Everybody needs this.
That’s a sentiment that I hear directly or indirectly from
most entrepreneurs. I mean that’s why they are getting into whatever business
they are in right? They have something people need and they are meeting an un-
or under-served market. So now that we have this given out of the way, let’s
get to the marketing, financials, and making money.
Usually when I’m working with someone in person I smile
politely and let them finish. Then I ask them for their market research for
this “fact.” Then I usually get one of two answers, either they give me broad
generalities showing other places that people are using what they are selling
and they are bringing it to their market, or, just as common, if not more
common, their product is different than anything else in the market and so
there is no existing market to compare it to.
Market sizing is great, it gives you nice broad strokes to
understand if a place to sell your product exists. But after that, you need to become
an Iowa corn farmer and ask the question, “If I build it, will they come?” I
love being around entrepreneurs because as a whole they have an amazing energy
that kills the room. But that same passion can give them rose colored glasses. They
are doing what they are doing because they are passionate. The challenge being,
they forget that not everyone is, or more importantly does not want to be, as
passionate as they are.
Think of it this way, I have several fairly niche hobbies.
There are days that I’ve been practicing, reading, or watching videos about my
hobbies. Then later that night I’m in a social situation and all I want to do is
talk to someone about what I’ve learned or experienced. There was a time or
place that you’d better hope you weren’t the next person to say hi after that
second beer kicked in because I would use that as the trigger to tell you
everything going on in my head. And I was sure that if I just explained enough,
the person I was talking to would want to know more and then even join me in my
hobby. This conversion technique of converting people worked approximately
exactly zero times.
You may have a product or service that you love, or can at
least explain why people should shop with you, or use your service instead of
others, but as sure of it as you are that doesn’t mean everyone, or even
anyone, else agrees with you. Pummeling people with your words is not going to
change anyone’s mind. How many products have had a lot of marketing money
thrown at them to no avail. (To show my age, my thought of the perfect example
of this is the Zune. Then I thought, well, I can explain that it was an iPod
competitor, only to realize that many folks don’t know what an iPod is. I’m not
old, I’m experienced. Now that is marketing.)
So how do you know if someone wants your product or service?
This will blow your mind, you ask! OK, well initially you ask yourself
questions, then go look up those answers. This is called indirect market
research. If you are making dresses, you might research dresses sold per
capita, then figure out how many people and how many dress shops are in your
town.
But maybe you sell medieval style cloaks. There most likely
isn’t a lot of data on cloak sales available. So what do you do? Give up? No,
we’re entrepreneurs, we don’t give up. Here is when you need to find
substitutes. Substitutes are one of the toughest ideas for many entrepreneurs
to get their heads around. For now, let’s look at how would we size up the
market for cloaks if we don’t have cloak sales data. Well, maybe we know of
other clothes that sell to the same group. Let’s say for instance they also buy
long bows.
Then we can go find sporting good stores, and see what they
sell in bows. If they don’t break out their long bow statistics, maybe we can
find total number of long bows verse compound bows sold every year and compare
that? Maybe folks wear their cloaks to renaissance festivals where they have
developed a hankering for turkey legs, which they now buy and eat at home. Or
maybe we know that the average buyer of cloaks fits a certain demographic, and
we can research the demographics of our town and the number of places selling cloaks.
If you are willing to set yourself up starting a company
selling whatever, in this case cloaks, we can hopefully assume you know about
cloaks, which should lead into some knowledge of correlation products, then we
can use the correlation products as a proxy. Be warned though, if your proxy
product is common, it will not work as well. If we say, “Cloak buyers tend to
buy dogs as well” that might not be a good proxy, because even if 90% of cloak
buyers do in fact own dogs, lots of people own dogs.
Additionally, we should look at substitutes. Right now they
are not wearing cloaks because no one is selling cloaks so what are they
wearing now? Maybe you can find out of the fabric store is selling cloak
patterns. Or maybe they are using robes right now.
But I would like to stress there are always substitutes.
I’ll slow that down and type it again. There are always substitutes. That trips
up a lot of entrepreneurs. They get an idea in there head and look around and
no one else has that idea, so they think there is no substitute for their great
idea. But there always are. Horses and trains were the substitute for cars when
they first came out. Telegraphs and letters were substitutes for telephones
before those existed.
I stress this not just because identifying substitutes is
important for market sizing, but also because there are two reasons something
doesn’t currently exist. The first is, no one has thought about it before. The
second is, someone has thought about the idea but there are technical or social
reasons no one has brought them to market. Often both. When evaluating your
idea, it not only needs to be a good idea, but better than the competition, or
in these cases, better than the substitutes.
Take for instance the Segway. When it came out, it was
really ground breaking. There had been all sorts of technical hurdles the
inventors had to overcome to get the product to market, and once it came to
market, the inventors just knew it was going to take society by storm. The
problem was, because of all the technology, the Segway is expensive. Plus,
those using the substitutes, were in fact happy with their solutions. Walkers liked
the simplicity. Bikes had a longer range and many bike commuters actually like
the health benefits as well. Many cities cater to cars so people continued to
use their cars which protected them from the other drivers as well as the
weather. So while on paper, the Segway was an amazing idea, they should have
asked more questions.
Speaking of questions, let’s get to direct market research. That’s
where you are directly asking the market
questions. One of the keys here is to select the right pool of people to talk
to. If you product is more af a general need, say you make cakes, then you want
to make sure you have a broad cross section of folks, and don’t interview say
all event planners who most likely order more cakes, for fancier events, than
the average person. So if you focused on event planners, you might skew your
results and think everyone needs 6 fancy cakes at a high price because 90% of
your respondents said so.
But, if you sell specialty tools, say automotive tools, you
might want to interview mainly auto mechanics, as the average person would
never use your tools, thus your results might say only one in fifty people
would be interested. This ties in directly with the earlier post about
identifying your market. Whatever your market is, make sure to question a large
cross section of its members, not just a subset, nor people outside of your
market. I will tell you, I am always fascinated by camping gear. Some of it is
so cool, titanium coffee makers, and two pound tents. So cool. But I don’t
camp, so I wouldn’t be a good person to interview for camping supplies because
while I think they’re cool, I don’t really own much as I car camp twice a year.
So now you’ve got your cross-section, there are two types of
questions; quantifiable and qualitative. Quantifiable are those questions that
can be quantified. So out of 100 people, this percentage live here, shop there,
make this amount of money, etc. This is what most people think about when they
think of surveying their target audience. We really should do a whole post on
this, but let me highlight the most common pitfall, and I see it not just with
new entrepreenurs but Fortune 500 companies as well, is asking questions just
for the sake of a question. General demographic questions are the worst
examples but useless questions come in all shapes and sizes.
The quick answer on how to avoid these questions is to pretend
to give lopsided answers to aquestion and then ask, “So what?” For instance,
how many surveys have you filled out that ask for income range? Some companies
may actually have a use for that, but most don’t. So when you’re building your survey, stop and say, “What iif
my results end up with all my respondants saying they make $25k a year. Now
what happens if they all make $150k a year? What happens if I originally survey
them and it’s $25k but then changes over the course of a year to $150k? What do
I do different? If nothing, you don’t need the question. There is nore to it
than that but that is a nice way to weed
out 90% of the useless questions.
Finally, qualitative questions are all too often over
looked. No, your “Any Other Comments” section on your qualitative surveys does
not count. The idea here is to understand how your targeted users are currently
working, understand what they like, why they are doing what they are doing, and
what challenges they face. You want to make sure you don’t lead them, so these
should be general, very open questions. Tell me about your typical day using X.
You have several brand options for product Y, tell me why you chose your brand
as your favorite. Tell about the last time you had an issue with Z. Things like
that.
Time will usually constrain you to far fewer qualitative
surveys, as, if they are done right, they can take time. So make sure you have
done the other market research and at least some indirect and quantitative research
so you can understand who is at the heart of your demographics, then take some
time to refine your offering using qualitative research with those people.
For today’s tool, let’s talk lights. I think this fits well
as it is a good example of me being a bad survey target for myself. When LEDs
first came out I bought a bunch of them and changed as many lights as I could
over to them. I love very white light, and LEDs let me get very white.
For those who don’t nerd out on bulbs let me give you a
brief summary of what all the numbers around a bulb mean. Let’s start with
size. The standard size (or shape) buld is the A19, and in the US the base (the
part the screws into the socket). Here is a great blog post on sizing (link).
Next, because most of us still think of the old incandescent bulbs for
brightness, many LEDs have the equivalent wattage next to it, but the better
way to measure brightness is lumens. Simply put, the higher the lumens, the
brighter the bulb. You’ll see in many outlets they say not to put in bulbs
higher than 60W or 75W. This was not to limit the brightness, but with
incandescent bullbs, the higher the wattage, the more heat that is generated.
So you can actually melt the fixture, even start a fire, if you use a wattage
that is too high but LEDs don’t generate near the same heat so this is much
less of a concern.
Then finally they have a K number. K stands for Kelvin and
this is a range. Here is a good link explaining the Kelvin Scale (link).
The lower the number the more orange or yellow the light. Those who like these
bulbs usually refer to the color as warm. I am not one of those people. I like a
bright white light, so I tend to look for bulbs that have a Kelvin number of at
least 6000K. With LEDs this is an easy find and I can get bulbs with high
lumens since heat isn’t as much of an issue.
But here is where I become a bad surveyee, OK, I think the
correct word is respondent but I like surveyee better. Once LEDs made the
mainstream, smart LEDs came out. These bulbs can connect to your smart phone,
you can turn them on and off, which is nice, but the real magic is that you can
also change the K of the bulb, adjust the lumens, and many you can even change
them to other colors like red or blue or green, etc. I was so excited. Now I
could have all the bright light I wanted but others could turn down the
brightness and up the “warmth” if they wanted. A great solution.
So I headed out and bought some smart lights, expecting to
eventually have everything being a smart light. When I got the first few smart
lights in I changed their settings regularly because I could more than anything
else. If you’d surveyed me then, I would have raved about how great smart LEDs
were and I would have 100% told you I was buying a lot more of them. But as
time wore on, once I got over the fun factor, I realized I really don’t change
the settings all that much. Like I have always done, I like to walk into a
room, flip the switch, and not think any farther. Waiting even a few moments
for the smart app to open got annoying, the same switch and instant on were
what I needed.
So this just shows that getting feedback from your customers
and potential customer should not be a one time thing. Keep it going. Initially
my market for smart bulbs was large, I was going to change them all. Then it
shrank. Those are quantitative data points. Then when you saw that happen, if
you did qualitative surveying on me, you’d understand why the market size
shrunk. That might lead you in another direction. If the app is the pain point,
maybe you change the bulb so we have a default setting of all the lumens and
6500K, but if I turn the bulb on and off twice quickly it takes me to the
secondary setting that is fewer lumens and a warmer light. Or something like
that rather than continuing to add features to an app that I don’t want to use.