Marketing Strategies - Get Corporate America Results on a Small Business Budget

Fortune 500 Companies know the importance of market research. That's why they conduct something called a concept test before launching any new product or service.

Don't you wish you could do the same thing? Well, here's the good news: you can.

First of all, you'll need to sit down and clearly delineate exactly what your product or service is, including what features and benefits it will offer and how much it will cost. Typically, you'll write 2-3 paragraphs describing your idea, making sure to clearly explain the benefits to the consumer. This is your concept statement.

Next, develop a survey to gauge the reaction of your target market, covering the basics:

- Purchase interest (i.e., How likely are you to buy this product, if it were available to you? A) Definitely will buy, B) Probably will, C) I might, D) Probably will not, E) Definitely will not buy.)
- Overall Likes and Dislikes
- Value
- Uniqueness

Make sure you include a range of possible responses for each question.

From here, you'll need to determine exactly what the target market is for your new product or service - if your product is a new all-natural diet soda, for example, your target market might be health-conscious women, ages 20-45.

Talk with friends, family, and friends-of-friends, as well as those of your employees. Anywhere from 50-200 people will work. Giving respondents an anonymous way to return your survey will help to ensure unbiased feedback.

Now, here's the most important part: how to use your results.

Before you even take a peek at your data, decide what your minimum requirements will be in order to take the next step. Large corporations call this decision an "action standard."

For example, many packaged goods companies (soft drinks, chips, cereal, etc.) will hold to an action standard that requires at least 80% of survey respondents to say they "definitely" or "probably" will buy. If the results do not meet the required action standard, large corporations will either "kill" the idea or "if it's close" go back to the drawing board in order to strengthen it.

But there are other ways to create an action standard that might be more relevant to a small business-owner. Foremost among these would be using your "purchase interest" data to estimate the true likelihood that people will buy.

Let's face it, people often say they will do something that, in the end, they don't. Market research professionals understand this, that's why they've created a rule of thumb to better gauge true demand, based on years of experience.

One rule of thumb for true demand states that 80% of the people who answered that they would "definitely purchase" your product will actually follow through, while only 20% of those who answered they "probably will purchase" will do the same.

Take a look at your research results. Does the number you get after taking this rule into account demonstrate sufficient demand for your product or service? Don't forget that you also have to create awareness in your target market - through advertising, publicity, search engine marketing, etc. - in order for them to buy.

For example, let's say that, using this rule of thumb, your DIY Concept Test data shows a true demand of 20% for your new product or service. Sure, there are 10 million potential customers in your target market. But the reality is, you're never going to get all of them to be aware of your product, even if you land a spot on Oprah!

So, with the advertising budget you've got, how many people can you make aware of your product? Five percent?

That means 50,000 people will become aware of your product. With a true demand of 20%, you might expect 10,000 buyers.

So, the question is - is 10,000 buyers enough to make your new product viable?

The thing about market research is, you can often manipulate the numbers to make them tell you what you want. The key is to make them tell you the truth. Although it may be difficult to discover that, after doing the math, "your baby is ugly," it will save you a lot of time and frustration in the long run.

But what if your product of service is "close," in terms of meeting your action standard? Then, by all means, take your concept back to the drawing board, adding new features and/or lowering the cost of purchase. Use the rest of your research to guide you in making improvements. And then run this test again.

When your research meets your action standard, that's when you've got a clear signal move ahead with your latest, greatest idea - knowing the market is with you!