Determining Viability of Your Product or Service
by Ron Kurtus (24 March 2009)
An essential part of starting or growing a business is to determine the viability of the product or service you plan to sell.
To do this, you first need to perform market research to gain information on the demand for such the product or service you plan to offer, as well as where to find the potential buyers. Then you need to examine the competition in that marketplace to get an idea of where you stand. Finally, you should to establish a position or market niche for your product or service.
Questions you may have include:
- What is market research?
- Why study the competition?
- How do you position a product?
This lesson will answer those questions.
Market research consists of finding groups of potential customers who might be interested in your product or service. You need to find what their needs are and which of those needs you can meet with what you plan to offer.
John noticed that most people in his community had large lawns that they mowed themselves. He estimated that each year a certain percentage of them would be purchasing a new lawnmower. He thought that selling lawnmowers might be a good business to start.
In some cases, there is a demand for a product but there are very few potential customers or prospects who would buy the product. Other times there are many prospects but you cannot meet their demands.
Oliver had the great idea of starting up a business of tinting automobile windows a dark color. He had seen examples in some gang-bang movies, and it looked like a sure thing. Unfortunately, he did not bother doing market research and didn't realize that dark-tinted windows was a fad that had passed and were also illegal. Needless to say, Oliver's business failed.
Good research will allow you to find the viability of selling this specific product.
You need to know who your competition is. Who is providing products or services similar to what you want to provide? From this knowledge, you can analyze the competition to determine the demand for your product, as well as the supply.
If your business is local, you need to look at local or neighboring competition. If you are selling a product on the Internet, you must look at world-wide competition on the Web.
John wanted to start a store specializing in selling lawn mowers. He looked at the competition and saw that there was an Ace Hardware Store nearby that would be his major competition. But there also was a Home Depot and Sears within 10 miles from his store.
Now the question he asked himself was whether there was a sufficient demand for lawnmowers, considering the stores that sold such a product.
A smaller company must often consider whether to compete with an industry giant.
In 1962, Studebaker Automobile Corp. started to build the Avanti sports coupe, consisting of a modern design, high powered engine and fiberglass body.
Unfortunately, they ran into production problems with the assembly of the body, which was being done by the Molded Fiberglass Products Co., the same company that provided the fiberglass body for the Chevrolet Corvette.
Because of the production problems, Studebaker was not able to deliver cars ordered and discontinued the Avanti within a year.
Rumors were that General Motors had applied pressure on Molded Fiberglass Products, such that they put a low priority on the Avanti assembly.
When competing with a larger company, it is best to establish a market niche that the competition cannot effectively touch.
Position or niche
You then seek to position your product or service by finding your market niche.
John saw that his competition could offer a wider range of lawnmowers, often at a lower price. But they did not offer a lawnmower repair and tune-up service. By offering a discount for tune-ups to his customers, he was able to gain a solid position for himself in the market.
Determining your market niche is important in gaining customers for your product or service.
You can determine the viability of the product or service you plan to sell by performing market research on its demand, examining the competition in that marketplace to get an idea of where you stand and establishing a position or market niche for your product or service.
Study and do research to see where you stand
Resources and references
The following are some resources on this topic.
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