Entrepreneurs are often so preoccupied with their idea that they forget to research the market demand first. New business owners frequently make the mistake of thinking about their product, service or website before learning who their customers are.
However, studying the existing market spending trends can often provide invaluable insight. By seeing what people are already paying for, an entrepreneur should be able to identify what these people want and how their desired outcome can be achieved better than by existing companies.
Existing customer spending is often an indication of what should be offered
A new business category is often slow to gain traction due to customers being unsure what they should spend their money on.
An established market category presents with less risk because the customers already know what they want and are willing to pay for it.
For example, if a business owner notices that the local companies are often outsourcing their social media management, they might want to research the trends in this category to see what clients are looking for. Some of these clients may be looking for help with short-form video content, some may need assistance with local ads, while others may want to only plan their social media content in advance.
Once the entrepreneur discovers what the customers in this category want to buy, they can decide what to offer that is better than what is available.
Note that there is nothing wrong with being the best at what you do, but it is often smarter to be significantly better than your competitors than to be slightly better than everyone.
Look for products or services that people will continue buying
Both businesses and individual consumers tend to buy the same things over and over again. Services such as car maintenance and accounting or products such as food, clothing and electronics are purchased repeatedly, often with businesses being the ones who facilitate these purchases. These businesses then reinvest the money back into the economy.
When trying to validate a business idea, look for products or services that are purchased repeatedly. Ask what makes these services worth continuing to buy and how this purchase habit could be facilitated better than by existing companies.
A recurring payment also helps an entrepreneur by providing them with a predictable revenue stream instead of relying on one-time purchases.
See what customers are willing to pay extra for
If someone is paying significantly more for a product or service than others, it is an indication that this customer either sees the value in paying more or has no other option. Either way, this information can be invaluable to an entrepreneur.
It is important to understand why someone would pay more for a service before trying to compete with them on price. There is little point in undercutting everyone if someone is willing to pay ten times more due to exceptional support or ease of use. On the other hand, an entrepreneur might also want to find ways to reduce the price that an average customer would have to pay while keeping the core value that the larger customers pay for.
Look for products or services that customers buy in addition to something else
Sometimes the market opportunity is not in doing something different, but in doing something additional. An entrepreneur can often complement an existing product or service that people buy by offering additional products or services.
For example, a company that sells and maintains websites might realize that their customers often need additional assistance with their online storefronts. A business that manages multi-family properties may find that their clients need photography and marketing services, while a personal trainer may see their clients struggling to plan healthy meals.
These additional opportunities often present themselves because the entrepreneur knows their existing customers and understands that they want to solve more problems for them.
It is therefore vital to consider what else can be sold to these customers.
See what customers have to do on their own
When a customer buys a product or service and then has to do additional work to enjoy the benefits of their purchase, it is an indication that they either don’t know what else they need or there is nothing available to help them.
An entrepreneur should therefore analyze what customers have to do for themselves after making a purchase and determine if these tasks could be provided as an additional product or service.
For example, a software product may be very powerful but extremely difficult to implement. Some equipment requires professional installation, while certain online services provide data, but no analysis of it. Whenever customers have to do a significant amount of work to benefit from their purchase there is an opportunity to assist them.
These opportunities also present themselves because the entrepreneur often knows that the customer is willing to pay for them, but there are also many opportunities for customers to pay for things themselves that they really do not want to do.
Study your competition
Many entrepreneurs wrongly consider competition to be their worst nightmare, but competition is often an indication of what the customers want. Competitors have already done a significant amount of research before launching their business and they also operate within the same economy as their competitors. An entrepreneur can often learn a lot about the target market from simply observing their competitors.
It is important to remember that it isn’t necessary to be better at everything than everyone else. It often suffices to be significantly better at a few things and serve a niche market better than larger competitors.
Ask people what they want and don’t want
Market research often consists of asking people what they want, but it is often more useful to ask them what they have already bought. Pay particular attention to what people are frustrated with and what they have to do on their own in addition to what they buy.
Ask these people what they would pay for and what they already pay for. While many people are happy to say that they would buy something, fewer are willing to admit that they already spend money on something else. However, the latter information is far more useful to an entrepreneur than the former.
Therefore, an entrepreneur should always conduct their own market research before launching their business. This helps them understand what people are already buying before asking them what they want to buy.
Make your offer better, not bigger
Many companies attempt to make their offers bigger in an effort to attract more customers. However, this can make their proposition seem less appealing due to increased complexity and price.
An alternative approach is to make the offer better in a way that is more attractive to a specific audience.
For example, if a customer only wants three things, an entrepreneur might offer these three things exceptionally well instead of attempting to do everything slightly better than everyone else.
If a complex service can be turned into a simple monthly plan, an entrepreneur might want to make it simpler. If customers buy different products and services, an entrepreneur might want to design a few different offers rather than one enormous one that is too difficult to navigate.
Remember that your first business idea doesn’t have to be perfect
Studying existing market spending trends is unlikely to make an entrepreneur perfect, but it will often enable them to find a market opportunity that was previously unfulfilled. An entrepreneur should always conduct market research before launching their business so that they know what people truly want even if they are unable to say it. This helps them make the right offer to the right people.
Before launching their business, entrepreneurs should therefore look at what people are repeatedly buying, what businesses pay for, what people are frustrated with after their purchase and what existing companies make difficult for them. Once they discover an opportunity, they need to ask themselves one final question – can they provide a superior customer experience, simplify the process for someone or do something significantly better for a specific audience. If they can answer these questions positively, there is likely a profitable business opportunity waiting for them in an existing market. The brightest entrepreneurs are often not the ones who spot completely new business categories, but rather the people who recognize the existing spending trends and realize that something was missing from the customer experience.
Written By: Editor Biztechtime
