As you start your business – whether in London, rural England or Silicon Valley – you need to think hard about the types of market research you need and what kind of market penetration strategy suits your venture.
Over the past few months, we’ve laid out some basic guidelines for eyeing up the competition in your chosen sector. Then we continued discussing market development and identifying a route to market to draw in potential customers and increase market share.
In this post, we’ll look specifically at the idea of ‘Market Penetration’ to help frame your thinking about existing products and the special niche you can exploit.
Before you forecast sales volumes and annual profits, answer these three questions:
- Where do you want your products to go?
- Where will you start?
- Who is active there?
The end goal for your tech or app might be the wider international market or it might be a particular city. Either way, you’ll need to start somewhere, identify the size of that first ‘addressable market’ and establish a strong core market.
Now ask yourself if that market is already open. How many active customers already buy and use similar products? Who makes those similar products and how much space have those incumbent firms left in the sector?
At this point you’ll need to take another critical look at how your startup will make in-roads into its core market. How much access does the startup have to it? Is that access reliable, or do bureaucratic or physical barriers block your way?
Next, thinking about the future, evaluate your access to non-core areas. Which other territories and sectors can you play in, and how easily can you get there?
Education vs evangelism
Obviously, a key challenge for innovative tech startups is getting the word out about their product and ensuring that the public will find it useful.
If your service is similar to existing ones, which firms have already ‘educated’ the marketplace and how well do people understand the current offering? If those answers aren’t clear, consider holding a focus group and gathering first-hand qualitative and quantitative data.
Quantitative research can give an idea of how strongly clients recognise a brand and understand processes. Meanwhile, qualitative research can give a crucial glimpse into the customer experience.
That type of information can help you ascertain whether your product or service is innovative enough to disrupt your chosen market. But think about your customers: will they assume new risks after buying your product for the first time, or in place of what they currently use?
If people are hungry for lower-cost alternatives to existing services, can you offer that? If so, create a penetration pricing strategy for your idea.
Are you a high school graduate aiming to be the next Steve Jobs, or a small business in the tech or social media sector looking for a great place to grow? Click here to learn how Innovation Warehouse can help realise your vision.