Great marketing ideas (new products, programs and projects) don’t always hit pay dirt. Conducting a feasibility study can help you aim your shovel and significantly improve the odds of success.
Typically, market feasibility studies are used to determine the best location for a business or venue. They also can be used to quantify market demand and response levels before making any major investment, e.g. new business, new product or extension, a new competitive positioning, pricing or promotion strategy.
The primary purpose of a feasibility study is to help you make an informed “go” or “no” decision or determine if a modification is needed. The two key questions your study should answer are:
What is the current market condition?
How will the market respond to my new offering?
Most studies focus on what I call the three C’s: your company, customers and competitors. In “feasibility speak” they are referred to as company project, customer analysis and competitive analysis, respectively (collectively referred to as a market analysis).
Company Project: Based on your company’s project, decide what is acceptable in terms of result. Before you analyze the market opportunity and competitive environment, map out a continuum between your best hopes and worst nightmare.
What is the minimum standard of performance you would be willing to accept? Also, look at strengths and weaknesses of the project. Consider how to best manage the project from logistical, workload and financial perspectives (risk/reward on allocation of your human and financial capital).
Based on all of these considerations, weigh your options and frame the project. As with any study, documentation is important—write down all of the key findings from your discovery. Be sure to involve the entire project team in this effort.
Customer Analysis: Next, you will gather demographic (and possibly geographic) data. The litmus is “who will be most responsive” to our new offering.
Profile who they are, where they are and how many there are. Check out free sources — government, chamber, economic development, trade association and library websites, and your own database — before buying any data.
This information will help you define current market conditions. Once you’ve profiled who would be most responsive, get their opinions.
Introduce your new product or program to targeted customers. Informal interviews work well. Even a small sample is better than gathering no feedback at all. In addition to acquiring customer preferences, you’ll be able to more accurately project market demand.
Competitor Analysis: Understanding what your competitors are doing is critical to the success and positioning of any marketing initiative. If there are competitors with a similar product, program or promotion, demand will likely be fragmented. Your revenue forecast and break-even point will depend on the extent of your competition. Ideally, the new program should separate you from the competitors, not compete directly against them. The most common practice for gathering competitive intelligence is through secret shops — onsite, website and phone shops all work well. After you’ve collected information in all three categories, analyze the data; opportunities and challenges will surface from this study and you’ll be better equipped to make a “go,” “no” or “modify” decision.
You need to know if there is sufficient demand, and if your competitive advantage is strong enough to make the venture profitable.
Evaluate every product, program and project as an investment; commensurately, it should be scrutinized as one. You’ll be more apt to strike gold if you study the landscape first.
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