In this thread: Champaign Dreams and a Kool-aid Budget

we touched on the importance of researching a market before creating a website in any ol’ industry just because we “assume” that niche will be profitable...

Well I was asked the following:

Nic - "Research is key". I've heard that tossed around before. But exactly 'what' research are we talking about? What are we all looking for, and whats the step by step process in finding out whether or not your time will be well spent? Reason I ask is, I happen to have a market I wanna get into, and I've come up with several sources for income for just one site. I'd like to know what numbers to apply where to figure out if my venture is going to be worth it.

So I thought I would open up the floor to this question in a new thread to let others explain what important steps they feel go into research

To me however these are the 5 important steps…

1) DEMAND: does anyone out there WANT what you are offering (whether it be a product or service)? If it’s unique then you will have to ask around. The more feedback you can get the better (simply having your mom tell you it’s the best idea she’s ever heard isn’t real research). If it something that already exists or a variation of something that does…by looking around you should be able to gauge what the demand is like.

2) SUPPLY: what’s the ratio of supply compared to the demand? Saturated markets will be tough to penetrate.

3) COMPETITION: not to be confused with supply. For instance you may find that while there are many suppliers in a niche, very few of them are well positioned and you can take advantage of that to secure a nice spot for yourself. Or you may notice most of the supply comes from only one source and people would be happy to have more options of who to purchase from.

4) REVENUE MODEL: how are you going to make $? What will be your expenses and what are your projected revenue?

5) MARKETING (LOCATION): How are you going to position your site in front of potential buyers? Relying only on Search Engine traffic? This may take a long time depending on your industry. Planning on spending $ on advertising? How does that affect your revenues? When you setup a real store you determine what’s its location will be so you can get the best exposure. Same with a website. Where would you like it to be, how will you get it there and what will that cost you?

So those are the ones I see as most important? Missing anything?

And this really depends on what type of site you’re building…if it’s a hobby site for yourself…who really cares? If you’re relying on your online ventures for grocery and rent money well you may want to invest a lot more time answering these types of questions. It may be a lot of work but could be well worth it over the long haul…

Demand - Where do you go to find that information? I could ask around locally, but thats hardly a definitive representation of the 'whole' internet base.

Supply - Is this in regards to 'how much or what types' of products are available by the competing sites? If so, that would be pretty easy to digest... onward!

Competition - How do we go about measuring the strength of those competing sites?

Revenue Model - Somehow, one might want to tie this to 'demand'.... from a different angle. Which, will probably come down to conversions, etc.  For those multi-revenue sites, do we just make a broad based conversion/dollar amount? i.e. - I expect to get at least 1,000 visitors per month, converting X into sales (clicks?). Profit on X will be an 'average' amount across the board. Suggestions?

Marketing - Whole other ball of wax there. But if we must look at the above options, then our marketing efforts will obviously be tied to how much we need to live per month vs. our start up capitol. This might be something reserved for AFTER the first four have been mapped out. Of course... I could be wrong.

1) DEMAND: We probably take a slightly different approach to demand. We will periodically poll consumers to identify deficiencies in the existing market place, and then we will build a product that satisfies that need. It may sound conservative to some, but it helps ensure that the demand is there and that it has some staying power.

2) SUPPLY: Every market has a weak area, identify it and then capitalize on it by making it one of your strengths.

3) COMPETITION: Competition comes in many forms and I really don’t worry about measuring their strengths. This really comes down to how well you know your trade. We have some remarkable and formidable competitors. But they have shortcomings, its not so much that they cant do something as much as it is that they don’t.

In example; Hawaiian shirt businesses compete against other businesses selling the same stuff, from the same manufactures, at the same price points. So to compete you have to do better than they are doing. Our solution was simple a simple one, manufacture under our own label and then turn their shortcomings into our strengths.

Peggy set an all time record for a single sale yesterday (it can qualify as a down payment on a house). The customer said that out of all of the businesses that they requested quotes from, we were the only one that actually sent them a quote accompanied by sample shirts. They said that level of service and display of confidence in our product was what it took.

4) REVENUE MODEL: On top of having a good business plan you should solicit and incorporate an accountant’s point of view, it does help.

5) MARKETING (LOCATION): For our particular business there is a lot of trend graphing and targeted marketing. Certain geographic areas and timelines perform better than others.  Advertising $$$? Again incorporate an accountant’s point of view, we have a set percentage of net revenues that’s earmarked for marketing each month. Sales trends and predictions can also help in deciding what to allocate for marketing.