The other day I was having a chat with some guys. One of them asked about which industries are most likely to make one a billionaire. Well, different kinds of responses were thrown in. some mentioned ICT, some mining, others farming, pharmaceuticals, and so on. Someone then remarked that mining is great but they feel that farming is too flooded. Given what I know I responded by saying I do not think that is necessarily true. That is the back story of my article today. I want to discuss the importance of not making assumptions about the market.
The Importance Of Research
If ever you have read our articles on starting any business we always underscore the irreplaceable importance of market research. Do not use biased observations and hastily conclude a market is flooded. Take a look at farming in Zimbabwe for instance. On the surface it appears that virtually everyone is talking of, doing, or contemplating doing farming. However, the net output of farm produce still falls short of satisfying the local market, let alone the export one.
The moment you contemplate a business idea, you must think of your target market. This usually starts basically from where you intend to operate. You assess the existence of prospective customers, their characteristics (e.g. ages, income levels, lifestyles, and needs, amongst others) and the size of that pool of prospective customers. You will also have to explore the existence and extent of competitors.
Primarily, these are the focuses of your market research. Do not just ask one or two individuals and form a hypothesis from that. Take time to actually conduct real research – things like interviews, focus group discussions, objective observations, literature review, questionnaires, and so on. You must come up with comprehensive data to then base your analyses and decisions on.
If you are objective you will either go ahead or abort the business idea. In some cases, you might have to rethink the business idea or consider a different location or target market. Many people make the mistake of being adamant that it will work despite never having done any research or even when the findings are speaking otherwise. Worse still, some even rule out everything without any research at all.
Proof Of Concept
The aim of this is to ascertain whether or not the business idea will work. Remember you started with just an idea – which is at best intangible. You subsequently have to add expression to the idea i.e. materialize it so that it can be seen or touched. This is where proof of concept comes in to test the business idea. Here is when I would advise you to come up with what is called an MVP – minimum viable product. A minimum viable product is a mini (yet substantially reflective) version of your product, something small or skeletal – something not too big or intricate but is sufficient enough to elicit data and or feedback.
A good example I can give you here is that of EcoCash. Before EcoCash was rolled out into the mainstream market it was tested using a small group of people. They actually used it for some months to get as much data and feedback as possible. For all intents and purposes, they could have just rolled out EcoCash given how cutting edge the business idea was. Remember that EcoCash was inspired by the great success of Kenya’s MPesa. They could have assumed that if it worked in another African country it should be automatic here too. However, they rigorously put it under the microscope for many months whilst testing proof of concept.
There are many ways in which you can sell a product or service. Broadly we have wholesale and retail as the umbrella. As you go down it all branches off into numerous possible approaches. Another broad categorization is selling online or offline. You have also had indirect selling and direct selling; there is also direct marketing and indirect marketing. For instance, indirect marketing can entail things like affiliate marketing, influencer marketing, content marketing, drop-shipping, and so on. You can already see how the options are plenty and varied and that is why you cannot afford to make assumptions.
It is all related when you look at it closely. If you thoroughly conduct market research and test proof of concept you will have a head start in figuring out what the market is like. For instance, you can just assume that a web app (i.e. for online shopping) would not be ideal for a rural target market. On the surface that seems like a valid conclusion, right? Well, you might be interested to know that most of those rural folk can have family, relatives, and friends in the diaspora who financially cater to them. That would mean online sales would apply to them because the diasporans can purchase for them online. That is a perfect example of why it is unwise to make assumptions about a market. Especially on sales channels, you will be doomed if you miss the mark.
This is important because markets can rapidly evolve. At times when you enter a market, it might be bumpy and slow-moving. You might even think that maybe you made the wrong move. In some cases that could be so but in most cases it is not. Iteration means the execution of the same set of instructions a given number of times or until a specified result is obtained. The same principle can be applied in priming a market that is not yet fully self-aware. We were just discussing sales channels just now – it plays into this principle. The idea is to come up with a reproducible marketing framework and apply it to different channels or contexts, gradually. You then draw insights and ultimately determine which the most effective approaches are.
The overall thrust is to move away from assumptions; the goal is to be empirical.
You have inspired me a lot with your journals
Glad to know. Much appreciated…