Market Research:

The role of research in your business is important as it impacts every aspect of your business and should not just be confined to the marketing plan or team. Research is important because it can:

Provide insightful intelligence on all aspects (competitors, pricing, business model, legal etc.) of your business.
Will enable you to position your business for maximum success
Assist you in determining what your customers really want, what they will pay and why they will use your product or service
Differentiate your business from competitors
Identify new market & business opportunities
Focuses the organization on the right tasks and opportunities as resources (time, skills and cash) in any business are limited
Decrease risk. The more you know the more prepared you will be to detect and face changes in the market, technology, legislation etc.

It will save you time, money and effort in the long run.

Market research can take a variety of forms and needs to be tailored to your specific business. Downloading or buying a generic report, while useful, is not specific enough. Market research can be:

Simple or highly complex/in-depth
Paid or unpaid
Use internally generated or external data
Be qualitative or quantitative in nature

What is important is that your sample size is large enough, as one or two people’s feed-back are merely opinions and you cannot analyse trends from limited information. You also need to sample from your target market. This may mean that you need to initially research who your target market is and then do more in depth research to gather relevant information about their requirements and behaviour.

Industry Analysis: The following questions will help you to analyse what industry your product or service is part of, key players, trends and new developments.

Detail the value chain in the industry
Who are the most important players in this value chain?
Where will your product or service be positioned in this value chain?
Who or what channel will be your suppliers, manufacturers, distributors? What relationships do you have need to establish?
What are the trends & important recent developments in the industry?
What are the barriers to entry?
And barriers to growth?
Are there any recent developments in legislation? Do you specifically have to comply with any legislation?
Do you need to obtain regulatory approval from any organisations to operate in this industry?

Target Market: To further analyse the market and which customers you are specifically targeting you need to work through the following questions and tasks.

Identify and characterise your target market. Be specific.
Are you focusing on the local market, the global market or emerging markets?
How big is this market and what is your target position?
How much market share are you wanting to capture?
What is the estimated size of your target market in volume terms?
How do you acquire customers and at what cost? Going viral is not a valid customer acquisition strategy, it is a freak occurrence.
How many customers to you have and what are the conversion rates?
What is the lifespan of your customer? Will they only purchase your product or service once, or will they be repeat customers generating annuity revenue for your business?
What are the local market trends? Are they in line with the strategy of your business?
Are there any barriers to market penetration? Why are you now able to capture market share?

Be very careful of making broad assumptions and over inflating your market size.

Competitor Analysis:

The golden rule is that there are NEVER “No Competitors”.

As a VC, Invenfin spends a lot of time investigating the competitive landscape and when we are told that there is “no competition”, it sets off alarm bells. We will not invest in a team which has no understanding of the market and key players, nor do we want to spend most of the investment funds and years educating the market about the product, before we can even market the product and it is adopted.

Competitive Landscape: To further analyse the competitive landscape and which companies or products your business competes against you need to work through the following questions and tasks

List your competitors (direct and indirect) both locally and internationally.
Who is the market leader? Why? What market share do they have?
What are their strengths & weaknesses? How could your product, process or service, take advantage of this?
Compare and contrast the features of each of your competitors services or products to yours. It is important to do this through the eyes of your customer.
Be careful to detail both the features and the benefits of your product against the competitors.
Matrix structures, tables and SWOT analysis are all useful ways of presenting this data. Ultimately investors are looking for WOW! Products and services. Those which are highly differentiated and solve a burning need for the customer.

Competitive Intelligence: This is the gathering of information about your competitors to make your business more competitive and is relatively easy to do.

Set up Google alerts.
Pay attentions to their ads & sign up for their newsletters.
Visit their website regularly.
Ask your customers, network and suppliers about them and how they do business.
Research and interview their customers if possible.
Become their customer – use, rate and critically evaluate their product or service.

Market research and competitor analysis are not once off tasks and should be on going activities, as the information you gather will influence every aspect of your business and its future.