases.  Traditionally marketed to males, the auto industry has recognized this shift, and more of their marketing strategies are starting to reflect this.  Not only in their advertising, but in product development of features and benefits. 

Positioning

We discussed in the previous Module the importance of having a niche for your products or services.  Look at positioning your products or services so they meet the needs of your target market.  Stressing benefits over features is another important consideration.  Customers don’t buy products for their features, they buy the benefits.  What can your product or service do to make the customers life easier, solve their problem, or make them more money for their bottom line?

The unique selling proposition

With most small businesses the proper target marketing and positioning of your product or service leads to a unique selling proposition.  This is what makes your product special, why in many cases a customer would want to try you for the first time.  Even for a tried and true product or service the unique selling proposition is what makes you look different to your customers.  Often, the unique selling proposition will allow you to charge the same or more than others in your industry and still gain market share.  This can often be the difference between success or failure in starting a new business.