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Class Introduction & Market Research

Lesson 1 from: Business 101: Start-up Considerations

Karen Okonkwo

Class Introduction & Market Research

Lesson 1 from: Business 101: Start-up Considerations

Karen Okonkwo

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Lesson Info

1. Class Introduction & Market Research

Lesson Info

Class Introduction & Market Research

I come from a background where I majored in business communication at Arizona State University. And although we have all these courses that we take in school, nothing really prepares you for business until you are actually out in the field. And I think one thing that really bothered me is that, when I decided to embark in business, I really had no idea where to start, where to go, and what advice I should absorb and the things that I shouldn't. And so, really, I'm just a representation of years of gathering and consolidating information. So, I'm one of those people where, I like to go online, I like to get around the actual resources, and take that advice from there. So, really, today is going to be a consolidation of all of that. A lot of you guys online, and here, you guys have worksheets that I've created that can help you kind of follow along with some of the information that I share. And I think the other thing is that, sometimes as creatives, business can be really overwhelming, ...

because we really just use our brains to be creative. We're not really thinking strategically from a business standpoint. So, I just tell a lot of people to not be overwhelmed with the information that I am going to share today. Just know that sometimes it makes sense to partner with someone else who may have a better business acumen. But it's great for you guys to at least understand the information today. So with that, let's go ahead and dive in. And we'll start off just by talking about market research. So, before you decide to actually pull the trigger with your business, it's just really important to get a summary of the market that you want to tap into, so then you can understand more of your competitive positioning strategy. So, ultimately the question here is, who is your customer base? A lot of people unfortunately kind of go into business blindly, and they don't really think, who is my ideal customer? Because once you identify your ideal customer, again, that's where you can be more strategic in the way that you tap into that market. So, the first question here is, how do you uncover whether or not there is an actual demand? You have to understand whether or not it makes sense for you to enter into a market, because maybe that market is no longer servable. And so one of the quick things that you can do is what we call a market demand. So I have a definition here. So, demand is the quantity of a good or service that consumers and businesses are willing and able to buy at a given price in a given time period. So, market demand is the sum of the individual demand for a product from buyers in the market. So, this is best portrayed by creating a demand curve. Which, it includes the individual curves of your competitors, to uncover the actual market demand. So it shows the quantity demanded of the good or service by all companies at varying price points. Knowing this is very important, because it will affect your sales strategy, your pricing decisions. And so here, in this example, what you see here is price. So the price here is on the y-curve. And then on the x-curve, this is the quantity. And so these are examples here of different businesses, and you get the market demand by totaling all of those out. And so, for you, when you're understanding how you're positioning yourself into the market, you'll know, okay, if I want to price my business at this price point, this is the demand, this is pretty much what I'm going to expect in terms of my consumers. So it's good to get your brain thinking in that capacity. So then, the next piece here is, you want to tap into understanding your market size. Your market size, of course, will help you in determining how many people that you actually have access to. So, here is a definition for market size. It's the number of individuals in a certain market who are potential buyers and/or sellers of a product or service. As a new company, knowing the market size before launching your new product or service in an area is very important. It determines your profitability, essentially. So, you wanna know what angle you can take from a competitive advantage standpoint, and your overall business strategy. So you need to know the actual numerical data, and the way that you have to pull that is by looking at different sources. So, when I tell people what that really means, it just means what piece of the pie is yours. What piece of the pie is yours that you can take, that you can tackle, that you can make profitable for yourself? This is a better visual for you guys. So, most industries, what they've done, is they've been able to create different reports that you can tap into that give you a potential on customers. And so, this slide here kind of lists a few of them, I'll read a few of them for you guys here. You can use the United States Bureau of Labor Statistics. Hoovers also has information for you. Yahoo Finance, InfoUSA, US Company Information, the US Census Bureau, professional trade organizations, professional industry associations, chambers of commerce, and analyst reports. So I would say that this is the most intricate piece in developing your business. It's going to take a lot of time. And a lot of the time, when you're new to business and you're starting into it, you may be new, and so there's not a lot of real data. And so that's why you have to create assumptions, with the understanding that as you enter into market, you're gonna create your own, more tangible results that you can kind of cater to figure out where your market is, and what your size of your market is. So here are some more market reports, I also wanted to point out that you can join associations where they have updated market reports that you can continually tap into. And I'll also say that if you plan on making your business in such a way that you want investors, these are the things they wanna see. They wanna see what is the sizeable market. So this next graphic here will give you just, kind of like a rundown of what I mean when I say market size. So this is a fictitious brand, so we're not putting any brands up here that you know. And so, here's the thought process here. So you're thinking, okay, I have XYZ, that's the business that I have, and it's a travel company. We book travel adventures. So, and it's travel adventures in Asia. So, the first piece here is figuring out how many people travel to Asia. What's the amount here? And then how many people are in the target countries in Asia that you wanna tap into? And then you determine that you have, of that market, five million which is an addressable market, which is 15% of those people there who are spending $7,000. So you know that your opportunity is 35 billion. And again, that helps you in understanding how to strategize with your business when you understand what the actual dollar amount of the opportunity is. So, the next thing here is understanding economic indicators. And there are three types of economic indicators. One of them is called leading, the other is called lagging, and the other is called coincident. And study.com actually gives a really great breakdown of what each of these mean with some corresponding examples. So the first one here is called leading indicators. So this pretty much helps you to predict what the economy will do in the future. So, an example of a leading indicator is number of hours worked by an employee. So if you notice that an employee is spending more time at work, they're increasing their hours. Well then that tells you from a business standpoint that you're probably going to need to hire more people, because the workload is increasing. So you understand that that's a leading indicator. Next here is lagging. So, lagging indicators confirm what leading indicators predict. So, if the leading indicator again is hours worked from an employee increasing, that means that after a few months, the lagging indicator of employment should fall. Because again, there's a need for more jobs in this particular business. And then the last thing here is called coincident. And that is basically mirroring what the data is saying currently. So, coincident indicators are generally what's happening right now, for example, job reports. So if a leading indicator is predicting that future jobs, there's a gain for that, and the lagging indicator is saying that unemployment is falling, then a coincident indicator would basically be the current employee number. So it's just important for you to understand these market trends as you prepare to enter into the market yourself. So then the next thing here is called location data. And location data basically gives you insights around your audience and their movement. So, location data should be compiled to identify basically new consumer markets. And you know you can improve your marketing when you understand where your current client base is. And just knowing that data is just really useful when you're considering ad targeting. So, location data is something that, honestly, I would say it's best for you to have a data scientist to try to pull that. I think the other way that you could do that maybe more homegrown would be if you have Google Analytics, that really shows you where your business is in terms of targeting. But again, that would mean that you of course would have to at least launch your business and have some of that data already calculated. If you're looking for past data on similar brands, I would try to get a data scientist. Back on calculating demand. Yes. What were the three, what were the three different data, like, the different colors, you know what I mean? Oh, the colors that I had on there? Yeah, what were those indicating? Oh, so those were basically showing different competitors. So they were fake names that I put on there. Okay. And here's another way, if you don't wanna create a demand curve, and you're just like, this is overwhelming, take your competitors and create an Excel spreadsheet, and say okay, this is, I'll make up a name, Dreamers dot, well that may be a name, On Air, okay. And then you know that another brand is TV Productions, whatever, and then these are all the price points that you know that they offer. And then that helps you understand, okay, so, customers are willing to pay at these price points. So overall, based on all of the competitors who are in the market, the average of all of those is how much your customer is willing to spend. Does that make sense? Yeah, cool, thank you. Okay, cool. Okay, so moving on here, we'll reflect now on market saturation. Market saturation happens when the demand for a product decreases, but just because the demand for a product decreases doesn't mean that you don't need to play in that market. There's different ways that you can strategize. So here is the official definition of market saturation. Market saturation is a situation that arises when the volume of a product or service in a marketplace has been maximized. At the point of saturation, a company can only achieve further growth through new product improvements, by taking existing market share from competitors, or through a rise in overall consumer demand. What I want to show you guys here is an example of a situation where the market is saturated, but that actually is a benefit. Using an example of one of the businesses that I have, called TONL. So, TONL is a diverse stock photography business, and when you look at how many images, digital image companies are out there, you'll see that stock photography is oversaturated. I mean, there's over 120 stock photos with billions of images. So then we think, gosh, you know, there probably isn't an angle for me. But the global stock images market will actually grow at a CAGR of 7.37% during 2016 to 2022. So, the reason why there's a rise in that is because the demand for stock images is directly correlated to the number of growing websites. So we already know just from that alone that there is going to be an increased need in imagery. So we took that as an advantage point. But it's important for you to understand where you are at in the market because maybe you won't be afforded this type of opportunity. Maybe it doesn't make financial sense for you to enter into it. All right, so, the next thing here is talking about pricing. So, pricing as it pertains to market research really uncovers what customers are willing to pay for your product or for your service. So, you know, organizations can then decide the optimal price point to maximize profit and revenue or market share. So, how do you do that? Well, one of the great ways that you can do that is to actually survey your target audience. There are a lot of survey platforms that you can utilize. One of the things that we liked to do is we created a landing page where we gather information from you prior, so that during the period that we're setting up our website, we could actually figure out, okay, how much are you actually willing to spend? And so, in my research I found that there is a really great type of survey, and it's called a conjoint analysis. It's basically the most accurate and reliable way to determine price. So I'm gonna show you guys just a graphic here that kind of depicts what I mean by conjoint analysis. So, how it works is the understanding is that, through discrete choicing, the modeling part of it is showing you what means the most to your consumers when it comes to price and value. So what that means is, so this is an example where there are three product profiles. It's the plasma, the LCD, and the LED. Rather than to say, hey, how much would you pay for a plasma, and you isolate it, they're saying put everything out there, and then create levels for each attribute, okay. So here, the LED, they're putting it at 899. And then the attributes are price, brand, size, and type. And so the logic is that you're considering both the product and the price point when you're making a decision here. So if you believe that the LED is worth it and you choose 899, then that means that you're probably thinking that somebody is willing to spend up to that point. So maybe if I had it for 699, they'd buy it. Maybe if I had it for 499, they'd buy it. So it's doing discrete choicing to really help you figure out a price point. Now, of course, this is just one of many ways that you can survey people. If you wanna be more deliberate and say how much are you willing to spend and leave, like, a blank box, and make it a requirement for your audience, or your consumers to answer, they can. I think you just run the risk of people being cheap, maybe, when you leave that box open. So I would just be a little bit more directive, put some price points. But I found that I think that this is the most accurate way of trying to understand what your consumer is willing to pay for.

Class Materials

Bonus Materials with Purchase

Startup Considerations Worksheet