There is no set order in which these choices must be made. In fact, you will probably make initial choices and select your product line, target market, distribution channels, and other aspects of your business model; then after working with those choices for a time, you will revise some or all aspects of your product line, target market, and so on. Revising and updating your product offerings is an activity that you may wish to conduct frequently, depending on the type of business you are in. Manufacturers of everything from cellular phones and automobiles to clothing and dish detergent revise their product offerings regularly.
Similarly, you may wish to regularly revise estimations of your ideal target market. In the example I proposed yesterday, imagine that you have decided to start your own business designing and selling clothing that you make in your residence. In yesterday's post I suggested that your style of clothing designs are probably most suited to fashionable young people in their early twenties; but I raised questions about the willingness of this target market to pay enough for your creations to make the enterprise profitable for you. As a consequence I suggested you may wish to also create a secondary line of fashionable baby-wear. There are several logical arguments to be made in favor of such a move. For example, the smaller clothes would take less fabric and less time to sew, so they would cost you less money and time, and therefore you could sell them for less than the adult clothes but for more relative to your cost per garment, thereby affording you a more likely sale and a better profit on that sale. Additionally, many young parents may be willing to spend more on clothing for their children than they would be willing to spend on themselves; and furthermore, you may be able to tap the friends-and-grandparents market as well, which gives you access to a target market with a much larger combined spending power than just the young parents themselves.
On the other hand, some would argue that while single young twentysomethings are indeed notorious cheapskates, they are also notoriously profligate. They typically make very little money at whatever job they have; often they are still in college and don't have any income at all. However, they may have access to student loan money, or better yet, to the Bank of Mom and Dad; and since they probably do not have families of their own yet, there is a very good chance that whatever money they do acquire will "burn a hole in their pocket" and be spent quickly. Making sure that yours is the product that catches their eye at the precise moment that they happen to have a few bucks in their wallet is a factor related to your distribution strategy and your marketing strategy, both of which I will address in future posts.
These are just a few examples of some of the considerations which you will be evaluating as you plan your business and as you revise your plans to help your business grow. Generally, you are looking for a target market that can afford the goods and services you are offering, and you are are planning to offer goods and services that are best suited to the target markets you serve. You start with an idea for a product offering; you identify a target market for your product offering; then you revise your product offering based on its suitability for your target market; and you further revise your target market analysis based on your revised product offering.
Incidentally, your chosen distribution model is a critical component of target market analysis, and vice versa. For example, if you decide to sell your products online and also at some kind of local street fair, then your target market is not simply all the people within a given age range who happen to enjoy a certain style: your target market is that small segment of those people who happen to either shop online or at local street fairs. If you wish to sell to people who go to street fairs, then you will want to get a booth at one. If you wish to sell to people who shop online, then you will need a website - more on that later.
Most established businesses engage in market segmentation as they plan their product lines and related target markets. Often this means they plan discount, median, and premium product lines, respectively targeted to various consumer groups based on income and other demographic factors. Alternatively a company may target different types of corporate buyers based on their industry; or a company may position itself to target lucrative government contracts. There are many choices to make, and various criteria for evaluating the factors that will influence your decisions; all these will depend on the type of business you are engaged in.
As a very small start-up, sewing clothes in your living room, you probably do not have the time or resources to engage in grandiose plans or extensive market research. You will conduct a certain amount of trial and error. Too much error and you will go out of business; and let's be frank, this is the sad fate of by far the majority of start-ups. But with some planning, some good ideas, and a lot of hard work, you may succeed where others have failed. Best of luck with that.
Until next time, happy planning.
Tuesday, December 7, 2010
Monday, December 6, 2010
Choose Your Product Offering
In reality, you probably already know what kind of business you want to be in. Whether you are an accountant or an acrobat, chances are you have a talent or interest that you wish to monetize. You already know generally what you want to do; hopefully it's something you enjoy doing, and this is good, because it will keep you motivated. Nonetheless, as you develop a business model, you may wish to make certain tweaks to your product offerings; and even after you have been an established business for years, you will want to periodically review your product line to make sure it is positioned well relative to your competitors, and relevant to the demands of your target clientele.
For example, imagine that you are a musician. You find that through persistence and charm you can get a small number of non-paying gigs playing whatever songs you happen to have been rehearsing lately. However, imagine that if you were to consistently perform a couple of specific songs from your repertoire, you would quickly gain a following. These particular songs happen to be in a sweet spot relative to your vocal range; and the lyrics, rhythm, or mood of the pieces really resonate with your audience. When people hear these songs, they will be more likely to come see your show again the next time you play. But if you don't play those couple of songs again the next time, these audience members will leave disappointed, and they will probably not recommend you to their friends. If you DO play those songs again, people will come back to see your show over and over, they will recommend you to their friends, and they will visit your website and maybe even buy your music online. You would start getting larger audiences and better gigs that actually pay real money, not just a couple of free beers. If you knew which songs would lead to this type of success, you would be certain to perform them, wouldn't you?
The principle is applicable to any industry. The process of determining which product offering is most likely to resonate with your target market is known as market research. There are any number of firms that offer market research services on a contract basis; but such services are prohibitively expensive for most individuals and startups with energy and an idea but little or no financing. Your alternatives are:
In choosing an industry focus for the purpose of this series of blog posts, I will focus on a relatively simple business that you can run out of your home. There are permitting and regulatory issues related to selling food that you make in your own kitchen, so for simplicity's sake, let's imagine that you like to sew. You've always been good at making clothes; you have been making your own clothes for years; your friends and random strangers often tell you that they wish more stores sold clothes as cool as the ones you are wearing. So you decide to begin selling unique clothes that you make yourself. In the future, perhaps you will just design the clothes, and have them manufactured in a factory, which will improve your cost efficiency, and with it, both your sales numbers and your profits. But for now, you are just getting started, so you're going to make the clothes yourself, using fabric from the local craft store, and perhaps augmenting it with some fabrics that you are able to reclaim by deconstructing used clothing from the thrift store. The question is, should you make fashionable clothing for the twentysomething set? Practical outdoor-wear for adults of all shapes and (often large) sizes? Or perhaps stylish onesies for toddlers?
Evaluate your skill set in light of the size, spending power, and taste preferences of your target market. You may really enjoy making fashionable clothes for young twentysomethings; but young twentysomethings are notoriously a bunch of cheapskates who are unlikely to want to pay enough for you to make a profit. So you decide to make a line of trendy clothes; but you will also make a line of baby clothes. Many parents are more likely to spend money to deck out their children than they are to splurge on themselves. Also, grandparents and friends may end up buying clothes for the baby. Your two product lines will complement each other; people may initially check your business out saying "I wish I could afford to buy something like that for myself" and end up buying something for their friend's baby shower.
So, start developing your product line, and in the next installment of this series we will continue considering your business model. Best of luck until then.
For example, imagine that you are a musician. You find that through persistence and charm you can get a small number of non-paying gigs playing whatever songs you happen to have been rehearsing lately. However, imagine that if you were to consistently perform a couple of specific songs from your repertoire, you would quickly gain a following. These particular songs happen to be in a sweet spot relative to your vocal range; and the lyrics, rhythm, or mood of the pieces really resonate with your audience. When people hear these songs, they will be more likely to come see your show again the next time you play. But if you don't play those couple of songs again the next time, these audience members will leave disappointed, and they will probably not recommend you to their friends. If you DO play those songs again, people will come back to see your show over and over, they will recommend you to their friends, and they will visit your website and maybe even buy your music online. You would start getting larger audiences and better gigs that actually pay real money, not just a couple of free beers. If you knew which songs would lead to this type of success, you would be certain to perform them, wouldn't you?
The principle is applicable to any industry. The process of determining which product offering is most likely to resonate with your target market is known as market research. There are any number of firms that offer market research services on a contract basis; but such services are prohibitively expensive for most individuals and startups with energy and an idea but little or no financing. Your alternatives are:
- Analyze your competitors. If they are making lots of money selling a certain type of product or service, then that increases the chance that you too could succeed in the same area of business.
- If you already have a business, don't be afraid to survey your customers. Ask them what they like, what they think you could do better, and what they wish you offered that you presently don't offer.
- If you don't already have a business, conduct an informal survey of your most likely prospects. The larger the sample size of your informal survey, the better; and the more questions you can get your respondents to answer, the better. Ask friends and family if that's all you can reach; but keep in mind that they are NOT your most likely prospects, so whatever your mom says, take it with a grain of salt; she is biased, and will not be as critical as a typical prospective customer.
In choosing an industry focus for the purpose of this series of blog posts, I will focus on a relatively simple business that you can run out of your home. There are permitting and regulatory issues related to selling food that you make in your own kitchen, so for simplicity's sake, let's imagine that you like to sew. You've always been good at making clothes; you have been making your own clothes for years; your friends and random strangers often tell you that they wish more stores sold clothes as cool as the ones you are wearing. So you decide to begin selling unique clothes that you make yourself. In the future, perhaps you will just design the clothes, and have them manufactured in a factory, which will improve your cost efficiency, and with it, both your sales numbers and your profits. But for now, you are just getting started, so you're going to make the clothes yourself, using fabric from the local craft store, and perhaps augmenting it with some fabrics that you are able to reclaim by deconstructing used clothing from the thrift store. The question is, should you make fashionable clothing for the twentysomething set? Practical outdoor-wear for adults of all shapes and (often large) sizes? Or perhaps stylish onesies for toddlers?
Evaluate your skill set in light of the size, spending power, and taste preferences of your target market. You may really enjoy making fashionable clothes for young twentysomethings; but young twentysomethings are notoriously a bunch of cheapskates who are unlikely to want to pay enough for you to make a profit. So you decide to make a line of trendy clothes; but you will also make a line of baby clothes. Many parents are more likely to spend money to deck out their children than they are to splurge on themselves. Also, grandparents and friends may end up buying clothes for the baby. Your two product lines will complement each other; people may initially check your business out saying "I wish I could afford to buy something like that for myself" and end up buying something for their friend's baby shower.
So, start developing your product line, and in the next installment of this series we will continue considering your business model. Best of luck until then.
Sunday, December 5, 2010
Introducing Basementia's Business Development Blog
Welcome to Basementia's business development blog. This blog will feature a series of posts about how to start and grow your own business. It will address such diverse issues as writing a business plan, setting up the legal structure of your business, how to raise capital, how to set up a website, how to develop a marketing strategy (including identifying your target market and creating catchy advertisements)... and more!
My name is Jesse Smith, and I will be leading the discussion. I am presently studying for my MBA with a Marketing emphasis at City University of Seattle. I am also the President and lead coder at Basementia Enterprises. This blog series will be an updated, expanded series based on a short three-part article on Starting a Business that I wrote several years ago.
It is my hope that readers will find this series useful and informative. Living in an economic downturn that won't quit, with unemployment persistently high, it is my belief that individuals must take the economy into their own hands, by starting businesses and creating jobs for themselves and their communities. It is my goal, and my company's purpose, to demystify the business development process, and to make it possible for anyone to start a business that will thrive even when times are bad.
Relevant comments are welcome. I look forward to a collaborative discussion that will promote everyone's interests.
Best Regards,
Jesse Smith
My name is Jesse Smith, and I will be leading the discussion. I am presently studying for my MBA with a Marketing emphasis at City University of Seattle. I am also the President and lead coder at Basementia Enterprises. This blog series will be an updated, expanded series based on a short three-part article on Starting a Business that I wrote several years ago.
It is my hope that readers will find this series useful and informative. Living in an economic downturn that won't quit, with unemployment persistently high, it is my belief that individuals must take the economy into their own hands, by starting businesses and creating jobs for themselves and their communities. It is my goal, and my company's purpose, to demystify the business development process, and to make it possible for anyone to start a business that will thrive even when times are bad.
Relevant comments are welcome. I look forward to a collaborative discussion that will promote everyone's interests.
Best Regards,
Jesse Smith
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