Marketing Strategies – The #1 Mistake in Small Business Marketing Part 3

Posted on April 20, 2009 - Filed Under Jane Thoughts, Success Tips for Jane

Fortune 500 Companies know the importance of market research. That’s why they conduct something called a Concept Test before launching any new product or service.

Don’t you wish you could do the same thing? Well, here’s the good news: you can.

This is Part 3 of a three-part article series on creating the do-it-yourself Concept Test. The first article covered the basics of how to create a Concept Statement. The second article was all about how to discover your target market by using the social networks of your friends, family, and friends-of-friends, and what questions to ask them.

In this article, I’ll show you exactly what to do with the results of your concept test – and how you can use this information to help ensure the success of any new product or service. (This is important, because small business owners tend to be more vulnerable to losses – so read carefully!)

HOW TO USE YOUR RESULTS
Before you even take a peek at your data, decide what your minimum requirements will be in order for you to take the next step. Large corporations call this decision an “action standard.”

For example, many packaged goods companies (soft drinks, chips, cereal, etc.) will hold to an action standard that requires at least 80% of survey respondents to say they “definitely” or “probably” will buy. If the results do not meet the required action standard, large corporations will either “kill” the idea or – if it’s close – go back to the drawing board in order to strengthen the concept.

But there are other ways to create an action standard that might be more relevant to a small business-owner. Foremost among these would be using your “purchase interest” data to estimate the truly likelihood that people will buy.

Let’s face it, people often say they will do something that, in the end, they don’t. One rule of thumb professional marketing research firms use to better gauge “true” demand is to say that 80% of the people who answered that they would “definitely purchase” your product will follow through, while only 20% of those who answered they “probably will purchase” will do the same.

Take a look at your research results. Does the number you get after taking this rule into account demonstrate sufficient demand for your product or service? Don’t forget that you also have to take the create awareness in your target market in order for them to buy.

For example, let’s say that using this “rule of thumb” your data shows “true demand” of 20%. The reality is, you will never get everyone to be aware that your product even exists – so you have to take that into account as well.

Let’s say there are 10 million potential customers in your market, but you’re advertising on a shoestring. With the budget you’ve got, how many people can you make aware of your product? Five percent? That means 50,000 people will become aware of your product. With 20% true demand, you might expect 10,000 buyers.

So – is 10,000 buyers enough to make your new product viable?

The thing about market research is, you can often manipulate the numbers to make them tell you what you want. The key is to make them tell you the truth. Although it may be difficult to discover, after doing the math, that “your baby is ugly,” it will save you untold time, resources, and frustration in the long run.

But what if your baby is “close” to meeting your action standard? Then, by all means, take your concept back to the drawing board, adding new features and/or lowering the cost of purchase. Use the rest of your research to guide you in how to make improvements to the idea. And then test again.

If your research reveals a demand sufficient to create a viable business, then you’ve got a clear signal to move ahead with your latest, greatest idea – knowing the market is with you!

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